Mobile makers shake up music biz

Nokia and Sony Ericsson threaten cellular carriers with their new music plans.

Mobile operators are losing their grip on the mobile-music business. The latest threats: a planned free service from handset vendor Nokia and a new music-downloading service from rival Sony Ericsson that will launch next spring.

Sony Ericsson plans to offer more than one million full-track songs that users can download straight to their phones or PCs with a service called PlayNow. It's a gutsy move, because PlayNow undermines Sony Ericsson's best customers, mobile carriers like Orange and Vodafone that buy hundreds of millions of phones.

"This is a larger step than what we've taken before."

Sony Ericsson, the No. 4 handset maker, has dabbled in services since 2004, offering games, ringtones, and a few songs from sister record label Sony BMG (SNE). But as Sony Ericsson head of content development Martin Blomkvist says, "This is a larger step than what we've taken before."

Sony Ericsson and Nokia are blowing caution to the wind - and a raspberry at carriers - because they have little choice. Apple invaded their turf by bringing the popular iPhone to Europe in November, along with a business model that sucks music users away from carriers and onto Apple's iTunes service. If the handset makers want to compete against the iPhone, it would help if they had their own music services. That's especially true considering that most mobile music in Europe and the U.S. lands on phones via sideloading (transferring tunes from PCs to handsets).

"What consumers are being offered today... is boring, banal and basic."

Universal Music has already agreed to make its catalog available to Nokia for an undisclosed fee, and other record labels, frustrated with carriers' mobile-music downloading sites, are likely to follow. "The sad truth is that most of what consumers are being offered today on the mobile platform is boring, banal, and basic," Warner Music boss Edgar Bronfman said at a conference in Macau in November. He noted that fewer than 10% of mobile-phone customers use phones to buy music, and fewer than 1% use them to purchase anything other than ringtones.

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