Nokia’s “Comes With Music” Model is Uncompetitive?

As 2007 came to a close, Nokia announced an exciting initiative that awarded a year’s worth of unlimited free music downloads to purchasers of a new N81 handset. The name of the service, “Comes with Music”, might not be the most creative moniker but the service itself is a breakthrough. At first CWM only included Universal’s catalog but we all learned late last month that EMI has now hopped on board as well. The concept is attractive to end users and the music industry alike; users get to download as much free content as they can for a full year and the music is theirs to keep with no expiration, and record labels increase revenue. Win, win. The latest related news swimming around the internet is that Nokia’s deal with Universal has them forking over between $30 – $35 per handset sold that is bundled with CWM. A presumably similar deal was struck with EMI so let’s call Nokia’s cost $60. Several bloggers are postulating that the weight of this cost is too much for Nokia to bear. The complaint is that all or a large percentage of the cost of CWM will be built into the handset, resulting in retail prices that are not competitive. Really? Let’s say Nokia’s cost is $60 and they conservatively absorb 30% of that, or $18. That makes the CWM handset $42 more expensive than the same handset without CWM. Is that not competative? If Nokia offered to sell us a CWM-less handset for $400 or the same handset with a year’s worth of unlimited free music for $442, you can be that we’d be in for the latter. Think about it; $42 is just over the cost of four iTunes albums but you don’t get four albums, you get unlimited music for a full year! Is that really uncompetitive?

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