* First UK customers get free extension of music package
* Music service seen as iTunes challenger
* Service has failed to gain traction on key UK market
(Adds analyst comment, background, details)
By Tarmo Virki, European technology correspondent
HELSINKI, Sept 23 Nokia NOK1V.HE has decided to
extend contracts for free for the first customers of its "Comes
with Music" service in Britain, where the offering has gained
"We're going to give you more. We are giving you another 90
days of musical freedom at no cost at all," Nokia said in an
email sent to the first customers.
A Nokia spokesman declined to comment on details of the
The music-download service, Nokia's challenge to Apple's
(AAPL.O) iTunes, has been a key part of the phone maker's push
into services, and the extension left analysts questioning who
will pay labels for the downloads.
"Comes With Music" offers unlimited music from major music
labels and a number of independents, and the music can be kept
after the contract has expired. The individual tracks can be
downloaded to a phone and a single computer and are free, though
the cost of the music is reflected in the price of the phone or
At launch it was strongly supported by major music labels.
Nokia had said previously that consumers could extend their
12 month music packages on a monthly-basis through mobile
operators. But the first subscribers in Britain were prepaid
clients to the 12 month music package, and were not linked to
Analysts said Nokia's latest move also reflects the company's
uncertainty about how to renew subscriptions for customers who do
not have an operator package and who do not want to buy a new
phone with the service.
"They need prepay because that is where their potential
customers are," said Gartner analyst Carolina Milanesi.
Nokia, the world's largest phone phone maker, unveiled its
music-bundle "Comes with Music" last October in Britain -- seen
as the acid test market for new mobile services in Europe -- but
it has gained little traction. [ID:nN15314787]
"Nokia's 'Comes with Music' had a troubled birth and it is
having a troubled first birthday," said Shaun Collins, chief
executive of UK-based consultancy CCS Insight.
The launch was overshadowed by a lack of consumer or operator
interest, and Nokia introduced the service on a relatively old
and unattractive phone model.
Earlier this month, Forbes reported Nokia has delayed to next
year the launch of its music service in the United States, the
world's largest music market. [ID:nLV442197]
It has launched the service so far in some 10 countries.
"All in all "Comes with Music" has failed to be the
differentiator Nokia hoped for. Consumers have alternatives,"
said Gartner's Milanesi.
(Editing by Steve Orlofsky and Carol Bishopric)