Nokia stands by Comes With Music despite lack of convincing figures; Vodafone champions DRM-free bundle

A little over 12 months after its Comes With Music service launched in the UK, Nokia is mute when it comes to just how many people actively use the bundled music offering. Comes With Music effectively requires a customer – be it a mobile user or network provider – to pay for over a year’s worth of unlimited music downloads at the point of purchase.

While much of the Comes With Music business model remains shrouded in mystery to market observers such as myself, it has clearly met with the approval of the major record labels, which have given Nokia access to almost the entirety of their music catalogs. Music-industry insiders suggest that the labels’ willingness to work with Nokia – and accept its undisclosed revenue-share deal – is motivated by a desire to break Apple’s stranglehold on the global digital market, since Apple is reputed to account for over 90% of global paid-for digital music downloads. But few mobile carrier groups have been convinced enough by the Comes With Music model to launch it.

Nokia made much of its rollouts in Australia, Brazil, Singapore and elsewhere in 2009 but has yet to offer quantitative evidence that Comes With Music has been a success, suggesting that its original marketing has been something of a botched job. One speaker at the MIDEM trade fair earlier this year even suggested that the “hidden music charge” – which is how money is made in the Comes With Music model – was the way forward for the music industry and that Nokia was sadly guilty of “cocking up” what is on paper a really good idea.

Nokia accepts that there had been some initial problems in getting operators to communicate the idea of Comes With Music effectively to subscribers and that there can be resistance from operators when Nokia attempts to intervene by showing them how best to sell the service to a customer. This is a little reminiscent of the “who owns the customer” debate, a frequent topic of discussion in analyst circles when Nokia first attempted to launch Ovi two-and-a-half years ago.

In contrast, Vodafone used the MIDEM conference to trumpet the success of its “all-you-can-eat subscription music service,” which enables users to download and keep 10 DRM-free MP3 tracks from the Vodafone music store for about €3 (US$4.19) a month. The carrier publicly announced that the service was now the biggest repeat paid-for music service in Europe, with 450,000 monthly subscribers in eight countries. This seems to have validated Vodafone Group’s decision to take Kevin Houghton from his far-flung New Zealand post to helm its global music offering. Houghton made such a success of Vodafone’s New Zealand music offering that it regularly featured on the list of the group’s 10 highest-grossing music stores. And now he appears to be producing similar results in Europe.

Vodafone’s announcement of such lofty figures only months after getting all of the major record labels on board will inspire the rest of Europe’s major carrier groups to follow its lead and adopt a similar model at a similar price point, dealing another blow to Comes With Music.

Will Comes With Music go the way of Nokia’s doomed premium N-Gage gaming platform? It’s hard to tell. In the meantime, Nokia has been touting its services strategy in emerging markets – Nokia’s CEO used his keynote speech at last month’s CES event to talk up the firm’s effort in that area – leading some to speculate that Ovi could become the iTunes of the developing world. Right now it seems unlikely, but 10 years ago who’d have thought that Apple would be in the position it’s in today?

Music & Copyright is a fortnightly research service published by Informa Telecoms & Media.