Uncle Miltie

Nokia: Profit Down While Aiming at Apple

Somehow, the economics of "Comes with Music" need to make sense for this to work for Nokia. And I'm not sure it does.

Assuming that Nokia receives a similar deal to the other on-line distributors, they will have to pay about 75 cents per song back to the music companies. Since downloads are unlimited, they might see a typical user download 250 or more songs a year - similar to the old Napster days. Since the user gets to keep those songs, Nokia will have to pay the entire royalty. That adds a significant cost to their music service that will eat into profits. Their hope then would be that users sign up for a second year of the download service, so they can recoup some of the cost (and of course users would keep downloading more songs which would have to be accounted for again).

I'm not sure how this can result in a profitable venture for Nokia, other than to possibly try to win marketshare. It will be interesting to see how this plays out...