Has Nokia got its CWM strategy wrong?

http://uk.gizmodo.com/2009/01/06/nokia_comes_with_music_not_sha.html#comments

This discussion is about Nokia's Comes with Music. It follows the above given web clip on the "Nokia CWM not shaping up as expected".I have always believed Nokia CWM initiative to be flawed. But Can Nokia make such a monumental mistake or is there something bigger at hand.

Original report: www.theregister.co.uk/2007/12/05/nokia_free_music_analysis/ (5th December 2007); www.reghardware.co.uk/2007/12/04/nokia_comes_with_music (4th December 2007)

Six months back, i had read up a lot about Nokia and its CWM (Comes with Music) strategy. Essentially, it was an attempt by Nokia to boost its standings in the Music space. Well, if you are thinking, what has Nokia got anything to do with Music, its time to think again. Over the last 2 years or so, Mobiles have become the primary convergence device and Nokia has significant stakes in the mobile handset space which it needs to hold on to. Towards this objective Nokia has emerged strongly into the convergence space making its high end devices more internet friendly, with the ability to carry more music, videos and multimedia content. In doing so, it challenged Apple which had a very elaborate music download portal in its portfolio, where in consumer could buy their music and keep it on thier iPods and iPhones. ( At a later date, Apple was to subvert the mobile industry rules of the game by releasing its iPhones).

Back to Nokia for now, Nokia had tied up with Universal and Sony BMG to offer tracks under these banner to its users. Its users could download the tracks from the Music store (A part of the Ovi services platform). CWM came later. Its USP was that it provided free music to the user of certain mobile handsets for an year. The cost of this was factored into the $100+ premium charged over the price of the phone. The devices so long carrying CWM are 5310, N 95 and N 96. Users could opt to pay the extra money and download as much music as they could for an year. The constraint was that the music could not be shared and its usage was limited to the Nokia phone and a computer of choice.


Pretty neat on the surface untill you got into the mathematics. It was reported that the premium for the CWM service for the consumers was $129.95 (at the time of purchase). While Nokia didnot make public its deal details with Universal and Sony, it was assumed that the price per download that Nokia had to pay to the music labels was around 90 cents. Apple it seems pays the same for a single track download. Assuming some hard ball bargaining, this floor price of such a deal would be 70 cents. Thus the consumer using the service was paying for 129.95/.70 = 185 track downloads! And more, Nokia would be paying 70 cents to the music labels for every 186th and onwards track downloaded in a calendar year. Did the Finns leave their brains around somewhere? Nokia was doing a Hoover!
www.theregister.co.uk/2008/04/17/nokia_comes_with_music
www.theregister.co.uk/2008/05/01/nokia_defends_music_giveaway/
www.theregister.co.uk/2008/04/28/nokia_comes_with_hoover/

In providing the consumer unlimited music of his choice, did Nokia goof up on the break even canculations. How could that be? (Apple had a pay per song as you download charge to the consumers)

There was speculation about the profits. It was assumed that such a liberal promotion could really eat into the operating profits of the Finn gaint! Apparently, there was also a lot of dissatisfaction with the operators as well, who were not at all figured in this deal. It would be understandable if Operators and Nokia would have done this in a partnership with the operator making money out of the downloads through their channel.


It was difficult to understand why Nokia would be a part of such a deal apart from its desperation to get into the music space as a serious challenger to Apple iTunes. Even that wouldnot have warranted these losses. It was on a discussion with a higher up at Nokia, that i understood the rationale of this strategy. Nokia had it seems worked on an insight that only one out of every five people availing the CWM would actually use it in terms of heavy downloads.


Well, this did not sound to me to be quite a reason. Basically, it is undoing of the base idea, which is to get maximum people hooked onto the CWM. However, the pricing and the break even is a math that is confounding.


However, over some time now, Nokia has not actively promoted this idea with marketing money. This leads me to think:

Is this really a mistake that Nokia doesnot want to support and hence the silence?

Or is there a bigger strategy (probably Ovi led) which will unfold in the future?


That i think, only time will tell though i think the Finns have stepped on this without adequate coordinates on what they should be doing and how to go about doing it.