Finnish vendor Nokia announced an extension of its mobile music platform on Tuesday, with the unveiling of a subscription service that allows users to keep their music.

At its annual investor day in the Netherlands, Nokia announced its ‘Comes With Music’ platform, that enables people to buy a Nokia device with a year of unlimited access to millions of tracks.

Once the year is complete, customers can keep all their music without having to worry about it disappearing when their subscription is over. [see telecoms.com for the full story]

This is very similar to Nokia’s purchase and inclusion of mapping software on high-end devices (something we discussed in the Mobile Marketing panel at the MoMo Summit). The buzz is that “it’s all about content” — that future revenues are going to be driven primarily by content.

Take a look at how Apple’s iTunes fits into its strategy: revenues are huge at 36%, but the importance is in the content’s role in driving sales of the iPod and computer hardware lines. That lesson hasn’t been lost on others. Think Amazon and Kindle, Nokia and Ovi, Sony and their upcoming revamped music store.

But is the buzz true as a trend?

What do these activities say about company strategy? Where are these players expecting their future revenues growth to come from?

1. Hardware sales? The device is the money maker, with higher prices/differentiation justified by including free content — sales of devices driven by consumer desire for the “free” (or premium) content included; or
2. Content sales? The hardware is a one-off sale, but the ongoing revenues from online content and subscription sales are the real money-maker; or
3. Something else entirely?

It’s clear that the future of computing in general — the big future — is in mobile. Desktop computers, home media centers, and laptops will be nice CE moneymaking appliances, like microwaves and large-screen TVs. Sure, they’re more necessary than luxuries like designer espresso machines, but you can live without them, for example, if you are struggling to pay off student loans.

Mobiles will be like refrigerators or washing machines. You just can’t manage without them. That’s already true now, but at the moment it’s more of a psychological need to not miss anything. As mobile email improves, flat data plans roll out, web browsing becomes usable, phone memory grows to accommodate video and audio entertainment realistically, downloading becomes easier rather than sideloading… as those things happen, the mobile device will be completely embedded as the primary computing device in fact, not just in theory. As the N95 ads say, “it’s what the computer has become” and it’s true (but not of the N95, I’m afraid).

The “content driving sales of content” model: Amazon’s Kindle appears to seek its profits not on device sales, but on opening the market to ebook sales. Is this how they intend to compete with Google’s devaluing of books… by making books affordable through non-printing? Cutting out of the loop the paper, the printing, the ink, the distributor, the store? Making it palatable by including the cellular connection? (Worthy of note: O’Reilly Radar)

The “content driving sales of hardware” model: This appears to be Nokia’s: rolling the cost of the content into the hardware, and keeping the content free by owning it themselves and amortizing the cost over tens of millions of hardware units.

The “content driving sales of advertising” model: Google. The evolution of the tried-and-true broadcast television model. It certainly works for Google. Will we see the day when Google struggles to maintain its advertising value as broadcast networks have? Surely a company is incubating somewhere that will eventually grow to challenge Google’s dominance… then what?

The “hardware driving sales of hardware AND content” model: Although you might argue that people purchase iPods because they want to use iTunes Music Store for price and ease of use… I wouldn’t buy that argument. I would believe that after the hardware sale, the content is a huge follow-on market.

If Nokia is trying to emulate Apple’s model, why are they including all this free content? It erodes the follow-on possibilities. On the other hand, follow-on content sales for mobile devices have been anemic all along (ringtones, music, video, mapping, whatever). So… is Nokia taking for granted that follow-on sales are not that valuable for some reason on this platform? Or are they betting that by getting people to use the content, later on (say, in two years) they’ll be unwilling to give it up, and will pay for subscriptions, and that that will be worthwhile?

I’m not a believer in educating the market. You see, once people become accustomed to not paying for content (eg, television programming), it’s hard to get them to pay for that same delivery later on. What you CAN get people to pay for is previously free content in a more convenient delivery (think buying a song via iTunes for “only” $0.99 rather than hassling to load a CD that’s down in the basement).

What do these models all have in common? With the exception possibly of Apple’s hardware business*, everyone is trying to figure out how to harness desire for content as a driver for sales of whatever it is they sell. Or how to change what they sell in order to make it driveable by content desire.

Why does content desire matter so much? Content is what you experience when you use the device. It is what brings you back again and again to use the device — you want to talk to someone, you reach for the phone. You want to hear a song — you reach for the iPod. You want to watch a movie — you reach for the TV remote. Only now, you can just reach for the mobile phone to do any of those things. It’s the mobile-able content that matters most, because it’s wherever you are.

* You could make a decent case that Apple’s “hardware” sales are actually sales of experience: combined hardware and operating system. Consumers pay more for Apple’s products not because they are beautiful, although they are, but because they want the usable, beautiful, stable operating system and applications. Which are themselves content, in a way.

You couldn’t miss Amazon.com’s new Kindle device if you visited their site today. It was the main attraction. Kindle, Amazon’s own e-book (a mobile computer specifically designed for reading digitized books) is being set up in direct competition to Sony’s e-book “Portable Reader System”. Both utilize the new e-ink display technology, which draws virtually no power when on, except when the screen refreshes.

Sony has been working on their product for years and years now. It’s only recently that the newest version (2.0) has gotten good enough to really garner the interest of the greater consumer electronics world. Even with the fabulous industrial design that Sony brings to their e-book, and even with years of testing the waters of the market, estimates on product sales are in the thousands of units.

Why hasn’t the market been more welcoming? Perhaps it’s a simple matter of solving a problem that doesn’t exist. Americans don’t read on the go much; if it’s digital, it’s on a PDA. Japanese read manga and novelettes on their cell phones. Why own another device to carry around (after all, you could just bring a book)?

Or maybe it’s the price. At close to USD$300, a Sony e-book is a substantial investment. You can buy a good stack of books for that money.

Or maybe it’s a straightforward case of user experience: reading is (mostly) pleasure and relaxation. Otherwise, you’d be online researching something. A computer just doesn’t have the feel of a book in the hand, just doesn’t feel the same to the eye, just doesn’t feel… like a book.

Why does Amazon think they can do better in this market-that-might-not-be-a-market?

Let’s be blunt: they’re not going to succeed on product design. Kindle is the most incredibly awful looking product I’ve seen in years. It looks like a cross between a Motorola Q and a pack of dental floss. It doesn’t hold a kindle candle to the Sony’s elegance.

Telecoms.com offers a reasonable answer: it’s about the business model. Whereas Sony makes their money on hardware (yes, I know that the hardware manufacturers are moving into online content sales), Amazon makes their money selling content. Take a look at the Telecoms.com link. It’s an interesting premise.

What should strike you most is the offer of free data. The cost of the cellular connection is included in the cost of the device. What a concept! Most countries are still struggling to bring flat-rate data to the masses; Amazon is upping the ante to no-rate data.

Might this be more than just another e-book? Might this herald the future of the always-on, always open network?

Update [Nov.  26, 2007]: In follow-up to the points made by Telecoms.com, it’s worth noting a comment left on Robert Scoble’s blog:

56. One thing about the Kindle introduction that sticks out to me-Bezos saying this isn’t a device, its a “Service”.

I’m guessing the 1.0 hardware is just something they had to do to get things started-but they must have a bigger strategy here. I’m wondering if Apple is going to release:

a) an update to the iPhone that can access the Kindle “Service”

b) a Tablet Mac that can access the Kindle “Service”

(Steven Levy even dropped a hint about something in his Newsweek column-”(I’ve been reading Boswell’s “Life of Johnson” on my iPhone, a device that is expected to be a major outlet for e-books in the coming months.)” )

Comment by Totoro — November 25, 2007 @ 8:13pm

Watching my son play his new Nintendo DS (purchased in the electronic wonderland of Akihabara), I’m struck by two exceedingly important differences between his gaming experience and my own as a kid. I’m from the original video game generation: Pong, Commodore 64, Pac-Man, and Q*bert.

First major difference: Not feeding quarters into the machine. Even now, most young kids would find a couple of dollars a lot to spend just to play a game. 25 years ago, popping $3 in quarters was a substantial amount of money — a whole week’s generous allowance, if you had an allowance. Arcade games showed up not only in arcades, but in lobbies and other public spaces, almost like vending machines. They were a way to gather a crowd around you, or to “kill” some time.

Which kid today has paid for turns to play a computer game? We have games in our phones (parents and kids), we have $2 handheld counterfeit Tetris games, we have home gaming consoles. Surely this has changed the game experience by reducing tension and encouraging risk-taking. When it doesn’t empty your wallet, getting out is no big deal: you just start over again.

The second major difference that strikes me is the Pause button. I can’t remember ever having the ability to pause Frogger or Space Invaders (even the handheld ones) so that I could scratch an itch, listen to my mother, or answer the phone. The impact is similar to the impact of the personally-owned game: reduced tension, and increased risk-taking.

Some other memories associated with those early years (4th-6th grade, about 1980-1983):

• The first time I played Pong. Pong brought out sudden, hidden reserves of aggressiveness, competitiveness, the need to win and win against someone else. Those unexpected visceral responses to the simplest possible game are proof, if any were needed, that graphics are not the essential driver in gaming experience. (If you’re still not convinced, compare Wii sales with those of the XBox or Playstation3.)

• My father brought me a handheld Donkey Kong from Japan (from Akihabara, for all I know) sometime around 1981 — well before any of the other kids in school had anything like it. It wasn’t so different in form factor from the DS of today. I had more fun with that Donkey Kong that with any game I’ve played since. Later on I had a mini arcade-shaped Frogger. The greatest thing about that Frogger was that the opening jingle was the tune of Maigono — the only Japanese children’s song that I retained from my early years.

• Then there was the game on our Kaypro II (one of the first portable computers ever sold, if you call putting a handle on a 30 lb. suitcase portable). The game was sort of a Donkey Kong knock-off, with graphics set in ASCII characters. Eating dollar signs gave you bonus points, the surfaces were made of dashes and “o”s, and so on. As I recall, you controlled your character with the arrow keys, and jumped using the space bar. I spent a surprising amount of time playing with what looked like a corrupt spreadsheet.

• Video Arcades. There was such an electric sense of excitement when you went into an arcade, very much like the feeling of walking into a casino in Vegas. The dark room, the bright flashing lights, the noise, the intensity of the players. The tension was energizing, but also overstimulating. Interestingly, I also remember taking a deep breath of relief when I walked out of the arcade. I don’t know if I was reacting to the intensity, the pressure (to get the most out of each quarter), or the disappointment of losing (you always do, after all).

One of my classmates had a videogame birthday party. His mom took us all to the arcade and gave us each a stack of quarters to play with. It was so cool and so hip that no-one mentioned that it wasn’t a great party. It was 10 kids each doing their own thing, but we said it was great, because it was such a cool thing to do, and in 6th grade, cool counts even more than fun.

• Arcade games. Today’s handhelds give a more controlled gameplay, but you don’t need get to slam the joystick around. Buttons are fun, and home consoles often have joystick controls, but nothing matches the primal satisfaction of really crashing an arcade joystick against the counterweight of a huge gaming machine.

• The summer between 5th and 6th grades was the prime of my gaming experiences (I retired early from the field of combat). When I think of Ms. Pac-Man, I call up also: Eye of the Tiger (theme song from Rocky IV), the Sand and Sea Club, riding around in the big camp van, and playing tennis. I suddenly feel the warm sand between my toes, the heat of sunburned cheeks, the saltiness of the ocean and the potato chips. My memories of pinball are not nearly so powerful.