5 Comments

Summary:

Nokia says its buying the Seattle-based digital music company Loudeye for $60 million, which aggregates content and rights from music labels for distribution across mobile, Internet and other platforms. Nokia said it is paying $4.50 per share. Loudeye’s stock had sat under $1 for weeks, mostly […]

Nokia says its buying the Seattle-based digital music company Loudeye for $60 million, which aggregates content and rights from music labels for distribution across mobile, Internet and other platforms. Nokia said it is paying $4.50 per share. Loudeye’s stock had sat under $1 for weeks, mostly because investors did not give the money losing music service any chance of making it to the black. It had lost $4.6 million for the first quarter of this year on sales of $8.7 million.

Loudeye previously sold its U.S. assets to Muze, which included the technology used by AT&T and O2 Germany. That was indication that there was a firesale in progress. Loudeye’s other technology, the “OD2 Platform” is used by many more companies in Europe and comes from a company co-founded by the pop singer Peter Gabriel and bought by Loudeye in 2004, says a Loudeye spokesperson.

Loudeye’s troubles are emblematic of the bigger issues around mobile music downloads, which have been slow to take off. (Update: Rafat leaves an insightful comment which explains Loudeye’s problems succinctly.) There is a school of thought that 3G would change that, as faster downloads could make it easier for consumers to buy music on their mobiles. Nokia’s new multimedia phones such as N91 are geared for those kind of services.


That’s what Nokia is buying and plans to launch a branded mobile music service , which could include devices, and the ability to purchase digital music, in 2007. The Post points out that Nokia sold more than 15 million music-enabled phones in April to June, roughly double the amount of Apple’s iPods and making it the world’s largest manufacturer of digital music players. With the amount of iPhone rumors out there, Nokia is gearing up for a mobile music fight.

However, the service could put Nokia in direct conflict with the mobile music service plans of various service providers such as Vodafone.

  1. How stupid is Nokia ?

    “Nokia said it is paying $4.50 per share. Loudeye’s stock had sat under $1 for weeks, mostly because investors did not give the money losing music service any chance of making it to the black. It had lost $4.6 million for the first quarter of this year on sales of $8.7 million”.

    Share
  2. Erik Schwartz Tuesday, August 8, 2006

    The problem that loudeye (and many others in the space have) is that the margins on music in general are dreadful. If you’re business is getting a slice of the retail margin you’re in trouble.

    Share
  3. Katie
    Loudeye’s troubles had nothing to do with the issues in the mobile music industry…it had everything to do with two things:
    — the low margins business of online music
    — the troubles Loudeye had in coming up with a mobile music solution working with Nokia since 2004. These were management and technical issues, not so much anything to do with “the bigger issues around mobile music downloads”, as you put it. Though those issues in and of itself are valid, but not just in this case.

    Share
  4. Nokia tried to make a direct-to-consumer play years ago with “club nokia”. They were eventually forced to take it down (or most of it) as the carriers freaked out. The problem is that, in markets where carriers dominate (ie most of the developed world), carriers are not happy when handset manufacturers try to get service revenue from their customers. Will be interesting to see how this pans out. Will Nokia go around the operators? Will the operators let them? (Don’t forget the operators can largely control what software is pre-installed on the handset.)

    Share
  5. How stupid is Nokia? They paid $4.5 a share for a company that had dropped to under $1 a share.

    What would have happened had Nokia paid $1 per share? The Loudeye employees, who have been dreaming for years of ‘going big’ and maybe a fortuitous buyout, would have been shafted. Nokia could have, but it would have been opportunistic vulturism, and the people who’d be hurt most will become Nokia employess, and will work on this new Nokia product after the buyout.

    The bottom line isn’t as simple as “nokia could have saved $45 million”. I work for avvenu, which was also recently acquired by Nokia. We feel like Nokia’s taking good care of us, and we’re doing our best to bring our product to market under Nokia’s name. Nokia takes care of us, we take care of Nokia.

    Also, you can’t look at this purchase simply in terms of “Nokia’s getting into music distribution.” Go to the OVI site, check out the whole platform (which at this point is still very exploratory). The idea is to create a whole transparent easy platform across peoples’ devices and PCs, which can do most common tasks with a couple clicks.

    Share

Comments have been disabled for this post