Digital Noise: Music and Tech

It's been a long wait, but more than a year after Nokia announced its Comes With Music plan--free music downloads built into the price of the phone--the first Comes With Music phone is apparently coming to the U.S. in February.

(Credit: CBS Interactive)

According to The Nokia Blog, the Nokia 5800 Xpress Music (a.k.a. The Tube) will go on sale at U.S. retailers on Feb. 26 for a suggested price of $399. No carrier partners have been announced, so there's probably little chance of a carrier subsidy reducing the price at launch. CNET reviewed a preview version of the phone back in December and liked it fairly well, but I'm most interested in how the Comes With Music plan will stack up against Apple's iTunes.

According to the information CNET got back in October, when the 5800 was unveiled in the U.K., Comes With Music tracks will be playable on the phone and one PC, and will not expire after the year is up. From the reviews I've seen, it's truly an unlimited downloading service--there's no hidden limit, although Nokia's terms of use would let them cancel your service for "abusive or excessive downloading."

The experience is a little clunkier than iTunes from what I've read in the reviews. The phone comes with a card containing a code; enter that code into the Web-based Nokia Music Store and all prices in the store disappear. Everything has to be sideloaded--there's no direct over-the-air downloading to the phone as you can do with the iPhone--and it's PC only. You can't transfer the songs to any other phone, even another Comes With Music phone, nor can you burn them to a CD without paying extra. Songs are encoded in the Windows Media Audio format (which I've always thought is an excellent audio codec, for all of the other flaws with Microsoft's digital media strategy and products), and of course come with DRM to limit what you can do with them.

Still--everything you download lives on your PC forever. So while $399 is a significant premium over the iPhone, add in the price of a few thousand PC-tethered downloads, and it looks pretty competitive. At the very least, it could be an extremely convenient way to discover music--you can always buy full CD-burnable tracks of the songs you really like, then transfer them to other devices in other formats later on.

Will it make a dent in iPhone sales? Not without a carrier agreement, no.

One more detail about the latest Zune update: the Zune Pass, which costs $14.99 a month, is now going to allow users up to 10 permanent downloads per month. That's in addition to the unlimited downloads that expire if you stop paying your subscription. Think of it like an insurance policy for Zune Pass: if your Zune breaks and you decide to switch to another brand of MP3 player, you'll still get to keep some of the songs you downloaded.

Soon, you'll be able to get 10 permanent downloads a month with a Zune Pass, in addition to unlimited music as long as you keep paying $14.99 a month.

(Credit: Microsoft)

I believe that Microsoft is the first company to offer free permanent downloads alongside unlimited temporary downloads. Subscription service eMusic does sell permanent downloads, but limits you to a certain number per month. Nokia's Comes With Music might offer more bang for your downloading buck, as it allows you to keep all of the songs you've downloaded during a one-year period. But those songs are DRM-protected, limited to your phone and one PC, and can't be burned to CD. In contrast, Zune's music catalog is about 85 percent MP3s. (Microsoft also announced that it's added songs from Universal Music and Sony BMG to its MP3 catalog, along with Warner, EMI, and a lot of indies.) This means a lot of the Zune permanent downloads will be completely unrestricted.

Is all this going to be enough to wrest some market share from the iPod, or even help Microsoft overtake number-two SanDisk in the MP3 player space? Probably not this year. But given that the Zune devices are just the first shot in a long-term plan to become a major digital audio and video distributor, I'm not betting against Microsoft. Look how long the company was willing to spend money on the Xbox business before it became a real player in console gaming.

I've written about Nokia's Comes With Music service several times, but the service officially kicked off Wednesday in the U.K. And the first hands-on reviews--from Music Ally and IDG News--are mostly positive.

The Nokia 5310 Xpress Music is the first phone to support Nokia's Comes With Music initiative.

(Credit: CNET Reviews)

In particular, reviewers are praising the PC software's intuitive interface and the relatively painless registration process. Access to the free music comes courtesy of a code printed on the inside of the phone's box. Downloads are almost unlimited, although Nokia has a clause that warns it might temper downloads if a certain undisclosed average number of downloads per user is reached.

The big problems: no burning to CD unless you pay per download, no over-the-air downloads, and a slow transfer time from PC to phone. Nobody seems to be gasping too much at the fact that the songs are in Windows Media Audio format and are DRM-protected, meaning you will never be able to play them on an iPod or other device if you ever grow tired of your Nokia phone.

I'm still having a bit of trouble figuring out the target market here. Digital music fans...who want to download a lot of new music without paying for every song and have never heard of free file-sharing...and who want a choice of phone types at different prices (the 5310 has PIM-like capabilities but isn't a smartphone, while the 5800 is a full smartphone with touch screen and more)...but are Nokia loyalists and don't intend to play their downloads on any other portable device, ever. How many people fit into all those categories?

Update 10/3: CNET's Bonnie Cha, with the assistance of a Nokia rep, has answers to many of these questions here. To summarize, Comes With Music really does offer unlimited downloads for one year, tracks are DRM-protected, and can be shared with one PC and other Comes With Music members but not burned to CD without an extra purchase, and release date for the U.S. is still up in the air.

Several sources are reporting that Nokia's expected to launch its would-be iPhone killer, the Nokia 5800 (code-named "Tube), tomorrow, Oct. 2, at an event in London. Based on leaked pictures, the phone itself looks pretty cool--a lot like an iPhone, in fact. But the big question for me is whether Nokia's music software and service will be competitive with Apple's iTunes.

This photo, rumored to be the upcoming Nokia 5800, appeared on Flickr back in April.

(Credit: Crave UK)

Announced last December, Nokia's Comes With Music initiative has a lot of promise: instead of buying individual songs (like iTunes) or paying a subscription (like Rhapsody, the Zune Pass, and others), the cost of downloading music will be built into the price of the phone. Now, the service supposedly "launched" on Sept. 2 in the U.K., but the Nokia U.K. home page still has a form for users to indicate their interest in the service. No pricing, no details. Meanwhile, press speculation is all over the map. Most folks are assuming it'll come with unlimited downloads. But The Guardian Music Blog has done the math about royalties and concluded that there will be some sort of limit on the number of downloads. (I speculated the same thing back in April.)

So here's what Nokia needs to announce tomorrow as they roll out the 5800:

How much will the new phone cost? (If it's more than the iPhone, good luck.)

What will users be able to do with those downloads? Will they be tethered to the phone? (No thanks.) Protected with DRM? (This may be acceptable if the restrictions are reasonable, although this means that downloads will probably not be playable on other devices if you ever give your Nokia phone up in the future.)

Will the downloads ever expire and become unplayable? If so, after what period or under what conditions? (This would be a deal-breaker for me--I don't want to redownload every time I buy a new phone--but might be acceptable for users who don't have huge libraries of downloads.)

I await the announcement when all will hopefully be revealed....

Some details are starting to emerge about Nokia's Comes With Music phones, which will come with the right to download music at no extra charge. According to a report yesterday on PaidContent.org, Nokia will pay Universal Music Group $33.50 per handset for the first 2.5 million sold, with the rate dropping after that.

Nokia will reportedly pay Universal about $35 per phone to allow users to download songs at no extra charge.

(Credit: Nokia)

It sounds like the download model will not be strict all-you-can-eat, but instead will be similar to eMusic--users will be able to download a limited number of songs over a certain time period, and those songs will be theirs to keep. It's not clear what happens when the period's up--the latest reports say that Comes With Music will not be a subscription model, so perhaps users will just be able to add a la carte downloads after their time expires.

As I've said before, any music service that's limited to a particular label will fail--music buyers don't shop by label, and often don't even know (or care) which label their favorite artists are on. So assume that Nokia signs the other majors and a few big indies for the same rate. Glenn at Coolfer estimates that such a deal would cost Nokia $116.32 per phone.

Hypothetically, imagine Nokia or the carriers subsidizes some of the cost to get the program rolling, and charges an extra $80 per phone. Most cellphone contracts are two years long, so it would make sense for the free music download period to last the same amount of time. So the last variable would be number of songs. How many songs would they have to offer to convince you to buy a Comes With Music phone?

My next phone's probably going to be an iPhone--the interface, apps, and browsing are excellent, and I seldom purchase music from iTunes anyway, so the $0.99 per song seems fine. To be swayed to buy another phone, I'd want enough content to fill it--say 1,000 songs. Otherwise, I'll just stick with my current MP3 players. But the labels are probably imagining a number closer to the $0.99-per-download paradigm that still rules the industry--say 100 songs.

Just like Apple launched a video iPod after Steve Jobs dismissed the idea of a portable video device, the company is now reportedly considering new business models for selling music, including subscriptions, despite Jobs' assertion that downloads make more sense.

According to a report in the Financial Times, Apple is talking with the major labels about letting consumers pay a premium for new iPods, then receive the right to download and listen to as much music as they want for a certain time period, along with the right to keep 40 to 50 songs permanently. Negotiations are apparently underway to determine the exact amount of the premium, with Apple holding out for $20 and the labels believing that consumers will pay $100. Apple may also be considering a straight subscription-based music service, but only for iPhone users, who already receive monthly bills from their cellular carriers.

The model sounds very similar to Nokia's Comes With Music model and Omnifone's MusicStation Max, both of which are slated to launch later this year.

This type of model acknowledges the way that serious music fans have chosen music for the last few years now: by sampling a wide range of compressed digital files for free (usually via file-trading services or from friends), then buying a select few albums in a higher-quality physical format (usually CD, sometimes vinyl). Consumers win by no longer having to sift through spoofed and low-quality files, although the real benefit will depend very much on specifics--how much Apple charges, and how long users are allowed to keep how many songs. The original FT report suggested there'd be no time limit, but CNET's Greg Sandoval has apparently heard that a subscription would be required after six months or a year in order to continue listening to files downloaded under the program.

Apple would helps the record companies earn some money from their normal behavior, rather than alienating customers (and facing increasing legal risks and expenses) by suing them. And Apple makes far more money from iPod sales than iTunes downloads, so using this technique to boost sales would more than make up for any loss of download revenue.

My fellow blogger, Don Reisinger, thinks the labels will only agree to a service if it's so crippled as to be worthless. I wouldn't be so sure--their strategy of ignore, delay, and sue clearly isn't working, and they all want a piece of the iPod phenomenon.

Yesterday, U.K. music download provider Omnifone announced a forthcoming program, MusicStation Max, that will offer cell phone buyers unlimited free music downloads. Of course, "free" is never free, and in this case, Omnifone is enlisting handset makers to subsidize the estimated cost of the downloads and pass that cost along to you in the form of a higher up-front price for the phone. So far, LG Electronics is the first cell phone maker to sign up for participation in the program. No confirmation yet on carrier partners, but the service builds on Omnifone's existing MusicStation subscription-based music download program, which has more than 30 carriers signed up worldwide, including Vodafone in the U.K. (No U.S. providers, however.) It's supposedly due out in the first half of 2008.

Later this year, MusicStation Max will offer unlimited free music downloads to LG handsets.

(Credit: Omnifone)

MusicStation Max will give carriers some leverage against Nokia's forthcoming Comes With Music service, which is due out late this year. That is, if people like the idea of paying a bit more (how much?) up front for free music downloads, carriers will be able to offer them phones from other handset makers, and won't be locked into Nokia's hardware, service, or prices.

But that's the big question: will people like the idea? With both services, there's an expiration period after which customers either have to buy a new phone to keep using the download service (although they will be able to keep the songs they've bought), or move to a monthly fee. Similarly, songs will be playable on phones and PCs only, and won't be burnable to CDs or transferrable to other types of devices.

So the success of such a service depends on whether people are truly ready to make their cell phone their primary source of and playback device for music. I know that people live on their phones, but I think an Internet-connected computer's hard to beat--you have nearly infinite selection and pricing competition, immense flexibility once you've gotten the music onto your computer, and the ability to hook it into all sorts of playback hardware for better sound quality.

Regardless, though, both Nokia and Omnifone are taking important steps toward the only logical future business model for the music industry, in which the cost of unlimited "free" music is subsidized by pooled payment from customers to some third party, be it ISPs, hardware manufacturers (PC, portable music player, cell phone, flash memory stick, whatever), or music software companies. That's the only economically sensible way to compete with piracy.

I stopped by the packed Nokia booth at the Consumer Electronics Show in Las Vegas to get an update on the Nokia Music Store announced over the summer. It's already online in the U.K. (PC only), with a library of nearly 3 million songs.

Will the Nokia Music Store PC app be as attractive (and popular) as its CES booth?

(Credit: Matt Rosoff)

The Web-based store looks fairly standard. But according to the folks at the booth, later this year Nokia will launch an associated desktop PC application that promises some unique features, including the ability to transfer songs directly from the store to an attached phone via drag and drop (no stop on the PC necessary), and over-the-air sync of playlists from the phone (created on the fly) to the PC. Interesting, but I still think selling DRM-protected WMA files is going to be a problem for it.

Yesterday, Nokia announced a new initiative, Comes With Music, that will offer "free" music to purchasers of certain cellphones. It's the first outgrowth of Nokia's Ovi brand, which the company announced earlier this year. It also seems to be the first implementation of Universal's Total Music plan, in which device makers bundle a music subscription on new devices and add the cost to the price of the device, rather than forcing consumers to pay the monthly fee.

(Credit: Nokia)

As with all such services, the devil's in the details. According to Ars Technica, there's an awful lot of deviltry going on.

First, the good points: unlimited downloads, yours to keep and play forever, playable on both a computer and your cellphone.

However...the downloads are protected with DRM. (Ars Technica reports that it's Microsoft's PlaysForSure system, but this doesn't sound right to me: Microsoft has a phone-specific DRM system, PlayReady, and Nokia was the first customer for that system, so it would seem odd for Nokia to use a three-year-old DRM system designed for portable and in-home devices instead.) Regardless of which system it's based on, the DRM will reportedly not allow users to burn tracks to CD unless you buy the download again--this closes the analog hole by which users could download a million tracks, burn them, re-rip them to MP3, and post and share wildly. Also, any track protected with a Microsoft DRM system almost certainly won't be transferable to Apple's iPod, and might not be transferable to other types of MP3 players either.

But here's the oddest part: after your year's up, the subscription expires. You get to keep whatever music you've downloaded, but if you want to continue downloading new releases, you'll apparently have to buy a new phone. And Nokia's not yet saying how much extra these Comes With Music phones will cost.

As Saul Hansell points out in the New York Times, Comes With Music/Total Music is at least a good stab at an alternative business model. The current model's certainly not working for the industry. But these "free" tracks have to compete against millions of MP3 files that are already out there, and are actually free in every sense of the word--no cost (free like beer) and no usage restrictions (free like freedom).

Here's an alternate suggestion. Remove the DRM restrictions, but put a monthly limit on downloads so users can't download every song ever recorded then cancel their subscription and keep the music. Maybe 500 songs or 50 albums--that's a very generous amount for even the heaviest music fan. When a certain time period's up--say, a year--start charging for the subscription. A plan like this would still offer significant advantages over file-trading networks--over-the-air downloads, no legal risk, sound quality assurances, no false file names--while being "free" enough in both senses of the word to keep users around.