Universal offers free music on Nokia phones

AMSTERDAM (Reuters) - Universal Music Group expects its deal to offer free music for 12 months on new Nokia phones to have a wider, “stimulating” effect on the digital music business next year, a senior official said on Tuesday.

The world’s largest music group Universal and the world’s top cellphone vendor Nokia said on Tuesday they would offer a free 12-month access to Universal’s music for buyers of Nokia music phones starting from the second half of 2008.

“I believe the announcement will act as a catalyst for a whole number of business partners to step forward. It’s definitely going to stimulate the business next year,” Rob Wells, Senior Vice President for digital operations at Universal, told Reuters. Universal is owned by French media group Vivendi.

The “Comes With Music” offering would differ from any other package on the market as users can keep all the music they have downloaded for free during the 12 months, the firms said.

“This is how the consumers will consume music going forward. This is a step towards where this business we believe will be moving to in two to three years time,” Wells said.

“We are moving into an access world. Consumers will have access to all the recorded music available through the price of the device, or the price of service, or the price of broadband.”

Wells declined to comment on the financial side of the Nokia deal, but said, “Unless there was enough money for the world’s biggest record company we would have not agreed to the deal.”

The recorded music industry is struggling in the transition to formats such as MP3 from the dominant CD format. So far only a small proportion of music used in music players or music phones has been downloaded specifically for that purpose.

“The single biggest issue that’s facing the music industry is there are huge waves of devices being sold and shipped to consumers on a daily basis. Very few of these devices are then subsequently used to subscribe legitimate downloads,” Wells said.

Digital music sales are dominated by Apple Inc.’s iTunes music site.

The free access to new music under the Universal deal is set to hurt peer-to-peer networking, while also raising pressure on Apple from Nokia’s foray into the music retail business.

As part of its new Internet services strategy Nokia has opened its first online music store in Britain and aims to open more virtual outlets in coming months.

In Nokia’s new offer, users can keep the downloaded music and there are no limits to how much they can download.

Wells said he was not worried about everyone trying to download all the music available.

“I don’t believe that every consumer who buys these devices will clot themselves on everything they can. I believe there will be large proportion of consumers that won’t use this device for any music,” Wells said.

Editing by Quentin Bryar