Nokia wants Apple-style cut of handset revenues

“Nokia, the world’s biggest maker of mobile telephones, plans to imitate Apple and seek a cut in user revenues generated by its future devices, according to the Finnish group’s chief on Sunday,” Monsters and Critics reports.

“Interviewed by the newspaper Frankfurter Allgemeine Sonntagszeitung, chief executive Olli-Pekka Kallasvuo confirmed the company had an eye on network operators’ charges for new data-based services,” M&C reports.

“‘When it involves mobile phones, we’ll be staying with our existing business model, which means getting paid for the device itself. But where we provide new services, a turnover share is entirely possible,’ he said,” M&C reports. “Nokia has sought to position itself as an inventor of new services. Several days ago it unveiled Comes With Music, a service on certain phones that can download titles from the Universal Music catalogue for one year.”

Full article here.

[Thanks to MacDailyNews Reader “Mike in Helsinki” and Linux Guy And Mac Prodigal Son” for the heads up.]

Luck has it that long-time MacDailyNews reader and frequent link contributor “Mike in Helsinki” also happens to be a 14-year veteran of Nokia who was active in several divisions. “Mike in Helsinki” writes to us via email:

Nokia proposes to give away 100 songs tops over a one-year period to folks who download them via their mobile phone (i.e. a mobile phone-centric model versus a PC/Mac-centric model). [These tracks will be] laden with technologically inferior Windows DRM, in cooperation with one catalog so far – Universal, whose clueless CEO Morris only some days ago professed that Apple was trying to suck the value out of the music industry by pricing music at $9.99 an album, and working with a company that time after time after time screws its partners and alienates consumers, For Sure™.

This is like the blind leading the clueless onto a burning ship…

History has STILL not taught hapless Nokia anything about Microsoft’s utter value-destroying, customer-hostile, partner-doublecrossing history.

Two summers ago I sat across the table from a very senior Nokia executive and told him that in my opinion Apple would use its music success to be the battering ram in other endeavors in the future, like mobile telephony. I told him that that all the strengths that Nokia has … in portable consumer electronics design, global manufacturing and logistics, customer understanding, and the intricacies of mobile phones were competencies Apple either already had or could quickly replicate in short order.

My thesis to this Senior Vice President was that Apple learned how to design, manufacture, distribute and sell mass-market consumer electronics in their iPod business. Apple also leaned how to retail and merchandise this kind of product through its Apple Store experiences and was quickly building other distributor channels. Apple had the tools, or knew where to get the remaining tools, to match mighty Nokia’s strengths.

I suggested to him that Nokia, on the other hand, would find it nearly impossible to catch up to Apple’s strengths in the same manner that Apple could match Nokia’s. Nokia depends on a mobile phone-centric model for things that require a PC/Mac-centric model, like music and video.

My point to him was that Nokia has no computer OS to wrap around like Apple does. I told him that they were fatally flawed in dealing with a company – Microsoft – that has an unenvied track record in failure at every single endeavor they try except their PC OS business, Office productivity suite and maybe servers. I told him that Microsoft is a lying, double-crosser of the first water.

I warned him that Apple, more than any company on earth, understood customer friendly software and hardware design, keenly understood the unsustainable business model weaknesses of the music, video and mobile telephony world … and that Steve Jobs was on a crusade to TEAR DOWN THESE UNSUSTAINABLE MODELS AND REBULD THEM TO BE CUSTOMER FRIENDLY. He has done it in the music industry, he is doing it in the computer industry, and he is setting the stage to do it in the video/TV industry.

I flatly told him that Nokia should considered Apple to be a very serious threat.

With a straight face, this SVP told me that I was hallucinating.

He proposed that iPod and iTunes was an exception, and would be eclipsed by a Nokia/Microsoft partnership in short order. Why wouldn’t he believe that? The largest maker of consumer devices in the world teamed up with a company that has 95% market share of the computer OS business [seems like a sure thing].

He further pointed out to me that Apple could never match Nokia’s legendary and titan logistics chain throughout the world, and that Apple, an MP3 device maker, had no clue as to the complexities of the mobile phone world, how mobile phones should be built, how to deal with operators, etc. Apple, said this SVP, was simply out of their league.

He also pointed out to me that Nokia already had umpteen gazillion MP3 players existing on their phones (never mind that NO ONE used them), and that they had just acquired white label music aggregator Loudeye and would parlay the Nokia/Microsoft/Loudeye team into a competitive offering – be damned their operator customers.

This SVP is a keenly smart, competent, accomplished guy, supremely educated and also a person who I consider a friend. And he was utterly clueless.

Time will tell, but it is telling a lot already. Apple owns the digital music business, and the Nokia/Microsoft/Loudeye/Universal response is in for a rude awakening. Further, Nokia better get in gear on their crummy smartphone software development PDQ as iPhone is storming the smartphone gates globally like a juggernaut. Apple will next pry open the door to lower and lower end devices, ripping market share away from Nokia and all others who have been punishing its consumer with lousy experiences, notwithstanding their opinion that they are Gods’ gift to the consumer.

My money is bet on Apple on this one.

44 Comments

  1. From the MySpace page for Universal Music Group CEO Doug Morris:

    His credits include writing the Chiffons’ 1966 hit “Sweet Talkin’ Guy” and producing such hit records as Brownsville Station’s “Smokin’ in the Boys Room.”

    That explains a lot.

  2. Mike-in-Helsinki’s email was insightful. Arrogance, greed and laziness will be the demise of these companies. Steve Jobs sees it and is attacking it (to his company’s advantage) every chance he gets.

  3. I flatly told him that Nokia should considered Apple to be a very serious threat.

    Mike, you talk too much. Loose lips sink ships.

    Use a spell checker.

    This SVP is a keenly smart, competent, accomplished guy, supremely educated and also a person who I consider a friend. And he was utterly clueless.

    Keep your friends close, but your enemies closer.

  4. Mike in Helsinki:

    No offense, but I’m glad the SVP didn’t heed your warnings.

    I used to be a big fan of Nokia’s phones, but they’ve fallen way behind. They don’t have a smartphone that can compete even with Windows Mobile. They used to have a clear lead in the UI department but that has eroded to zero as the other cellphone makers have improved their UIs. There’s not one single device in their line up that interests me anymore.

    Also, it’s interesting to see how arrogant and/or naive many of these executives are…

  5. Yah, well…no one needs the Universal catalog as much as one needs “a universal catalog.” We still need competition to keep Apple on “our” road and not just on “their” road. Look at Microsoft: monopoly begat immense wealth for the monopolists but shit for their customers.

    More than twenty years ago I said something similar about computers in general to a friend in a Japanese company, urging him to extend the company’s constructive partnership with Apple as much as possible. They bought NeXT’s hardware business instead (I wonder why).

  6. HAHAHAHAHAHAHAHA, Ok Nokia then go make a phone that is worthy of the revenue and I’m sure you could get it as well. Until then I am laughing my ass off.

    I love how these companies think just because they exist someone should pay them. So funny.

  7. Very interesting juxtaposition of views. True David and Goliath stuff. Nokia and Microsoft. How could they possibly loose. This upstart Apple has some good ideas. We will simply “cover them” with versions of our own. If there is a flaw to the plan it is Microsoft. They are so bad at what they do and so evil in their treatment of both the consumer and their partners that they just might fail.

    Apple does these things right from the consumers perspective. Obviously, theirs products are the ones to have. On the other hand they really have no partners at all. Are they big enough to pull this off? I think they are probably not big enough to bring down M$ and Nokia. I do think Apple will prosper as an upscale alternative to the main stream. They will also continue teach that main stream a thing of two.

    Isn’t it better that way? Isn’t Apple better as the alternative for those who know better? Wouldn’t a 25 to 30% share of the world be big enough?

  8. Well written, Mike! Of course, the SVP was going to naysay, as you didn’t give him a solution! You gave him the problem, Nokia doesn’t have a powerful enough, computer-based OS to wrap around their phone, but not the answer. Tell him they need Windows CE/Mobile, teehee!

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