Firstly, like many people based in Europe, I have been a long term fan of Nokia.
However .. Today, it seems to me that there are three Nokia strategies: The emerging market strategy, The Internet strategy and the current favourite – the ‘media’ strategy i.e. to be the world’s biggest entertainment network. I think the first two are leadership personas. The third (media strategy) is reactive and a follower (of Apple). It does not make Nokia the market leader that it once was. In any case, I don’t think that even Nokia can execute ALL three strategies simultaneously – and in attempting to do so – is confusing the market, it’s customers and itself.
As I have said before, it is simplistic to do a comparison between the iPhone and Nokia
I hope that this analysis will be useful to many including Nokia itself. The comes with music strategy is interesting but not on a global basis in the near future i.e. creating the biggest entertainment media network – saving the artists etc sounds excessive and begs to be challenged ..
The Device industry today
Before we begin, a brief overview of the device industry as I see it:
Traditionally, mobile devices were based on a mass market strategy. There was little to differentiate devices – hence differentiation was based on factors such as aesthetics and price plans. Profitability was based on supply chain management i.e. simple devices mass produced and efficiently distributed. Operators also tried to focus on a wide range of devices to suit a variety of customers.
The iPhone changed all that.
Apart from the obvious (user interface etc etc), the market changed in more deeper ways
a) The iPhone demonstrated that it was possible to make a profit based on sales of a smaller number of devices. This contradicted the then prevailing wisdom
b) Mobile Apps gained in importance and became a source of revenue to the device manufacturers
c) Operator relationships changed(driven by the customer) – ex Billing was now manage by Apple through iTunes
But that’s just the beginning .. More is yet to come .. – Much of which I have covered in the OpenGardens blog previously
• Increasingly, we will see the device market emulate the PC market with more ‘white label’ devices.
• With Cloud computing (ex Azure from Microsoft) and social networks, data will reside in the cloud (and hence away from the device)
• Specialised services (ex: deep integration of Skype into handsets) and devices( like the INQ1 phone )will play an important part
• Open source and chipset integration will lead to many first time device manufacturers(like Dell)
• LTE will shift the emphasis to non phone devices and machine to machine integration
• The Smartphone price point will drop and we are already seeing a $100 price point. This means applications are likely to be more important as hardware becomes cheaper
• Net books are becoming more important – and that has an impact on devices since there is now a need for an Operating system that can transcend multiple platforms(notebooks – devices etc). Hence, the importance of Android and Maemo and the reduced importance of Symbian and Windows mobile in this new world
• The Web OS will also be important going forward(ex Google Chrome)
Consequently, rather than having ‘one of everything’ i.e. a broad-based strategy – Operators are now focussing on specific devices(iPhone, Palm Pre etc) and the customers have driven this change
Thus, ‘niche’ and ‘consistent’ wins .. And we see this played out very well in the state of play for the device market..
• LG and Samsung have a consistent policy working with US operators and are also likely to benefit from LTE.
• Motorola and Sony Ericsson are broad based and hence are in transition and are vulnerable.
• RIM is fast emerging as a serious player. RIM owns HALF of the US Smartphone market and RIM is named fastest growing company in the world by Forbes
• Like Motorola and Sony Ericsson – Nokia is also broad-based and this accounts for some of its woes.
With this background, we discuss below the media strategy from Nokia and why I am sceptical of it
The missionary man ..
Alex Kerr pointed me to a very interesting article which compares Nokia with the iPhone. Nokia Rocks the World: The Phone King’s Plan to Redefine Its Business
This is well worth a read .. And I have used that article for my analysis below
I loved the music (and video) of Eurythmics – and there is a song called the Missionary man whose lyrics include
And if I had a dollar bill
For all the things I’ve done
There’d be a mountain of money
Piled up to my chin…
Kind of reminds me of the business model here ..
All driven by music!
But lets take a step back … Only 10% of U.S. cell phone users listen to music on their cell phones, according to Forrester Research.
-so this is a contradiction if Nokia wants to use this strategy for acquiring US customers. But it gets worse ..
The problem with Nokia being a ‘media company’ aka world’s biggest entertainment media network
Nokia says: Our plan is to change the whole landscape of how music publishing works, and I think it is going to be a better direction for everyone
Why stop at comes with music? Why not go for ‘Comes with movies?’
Because content deals are VERY hard to do and the content industry has become wary of Geeks bearing gifts(Eric Schmidt with YouTube, Steve Jobs .. and now Nokia). (Having said that – it does not prevent Motorola from trying a ‘comes with movies’ idea with their partnership with blockbuster! )
Nor are Nokia the only ones with this idea – there is spotify and many more to come
None of the music deals are exclusive and merely having a large number of devices may not translate to the ‘world’s biggest entertainment media network’ since it ignores the tricky issue of distribution and discovery of content on a global scale
The Napster effect ..
People attribute the success of the iPhone/iPod to many things(and rightly so) – but they often miss one important and simple factor in the success of the iPhone.. The precedence of Napster. i.e. Steve Job’s TIMING was perfect! The music industry had a choice between napsterised and getting a 99c for their song. They chose the later i.e. the lesser of the two evils from the music industry standpoint. The rest is history .. But lets not forget the Napster factor and that it is ABSENT now .. Which means content deals are not likely to the iPod like ..
The world’s largest media network
And here were some more of my impressions about Nokia’s strategy from that article:
a) People read too much into Symbian/S60 etc etc i.e. the challenge is greater than mere technology
b) ‘Music’ is not the same as ‘culture’ – Nokia seem to think that it is (i.e. save music and we help artists and help customers)
c) Music’s problems are deeper. ‘Caring for the artist’ has a warm fuzzy feeling .. Easier to blame P2P - harder to acknowledge that the single (as opposed to the album) is a change for the music business. That won’t change with anything Nokia does – so not likely to help artists.
d) I doubt if Nokia can truly achieve economies of scale (release albums globally on Ovi alone). May be possible in the future at some point but not in the NEAR future
e) “It’s not only about music,” he adds. “It’s about paying.”
The problem is easy to articulate. Hard to solve. Not easy creating the payment mechanism and content discovery mechanism – in competition with Operators. This has been covered many times before i.e. – easy to articulate the problem – not easy to execute the solution
f) “I am claiming now that we will quickly be the world’s biggest entertainment media network.” –
Nothing new here .. lots of people are already there. Can Nokia uniquely use the mobile device to create the world’s biggest entertainment network? That would need using the phone to uniquely leverage the social capabilities. Possible – but not easy
g) Is Nokia an Internet company or a media company? Until recently, it called itself an Internet company (communications) and now seems to be a media company (content). The two are not the same. And certainly – it is hard to be BOTH!
Because the group is composed of music execs, Ojanperä then explains Nokia’s Comes With Music service, which offers unlimited downloads of more than 6 million songs (that can be kept for life) and is paid for with a fee built into the cost of certain mid-to-high-end Nokia handsets. “The two forces we are competing against are actually nonconsumption and piracy,” Ojanperä says. “If we can get people engaged with music and compete against piracy, then we have won the war. And we believe we are revolutionizing the way music is being consumed.”
I have never quite understood this – and I have directly asked Nokia people but got no answer – how EXACTLY do we share royalty with artists with the 6 million songs? (and it seems a fee built into the device cost) i.e. who knows the rev share and how is it decided when the ‘fee built into the cost of certain mid-to-high-end Nokia handsets’
i) Nokia plans to win that scale game.
No no no .. Apple did not WIN the scale game – it showed – contrary to popular perception – that you can make a lot of money on NICHE! this is OPPOSITE to scale .. Nokia ALREADY has scale
j) Nokia has always been a company with a conscience.
I worry when people say that .. I really do .. I used to work in a company which had ‘People’ for everything ‘PeopleCode’ etc etc .. Great company. Great people! Wonderful ethos. A company with a SOUL as they said .. However, when the chips were down – they did what everyone else does .. chop employees .. (people) for ‘performance’ reasons ..
k) ‘The company believes there are three reasons why people adopt new technology. The first is survival, the second is social, and the last is entertainment. The common thread among the three can be loosely described as culture,’
The understanding of culture is probably Nokia’s greatest strength .. note though that it is still a conceptual leap to tie culture – to music – to sales and profits
l) ‘if you get a dollar a month from 200 million farmers, that’s a good business’
This (and not the music) is probably Nokia’s biggest opportunity and they are best placed to make it happen
m) ‘The rollout of Ovi was a major step in Nokia’s effort to infiltrate the cultural turf now ruled by Apple’
What rollout? I don’t see it this way .. I don’t see Ovi to be as good an experience as Apple(at least so far)
n) Too much obsession with Dave Stewart and too many hopes pinned on this one person .. Now if it were Anne Lennox … But seriously – I question how iconic is Dave Stewart to the younger generation? Even in Eurythmics .. It was Anne Lennox who stole the show You can see I am a fan (of Anne Lennox – not Dave Stewart!) – which is the case with most people ..
o) “The reason I get on so well with Nokia is that we are both open-source,” Stewart notes
HA HA HA !! See previous point re Dave Stewart .. Does he (or anyone else) understand what really that means? For example – Is Nokia ‘Open source’?
p) ‘I’m an Apple person’ brand,”
To build a global media network – Nokia will need to be a global brand .. that’s a problem .. It succeeds in some places (India) very hard to do globally AND have a seamless network which enables the flow of content
q) Some of this gets cringe worthy to me .. too much fan worshipping .. very UNLIKE the Finns who are more stoic ..
“Maybe this is because of the social-democratic philosophy of the Finns, or maybe it’s just their humanity, but Nokia actually cares about artists.”
“He’s the one who can comprehend the two worlds of creativity and engineering and this vast enormous network and how they can possibly come together. It’s like he sees these two enormous ships floating in space yet moving hundreds of miles an hour; with Nokia, he can direct them to a docking point.”
r) He also tells me that while his ambition for Nokia is to be the biggest entertainment base in the world, it’s only part of an even greater ambition to be the largest network in the world — period.
We HAVE the world’s largest network. It is called the INTERNET. Betting against the Internet has not worked so far ..
q) As Kallasvuo says of Ojanperä: “Tero is looking more and more like Dave Stewart every day.” hmmmm … No comment ..
The problem is in the execution ..
Let me illustrate the problem even more .. While Anne Lennox in leather is always a good thing for viewers My favourite Eurythmics song is not the Missionary man .. but a hauntingly beautiful song called ‘Here comes the rain again’ filmed on the Scottish island of Hoy (‘hauntingly beautiful’ since in many scenes the two (Anne Lennox and Dave Stewart) are filmed separately, then superimposed into the same frame. The result is that the viewer may perceive one as being a ghost in the world of the other. source: wikipedia)
The problem is: you cannot see ‘Here comes the rain again’ in the UK on YouTube .. because the rights are not valid there(you can however see the Missionary man on YouTube in the UK) – Showing that rights negotiation across geographies is hard to do and customers/fans find the whole thing frustrating and perplexing i.e. no reason why one song is allowed – other is not. Not something Nokia can fix in a hurry
And when you DO see the missionary man on YouTube .. what do you see? An advertisement to buy the song from iTunes!
What does it mean? (No Eric Schmidt has left the board of Apple!) … It simply means that there are many others pursuing the ‘music’ strategy – the customer does not need the ‘world’s largest media network’ – if it can be achieved in the first place .. to buy, share and recommend music. Its already happening
There are many things going well for this great company .. especially a long history of successfully reinventing itself
Against that backdrop, a desire to be a mass market iPhone is strange .
The Missionary man song goes ..
Well the missionary man
He’s got God on his side. -
Good luck .. Nokia needs divine intervention to make this work ..
And if you have come thus far .. you might as well enjoy the Missionary man and Here comes the rain again
SINCE IT IS NOT ON YOUTUBE, HERE IS ANOTHER LINK TO SEE ‘HERE COMES THE RAIN AGAIN’ ..
Thanks for reading this. Comments welcome