Paid Content report ‘well informed music industry’ sources as claiming that Nokia have guaranteed Universal Music $33.5 per handset for Comes With Music. That works fine for getting UMG to the table and kick starting the subsidized subscription marketplace, but it doesn’t scale well if you want a full choice of catalogue. Add in the other four majors and the indies (assuming they’ll each want a fee that is proportionate to UMG’s based upon their respective market shares) and you’re up to over $130 a handset.
If this was just a MP3 player we’re talking about then you could make an argument for some small margins based off a premium consumer price point. But we are of course talking about phones, and phones that will also do many more things than just music and voice. And as such there’ll be complex subsidy and other such negotiations with handset operators and other content partners and internal content divisions at Nokia. So it’ll either:
• It’s going to have to retail at a very premium price point and thus price out much of the target young market, or
• Nokia are very bullish about how much additional revenue CWM will generate and it’s associated additional benefits (handset market share, customer retention etc)
Then, for the UK, add into the mix the UK music industry’s current call for a blanket license on MP3 players (to drive revenue from format shifting). Would this apply also to devices such as CWM handsets for which a license fee has already been paid? If the license proposal was adopted in legislation it would need to have a specific addendum to exempt devices with licensed content components. Otherwise that’s yet more on the cost side of the equation for Nokia.
UPDATE – Nokia have publicly rejected the claims that they are paying Universal such a high fee for the device.