Nokia, Microsoft to boost mobile entertainment

A visitor talks on his mobile phone at the 3GSM World Congress in Barcelona February 15, 2006. Mobile-phone giant Nokia <NOK1V.HE> will start to use Microsoft's <MSFT.O> copy protection software to boost the use of wireless entertainment, like music and videos, the two companies said on Monday.

HELSINKI (Reuters) - Cell phone giant Nokia will start to use Microsoft's copy protection software to boost the use of wireless entertainment, like music and videos, the two companies said on Monday.

Microsoft's technology allows users of Nokia cell phones to share protected pieces of content -- like music, games or videos -- between phones, PCs and other devices.

Nokia, the world's largest cell phone maker, will license Microsoft's PlayReady digital rights management (DRM) technology, and build it into its S60 software, the most widely used software platform in the cell-phone industry.

Nokia's S60 software, built on UK-based cell phone software firm Symbian's operating system, is used extensively in Nokia's line-up, but also in advanced cell phones of LG Electronics and Samsung Electronics.

Its closest rival is Microsoft's own Windows Mobile, but analysts said the deal should benefit both.

"It is in both (companies') interest that there is compatibility between the two and content can flow between devices," said Geoff Blaber, senior analyst at consultancy CCS Insight.

In 2005 the two companies signed their first co-operation agreement to put Windows Media player on to Nokia phones, raising eyebrows as the two had been fierce competitors in the mobile software industry.

As cell phone prices fall, handset vendors are looking for new revenue from potentially lucrative software operations, while at the same time Microsoft is looking for new revenue from the mobile space.

In June, Nokia said it would reshape its whole organization to better focus on software and services.

Nokia said it expects many S60 and its lower-tier Series 40 phones, which are also included in the deal, using PlayReady technology to hit the market in 2008.

"This takes it to a huge portfolio of Nokia devices," CCS's Blaber said. "The deal makes perfect sense for Nokia. There isn't so comprehensive a DRM solution available for mobile space."

$20 BILLION INDUSTRY

The companies said they expect the deal to widen the entertainment offering on cell phones.

Entertainment services -- games, music, TV, adult content and gambling -- would grow to $38 billion by 2011 from around $18.8 billion in 2006, according to research firm Informa.

Music has been the main driver for mobile entertainment so far, the breakthrough of mobile television broadcasts is expected to give the market a new boost.

"This is a new thing and developing at a rapid clip. Can it get better and move to the mainstream? Absolutely. Nokia and Microsoft, being large influential companies, are trying to push the ball forward," Chadd Knowlton, general manager for content access and protection at Microsoft, told Reuters.

"Mobile television, that's going to be much more mainstream than today's entertainment features," Knowlton said.

Microsoft and Nokia said they would also work together to enhance and simplify consumer access to digital content using mobile devices.

"This partnership will enable a very broad range of content to be available for consumers," said Sebastian Nystrom, a director at Nokia's technology unit.

Nokia is widely expected to launch an online music and mobile content store, a rival to Apple's iTunes, in coming months, using technology gained from last year's acquisition of U.S. digital music distributor Loudeye.

Nystrom declined to comment on the possible impact the Microsoft deal could have on services built on the Loudeye acquisition, but said: "Overall, PlayReady will be the key component in offering such services to consumers."