Nokia, UMG launch handset-based unlimited music service: ‘Comes with Music’ offers access to 2 million tracks

AMSTERDAM, Netherlands- Nokia Corp. and Universal Music Group International shook up the music industry this morning at Nokia World.
Imagine a service-“Comes with Music”-that gives Nokia device owners instant access to two million tracks for free. Well, nothing comes free in life, but the price consumers pay for their Nokia devices will include the licensing costs associated with that music for one year.
Nokia’s music store is only available in the United Kingdom at the moment, but Nokia says it’s planning an aggressive rollout that will bring the service to users across the globe as soon as possible.
“All music to everybody, anywhere, all the time. That’s been the quest for music service for Nokia,” Anssi Vanjoki, executive VP and GM of multimedia for Nokia, said in his keynote address this morning. “This is not a streaming service, but all the songs and albums are there for you to own and keep.”
Once the stars are aligned-specifically if a consumer lives in a region where the service is available and they own a compatible device-music lovers will have access to as many tracks as they can possibly muster. Once the 12 months are up, the consumer can purchase a new device and with it comes another license for 12 months of use. Regardless, whatever music the user downloads within that 12-month period is theirs to keep forever.
“There is no comparable service where the music can be kept by the consumers, even if their subscription lapses,” Universal Music Chairman and CEO Lucian Grainge told this morning’s audience.
“It’s certainly a ground-breaking moment for Universal Music,” he said, describing the deal between the world’s largest mobile company and the world’s largest music company.
“We believe that mobile is inevitably one of the keys to our future growth,” Grainge said. “Music on the move is what people want. No one stands still anymore.”
Nokia also believes that the portable “multimedia computer” (the handset maker’s fancy word for a feature-rich cellphone) is quickly becoming the digital music player of choice. The company already enjoys the largest market share for portable music players through the sheer volume of its branded, music-capable handsets in mobile subscribers’ hands.
More than 40% of the people who own music-capable mobile devices use them as their sole portable music device, Vanjoki said.
Rob Wells, senior VP of Universal Music’s digital business, gave a presentation later in the day to elaborate on this first-of-its-kind deal
“Music is probably the most evocative art form,” he said. “It’s very unlikely that there’s anyone on the planet that can actually claim to hate music.”
The problem is “not everybody loves to pay for it,” he continued. “Piracy is the single biggest factor in the decline of music sales over the last 10 years.”
But digital sales are helping to ebb that flow. In 2005, digital music accounted for 3% of overall music business sales, a number that in 2006 jumped to at least 7%. For 2007, forecasts are putting the number closer to 14%, Wells said.
“We’ve made history today,” he said. “I believe definitely the digital music industry will never be the same again.”
He allied fears of cannibalization by reminding attendees that Universal Music will continue to earn revenue from this new service and artists will continue to get their share.
“The building blocks of our industry remain unchanged,” Wells said. “Our revenues will come from the sale of the device.”
This despite the fact that there will be no download limits over the 12-month period. However, Wells pointed out that the 2 million tracks currently available on the service would take at least five years to download and more than four years to listen to in their entirety.
Additionally, the music can be transferred to a PC for further use and availability.
“There is no catch,” Wells said. “The concept of ownership disappears. Consumers will naturally gravitate towards this model and away from the pay-per-track model.”
Ed Averdieck, who runs Nokia’s music business, told RCR Wireless News that today’s announcement is the latest shift in a years-long strategy undertaken by Nokia.
First it embedded music players in most of its devices, then it enabled consumers to purchase music directly on their device-and now it has closed the loop on what consumers’ really want: music for close to free.
Because of that, Nokia decidedly went against developing business models that would require consumers to pay for a subscription service after 12 months. It would rather drive users back to the store to purchase a new device.
“We want to create a sustainable business,” Averdieck said. Indeed, it’s arguable that no other service could possibly draw people into buying a new device after 12 months in as compelling a fashion.
“We want this to be as simple as possible,” he said.
“This is a good way of re-engaging them in the music business,” Averdieck said of the millions of young music fans that haven’t purchased an album for years.
Nokia’s Comes with Music service is currently compatible with its N81, N82 and the N95 8GB models. All future N-Series devices coming down the pike will be compatible as well.
Nokia says it’s also in serious discussions with the other major music labels and plans to expand the magnitude of the offering for many years to come.