Nokia CWM: The Inconvenient Truth

Approximately 7 days earlier, i had blogged about Nokia CWM, "Has Nokia got its CWM strategy wrong?". This was published on 13th January 2009. This followed an article on www.uk.gizmodo.com, "Nokia 'Comes with Music', not shaping up as expected".

In 2 days from now, Nokia is going to share its 4th quarter results. Very intriguingly and aptly, i found a release in the UK telegraph yesterday morning which allayed fears that consumers will act responsibly and not abuse "all you can eat music". I would call this a very amateurish attempt to signal press and investors around the world that its CWM startegy is doing fine because Consumers are behaving responsibly. Indeed! The article in Telegraph is sited below:
http://www.telegraph.co.uk/culture/music/4285381/Nokia-Consumers-will-not-abuse-all-you-can-eat-music.html. Not putting stops there, there was another release http://www.electronista.com/articles/09/01/19/nokia.music.to.expand/, where in the mobile giant also hinted roll outs of CWM in Singapore, Australia, Latin America, US and Europe within this year.

All this, with no major operator pledging alliance to CWM. Nokia's CWM has been a "go alone" venture. As is, all ventures start with a good purpose. In this case, bringing music free to consumers for a one time fee on certain Nokia Handsets. The company thus expected a foothold in the Music space, which so long has been Apple's strong hold. In the US, where Nokia would squarely take on Apple on music as a part of convergence, none of its smart phones feature in operator portfolios yet!

Interestingly, the first proponents of CWM in Nokia, Ed Averdieck (MD, Nokia Music) has been fired and Tommi Mustonen (Head of Multimedia, Nokia) has been given a "punishment assignment". Analysts consider the CWM to be "a step too far in Freetardonomics" and "a reckless business move". At $129 one time payment and .70 - .90 cents per download, Nokia could have to pay for heavy downloads through its nose. Nokia has not made public any information on other sources where by it can justify the additional cost/losses in heavy downloads.

Another "unofficial" word from a Nokia Executive (anonymous) explained the motive, i.e the insight, Nokia has been working upon in terms of justifying the CWM. Only 1 out of 5 users uses the service to tyhe full effect. Which means, 4 others forego taking advantages of the service or forget about it altogether after paying $129. Which also means that Nokia, is betting on a self defeating purpose. If only 1 out of 5 users uses the service, isn't it limiting the spread of Nokia CWM?

This insight, that Nokia seems to have is being backed by its offices. Its "sort of" tested in UK. Now Nokia would extend the same logic around across the world. Nokia's success (Not bleeding in loyalty payments) would depend on consumers not "abusing" the service. This could be tested! If it successful, Nokia will get only 1 out of 5 conusmers to use the service effectively and make profits or break even at the cost of usage being low. If Usage is high Nokia may have to pay for the heavy downloads and make losses on the venture.

This at a time, when, OPK announces that profitability is more important than just the sales numbers!

Nokia faces two choices: Either it can shut the service down ( which means it conceedes a defeat in the music space) or it can get more partners (operators) to work on other revenue streams for the CWM business!