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SEPTEMBER 10, 2007
Nokia Aims Way Beyond Handsets It will offer multiplayer games, maps, new ways to swap music and photos, and more For the last several years, Finnish handset giant Nokia (NOK ) has been on a furious shopping spree. It spent $60 million on a rival to Apple () iTunes called Loudeye, the largest independent music distributor on the Net, and followed that up by acquiring navigation software maker gate5 and media-sharing site Twango. Now it's clear what the buying binge was all about. At an Aug. 29 London press conference, Nokia unveiled plans to launch a slew of services for mobile users, starting later this year in Europe and Asia. The scheme includes an online music store aimed at the 200 million music-capable Nokia mobile phones already on the market, an interactive multiplayer game service, and a new venue for Nokia handset users to swap photos, videos, and music. Put all the pieces together and it's the most ambitious bid by a phonemaker to spin profits out of content and services. "Devices alone are not enough anymore," says Nokia Chief Executive Olli-Pekka Kallasvuo. "Consumers want a complete experience." Europe's mobile operators shunned Nokia's earlier efforts to break into services. This time they're listening because their own efforts to create music stores and other destinations have failed. Without such offerings, there's no way mobile subscribers are going to run up the kinds of high monthly data charges companies are counting on. "Mobile operators around the world have invested a fortune in networks, services, and marketing—and it has been a gigantic disaster," says John Strand, CEO of Copenhagen mobile consultancy Strand Consult. For example, instead of downloading music over the airwaves as operators had hoped, most Europeans "sideload" music to phones from their computers. Britain's Vodafone Group (VOD ), the world's largest global service provider, is one company that spent big for naught. It sunk a total of $38 billion into third-generation mobile licenses, hoping to spur customers to use data services such as mobile music. But as of last spring, only 32 million of its 206 million subscribers used its Vodafone Live! content portal. Nokia says its move beyond hardware can help the carriers. Take Nokia Maps, the service it launched earlier this year, which now comes preloaded on the high-end Nokia N95 phone sold by many of the world's operators. Users choose nearby points of interest on their screens, such as a coffeehouse, and the service shoots back directions or a map. Operators have the option of handling the billing for this in exchange for a cut of Nokia's content revenues. Its new music, photo, and game services probably will be handled the same way. Arrangements like this should appeal to smaller mobile operators. But analysts expect some resistance from large players such as Vodafone and Orange (FTE ), which may balk at the idea of replacing their own music services with Nokia's. And while Nokia claims it has had "very positive discussions" with most wireless carriers, few have been willing to comment publicly on the initiative. Nokia's service push also puts it in competition with Google (GOOG ) and Yahoo (YHOO ). But while those Internet companies have strong brands, they don't have control over the phone's screen. Nokia, on the other hand, can bundle imaginative services with specially tailored, user-friendly hardware. With close to a billion customers and longstanding relationships with hundreds of mobile operators around the world, Nokia looks to have a head start on marrying the Web with the wireless world.  By Jennifer L. Schenker, with Cliff Edwards in San Mateo, Calif.
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