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An article by Alexander Dryer entitled "Apple Chomper: How Nokia can knock the iPod from its perch " that was kindly forwarded by Neil Kothari has me wondering, once again, about what sorts of hallucinogenic substances they must put in the coffee over at Slate. Dryer, it seems, is convinced that Nokia's (NOK) N91 is the long-awaited Apple (AAPL) iPod killer.

He cites all sorts of reasons: it has an 8gb hard drive, it's software is usable, it's a "good" music player (only good, huh?) and a superb phone. Nokia has purchased Loudeye so it can build online stores for carriers. Also, Nokia sold 89 million phones last quarter vs a mere 8.7 million iPods. Oh, and it is opening sleek retail stores that copy Apple so slavishly that it has actually hired the same designer.

That's why Nokia is the Apple killer?

Sorry, but I'm somehow not convinced.

I suppose it was inevitable that Nokia would try, given the long and distinguished list of firms that have gone before them. But the history of the consumer products industry over the last five years is replete with the corpses of companies that have tried to knock the iPod from its perch by a range of means and have returned from the fight mauled by wounds mostly self-inflicted. I'm afraid Nokia will be no more successful trying to kill the iPod with it's candy-blob phones than it was when it tried to whomp Sony (SNE), Nintendo (OTCPK:NTDOY), and Microsoft (MSFT) in the portable game player business with the über-flop N-Gage.

Here are the reasons I would say this effort is a non-starter, in general but especially in Asia:

One Expensive Candy-Blob

Charging $599 retail for a "good" 8gb music player and a great phone will kill this. I can buy a great 80gb music player and a great phone for less money. I'm hardly a music aficionado, but after I loaded my 300-odd CDs and some podcasts onto my player, I was well into 20+ gigs, and that's before adding video and any data files I want to carry. And I'm sorry, but I can't be bothered with having to choose what songs go into my player and what songs stay on my drive, and if I wanted something that loaded only a playlist or two for jogging or commuting, I don't need 8gb. I need 1gb.
Nokia phone image
The other problem with the device is storage. Dryer is quick to dismiss flash. He should slow down and think about what happens to battery life when you throw a winchester hard-drive drive into a phone. All those moving parts suck juice. I can live with 12 hours battery life - less - on my iPod. I cannot live with charging my mobile phone every 12 hours, or even every 24. You buy an N91, and you had better be ready for the music function to make your "great phone" less than adequate in use. "Yes, I'd like three batteries with that, please."

Oh, and one more thing on price: competitors like Motorola and Samsung have already introduced phones in different parts of the world that do everything this product does, PLUS provide satellite TV, for the same or less money. So even on the basis of functions, the N91 is a loser.

Help Us North America - You're Our Only Hope

Fighting Apple in North America is just plain bad strategy. It is Apple's home market, the one where it is most deeply embedded, and where the total Apple ecosystem is strongest and, frankly, where Nokia's brand name is weakest. Europe, Latin America, and Asia, on the other hand, are much less Apple country and are places where Nokia traditionally has stronger market presence. (Indeed, I've been involved in long, late-night debates over whether or not Apple really sees Asia (ex Japan) as a strategic market. Corporate structure and marketing efforts to date leave that in question.)

Further, they are parts of the world where the mobile music usage model is still in its formative stages. People aren't used to carrying music players, but they ARE used to carrying mobile phones, and are already proving more amenable to using their phones as their primary music players.

Of course, Nokia is losing these battles as well, especially in Asia. Against the N91, over 75% of Motorola's phones are music enabled. The second-generation ROKR - the E2 - has been doing brilliantly, as has Motomusic.com, which is the largest legitimate music download service in greater China. Sony-Ericcson, Samsung, and LG have taken up large chunks of the mobile music market, and Nokia is showing up late at the party with a product too large for the Asian hand, pocket, or purse.

So perhaps Nokia is putting so much focus on the U.S. because it hopes the lighter competition will help. Or maybe they think U.S. consumers will be less sophisticated than their counterparts in Japan, Korea, China, and Hong Kong.

It's the Music, Stupid

The one thing I haven't seen in all of this discussion of Nokia's supposed ascendancy has been any relationships the company might be forging with record labels and artists. If you will recall, it is exactly those relationships - with the actual owners and creators of content - that gave iTunes its legitimacy among consumers and gave sales of downloads legitimacy with artists and labels. Unless Nokia lines up the backing of major labels - and the independent artists who are generating more and more of the world's leading music - the ecosystem will not materialize, and the operators will go elsewhere.

This all assumes, of course, that Nokia is genuinely interested in making the legitimate discovery, purchase, enjoyment and sharing of music part of its overall strategy. The other possibility - far more likely, IMHO - is that it could care less about whether the music is legitimate or not, as long as the phone sells. Short of a clear commitment to digital rights management and relationships with labels and artists at all levels, it would be hard for Nokia to claim that the N91 and its siblings do much more than provide pirates with a way to enjoy music.

It's the Experience, Stupid
Mobile music is about much more than "stick it in the phone and listen." The full experience includes discovering the music, purchasing it, storing it, playing it, and sharing it. From what I can tell, storing and playing seems to be covered, but as noted above actually discovering the music, purchasing it, and sharing it are missing.

Finding new music - or at least a song we've heard that we like - is an essential part of the entire experience. If it wasn't, then HMV, Amoeba, Tower Records and the Virgin Megastore would have exited the business long ago. In countries like Asia where radio is basically a dying medium, other means of musical discovery are becoming ever more critical to the health of the music industry. The ability to conduct limited sharing of music, to provide an online alternative to radio, and to share information about music and artists with others of similar taste lies at the core of a successful system. I don't see that coming from Nokia so far, and given that they've got music devices out there, it's pretty clear that in Espoo Finland, the device comes first, and the experience is an afterthought - an unnecessary evil.

Clearly, Nokia has it backward.

This is the company that's going to beat Apple? I think not.

Source: Nokia the iPod Killer? I Think Not