re: Yet another Nokia Alliance - EMI for Asia-Pacific
>> Nokia/EMI Alliance
Steve Wallage
TheFeature
December, 03 2001
Local Event With Global Implications
In early November 2001, Nokia and EMI announced a wide-ranging agreement for the Asia-Pacific region. The deal is certainly not the first of its kind but is unusual in its breadth and scope.
The first output from the agreement has been in the marketing of the band, Blue, initially in Singapore. This involves cross-marketing agreements such as a Blue promotional CD in the Nokia 5510 sales package and Club Nokia credits with the CD.
What's In It For These Global Players?
For Nokia, it’s a great opportunity to meet the needs of one of its main target markets - the 15-35 years age group. It also ties in with other local initiatives. In early November, Nokia hosted an underground midnight party on Singapore’s subway.
It meets the needs of Asian users for personalized services. More importantly, it means that Nokia users become more used to listening to music on their mobile devices, paying for such services, and using Club Nokia.
Record labels need new source of revenues and mobile devices are a new platform for their services. EMI want many of the same things as Nokia - consumers to become used to using their mobile terminal for listening to music.
However, the record labels are not going into such ventures naively. They know from harsh experience, that digital media such as the Internet can be a bottomless pit in which to lose money. Thus, their expectations are suitably realistic.
However, given that they have the opportunity to drive the 'mobile music' market, rather than allow it to be established by start-ups, some music executives believe that mobile is potentially a more lucrative platform than the Internet.
Moreover, record labels have an additional services and marketing channels for artist management.
Future Developments And Competitive Response
The depth and scope of this deal makes it unique, but it is certainly not unique in terms of relationships between record labels and mobile handset vendors. Other vendors have been watching this deal with interest, and trying to develop similar arrangements with record labels.
Of course, other vendors can watch and learn from the deal, copying the elements that work. It is still unclear how much consumers are prepared to pay for these services, and the Nokia/EMI deal could still prove a flop.
Both Nokia and EMI stress it is in both their interests to expand the total market and develop the idea of using the mobile handset as an audio player. Other handset vendors will soon announce further deals with record labels. However, the scale of this deal will remain atypical, and record labels are wary of forming too many close relationships.
It is also clear that the music industry is still quite tentative in supporting such deals. This is particularly true until they build the commitment of artist management, who are usually yet to be convinced of the benefits of the mobile platform. A lack of support from artist management could dramatically limit the scope of the Nokia/EMI deal.
Such deals will boost the importance of 'digital wholesalers' and management companies who offer the means to distribute music. Nokia and EMI are using Singaporean company, Soundbuzz, to provide this service.
While wireless streaming is at least three years away, the development of Java and MMS will offer new audio opportunities. Polyphonic audio will offer improved sound quality from next year. Some believe that users will throw away their portable MP3 and CD players as sound quality on mobile terminals improves, but this sort of cannibalisation still seems several years away.
The range of marketing opportunities will also grow. This will vary from new services - such as games involving recording artists - to opportunities in different geographic markets. For example, Nokia can now offer local music to the Singaporean community in other countries.
There are three wider trends that can be seen in this announcement.
Localization Is Key
It can sound trite; 'act global, think local' is almost repeated as a mantra by many marketing directors. Yet, its truth is becoming undeniable in the mobile world, and is widely accepted in the Internet market.
There is little doubt that Asian users have some different characteristics to other regions. In Singapore, as indeed with many other Asia-Pacific countries, the mobile device has become a lifestyle tool far more than in Europe. For example, many users keep their terminals on 24 hours a day, and younger users upgrade their terminals, change fascias and personalize their services far more regularly.
Yet even in Singapore, a country with a population of just four million, musical preferences can vary widely from neighboring countries. Although, the Nokia/EMI deal covers Asia-Pacific, execution will be planned between local offices.
Vendors cannot just talk about localization, they need to ensure they truly offer localized services.
Profit Drives Alliance
Nokia Digital Services is a profit center within the company. Although the agreement with EMI provides strong marketing and advertising benefits, the ultimate test is whether it can bring in revenues.
To this end, Nokia plans to charge customers, both through 'pay-per-use' and subscription services, for EMI-related graphics and ringtones. Future services will also be charged in a similar way.
Record labels realize that investment in digital media can be an extremely easy way to lose money. For EMI, revenues are the clear goal although they see this as a longer-term target.
Lots of alliances are currently being formed as the mobile market matures and new applications evolve. Increasingly, attention is being focussed on a small number of important alliances which are geared around revenues and profit.
The Changing Relationship With Operators
How will Nokia/EMI services be sold and marketed in Singapore – through mobile operators and independent retailers? No, through Nokia World kiosks and Club Nokia.
In Singapore credit card penetration is low among some parts of the population, and there is a reluctance to pay by credit card when the user is not physically present. So, the mobile operators there are not totally excluded, as they still maintain the billing relationship.
Nokia has been the most aggressive of the handset vendors in being willing to go outside the mobile operators. Other vendors, such as Ericsson, have seen the mobile operators as their main customers and have been loathe to directly compete against them.
On the other hand, the record labels, from their tentative dealings with the mobile operators, would rather work with vendors who have a far better understanding of their target market.
The mobile market is changing fast and the mobile value chain is becoming more complex. Vendors need to ensure that they are not stuck in low-margin and commoditized areas of the market, and must offer higher-value services. They also cannot rely on many mobile operators to have the innovation and commitment to drive future mobile applications and services.
Steve Wallage works and writes for the451. Steve has more than 13 years of experience as a technology analyst specializing in telecommunications. <<
- Eric - |
