“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.
I was thinking the same thing. I mean… MIke just stated a problem. And things could have been different. IT just so happened that the companies that Apple partnered with didn’t fully understand how to leverage that position (see HP, Motorola)… They were mired in old business practices and didn’t see what was really afoot.
How are the people in this industry (mobile phones) so utterly stupid? Nokia has no leverage to ask for (let alone demand) revenue sharing of any sort. The reason Apple could do it is that they offer a product that no one else can match (True internet browsing, Visual Voice Mail, and a video iPod/Phone combo).
Nokia offers nothing that Samsung, Palm, or RIM don’t already offer. Their “services” are pathetic “me, too” attempts to keep up with Apple.
Even MORE stupid is this idea floating around that the carriers are planning to make money on ad revenues by somehow displaying Ads on phones. I can tell you right now that I will NEVER sit through an ad on my phone. If my carrier tried that, I would switch immediately.
I think the Apple Inc. as BMW comparison works well. While the are in the same business BMW and Ford are competitors but compete only on a few products. Apple will not sell more phone than the large cell phone companies, it doesn’t apprear to me they are out to sell phones to 90% of the population. Nor do they have to sell to that many people tpo be successfull. Nokia probably will be a very successfull company regardless of what Apple does.
But in the smartphone market they are going to get their asses handed to them. They will never match iPhones ease of use with any of the cell phone OS’s out there. The iPhone will stay ahead for 2-3 years just because no one else has a credible OS to run a highend smartphone well.
MS will have to start from scratch and the Google one hasn’t been seen yet. Nokia need only worry if they see their future growth in smartphones…they are screwed. If they want to build clever and cheaper commodity phones they will do well.
Jim – TIV: Something tells me Mike in Helinski is going to be polishing his resume a bit in the next few days. Unless the “who was active” means he got out while he could.
From his piece, it sounds like he is no longer with Nokia. He refers to Nokia with words such as “they”, “them” and “their” instead of “we”, “us” and “our.” He no longer includes himself as a part of Nokia.
Of course what isn’t being recognised by most people is that eventually all phones will be ‘smart’ phones of one sort or another with varying degrees of smartness. the dumb phone that is the bulk of the market at present and in particular the core of Nokia’s range and domination is heading for a medium to long term dead end. Apple just needs to have a strong position in the smartphone market to see the market as a whole come to them.
As for Nokia and Microsoft it seems that the former has learnt little from the Microsoft IBM partnership which ignited the desktop computer industry, one that Microsoft (for now) dominates and IBM has exited. Microsoft wants Nokia’s market and any such partnership if successful will only deliver that all the sooner.
A number of MDN forum contributors have pointed out over the last few years that big companies can fall – sometimes very fast and hard. There are precedents.
M$ has a lot of money and still has a strong, but slightly declining grip on the operating system and office productivity suite markets. However, to the best of my knowledge M$ has been a multi-billion dollar failure in virtually every other major endeavor. M$ has found it impossible to quickly buy the success it craves in these markets, although only time will tell if the investments pay off in the long term. I wouldn’t bet on it.
“AppleGoo”
Beautiful!
These two are maybe the only ones really changing things right now. Who else?
Mike points to the elephant in the room when he says that Nokia don’t have a desktop to go with their handheld devices.
And they may have a handlheld OS, but I’m not convinced that’s up to much either. I’ve got a Nokia and it’s OK, but it’s a few years old now and looking its age, while I don’t know what they have now is much better. If phones are getting “smarter” and smartphones are eating the PDA market, is Symbian really up to it? We know Palm’s OS isn’t. Heck, Palm are even abandoning their own OS and dabbling in horrible Windows Mobile. And doing deals with Microsoft, as has already been observed by several people, is madness of the first water, anyway. A glance at their history – and court cases – should tell anyone that.
Nokia have launched a Linux tablet. Maybe Linux will be the way for them to go on all their lines. At least they’d have something solid underneath … not that they’d have anything like the Cocoa frameworks to go on top. And no “Java will do” is not a good enough answer.
All these people really don’t know what’s hit them. Their technology just isn’t that good, and they’re not going to catch up in a hurry.
Here is a New York Times interview of Nokia! Came out today. They call Apple a “credible cellular newcomer.” A backhanded compliment, i.e., ‘newcomer’ means, ‘not as experienced as Nokia…”
Found it at Macnn
http://www.nytimes.com/2007/12/10/technology/10nokia.html?ex=1354942800&en=50b2f29b243294bc&ei=5088&partner=rssnyt&emc=rss
[Microsoft] 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.
Come on, Mike – no need to sit on the fence
” width=”19″ height=”19″ alt=”grin” style=”border:0;” />
Mike is correct from what I can see.
I always liked Mike in Helsinki, this just reinforces that impression. Great advice, Mike. Too bad it fell on deaf ears.
Apple needs to come up with a unlocked version of iPhone that can be used on T-Mobile. Can’t use AT&T;in my area.
The problem that I see for Nokia is that in order to warrant getting a cut of the revenues, they need to produce a handset with new features that so compelling that it makes it worth splitting revenues. Tugging on the coat tails of Universal and Microsoft doesn’t look like a winning formula to me. Insisting on getting a share of the revenues may make Nokia products less attractive to the networks and may reduce their market share.
Apple has already shown the way. Nokia are trying to make out that that they are the experienced players and Apple are the new kids on the block, but who is actually copying who ?
One further problem that I see for Nokia is that there doesn’t seem to be much brand loyalty concerning mobile phone handsets. Most of the people I know have had handsets from nearly all of the leading brands in recent years and wouldn’t hesitate to swap to another brand. But Apple customers have a legendary product loyalty that many companies envy.
It looks to me that Nokia are denying the world as it really is. I already thought that before I read Mike’s fascinating account, but after reading what he had to say, I’m even more convinced that they are fooling themselves and refusing to acknowledge the things that are obvious to everybody else.
One phone from Apple spoils the whole bunch boys.
This is Apple’s first phone.
The Mac made a change in the world and Apple has done it again with the iPhone.
Congratulations Apple.
Customers want the iPhone, and the next two models showing up on January 7th will let everyone enjoy a iPhone.
It’s your choice, highend G3 (gPhone) with 16 or 32 Gb of storage, mid-level Edge (iPhone) 4 or 8 Gb or the at the low end of the product line Google ready 700 Mhz (ePhone) 2 or 4 Gb.
Nokia better get back into the drawing board.
j
“so compelling that it makes it worth splitting revenues”
Bingo!
You’ve hit the nail on the head. Nokia is yet another in a long line of organizations that led their industry, became complacent, and is about to learn a very expensive lesson.
-jcr
Like Palm?
Spelling Police Alert:
The word is “LOSE” people, not “Loose”!
Thank you.
Oh yeah, and Nokia/Comes With Music will Go With Tail Between Their Legs.
Great letter, Mike! Some good observations.
Face it, there will always be a place for dumb-phones. There’s actually a big market for “just-a-phone”. Take a look, it’s on the flip-side of the iPhone trend and there are millions who just want a feature-itis free phone with long battery life that just works… NO PDA features, NO camera (PLEASE!), NO music player, NO calendar, NO web surfing, etc., etc., etc.. Just a decent, easy to use phone with a contact list. PERIOD.
I only have a feauture-itis phone, because that’s all you can get if you want Bluetooth. My next phone WILL be an iPhone.
Apple is smart to stay out of the dumb-phone market. Let Nokia and Motorola and Sony Ericsson and BenQ slug it out and bloody themselves in that space. Their phones fall into the “good-enough” market space, whether they’re flip, candy bar, slider or swivel models, they ALL essentially suck in equal measure. They just Suck Different™.