Analysis: Nokia faces off with Apple iTunes

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UK consumers who have only used Apple's iTunes to buy digital music now have a different option- a Nokia mobile music service offering thousands of free tracks.

Nokia's new "Comes With Music" phones are not just a boon for the Apple-averse: parents, worried about piracy may also take to the subscription service.

"Comes With Music" phones make their global launch in Britain on October 16, offering unlimited music from the four major music labels and many independents which can be kept after the yearly contract has expired.

The individual tracks can be downloaded to a single computer, and are free - although the cost of that music is reflected in the price of the phone itself.

But with millions of consumers already tuned into their iPods or the more recent iPhone from Apple, Nokia will have some catching up to do. Due to anti-piracy software, the tracks will not play on an iPod.

"While the Comes with Music offering is a proposition that Apple lacks, the new device and the scope of the service are still significantly behind," Nomura analyst Richard Windsor said, explaining that it would only be available on a few Nokia devices compared to Apple's wider range.

"(But) the price of the device and the service are relatively attractively priced and we think that there will be good demand."

The sleek 5310 XpressMusic phone is the first handset to be launched with the offering. The music, which spans genres from hip-hop to classical, is available through the phone for the 12 months of the contract, and thereafter users can either buy individual songs on an a la carte basis or buy another "comes with music" phone if they want continued unlimited music.

Anyone buying a new phone would have to transfer their existing tracks from the computer to the new phone.

Pay-as-you-go only

But the 5310 will only initially be available on a pay-as-you-go contract for £130 through Carphone Warehouse, or without a SIM card on the Nokia website, which may put off those who are used to monthly deals.

The sophisticated N95 smartphone with 8 gigabytes of memory - a capacity of about 2,000 songs - will also carry the service, but its price or type of contract has not yet been revealed.

An industry source told Reuters that the phone would be available on a monthly contract on the operator 3 UK in time for Christmas.

The launch follows a push by the music industry to reinvent itself for the digital age after years of falling CD sales and rampant piracy.

The global music industry has been experimenting with several versions of free all-you-can-eat music in the last 12 to 18 months in a bid to compete with piracy including free streaming music on social networks like MySpace Music, Imeem and Last.fm.

The presence of an "all you can eat" service also comes at an interesting time for digital music in Britain, with the government increasingly looking to tackle online piracy.

With the threat of punishment ringing in their ears, parents could be encouraged to opt for a service like Nokia to avoid their children using illegal alternatives.

Nokia is not the first company to offer music through a mobile, but analysts believe the "all you can eat" package will be very tempting, especially from such a big player.

"The intended range of phones indicates Nokia's commitment to becoming the leading distributor of mobile music by displacing its rival, Apple," said CCS Insight analyst Paolo Pescatore, "This is a huge task, but Nokia is in better shape than other pretenders to Apple's crown, given its dominance of the global phone market."

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