A year later, Nokia's music service has few users

A year after launching in the U.K., with rollouts elsewhere since, Nokia's Comes With Music service has amassed just 107,000 subscribers, according to an analyst report.
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The report, issued on Thursday by Music Ally, came the same day that Nokia reported dismal financial earnings.

Comes With Music lets anyone who buys a supported Nokia phone download and keep as many songs as they like from Nokia’s collection of 6 million tracks. The cost of the service varies based on how many voice and text minutes a user wants each month. After a year, the deal ends unless users buy a new phone, but they still get to keep all the music they’ve downloaded.

The service first launched in the U.K. one year ago and since then 33,000 people there are using it, Music Ally said. Other countries got the service throughout the year. Australia has the second-largest mass of users, with 23,000 people subscribing to it. Italy has only 691 users, after the service launched in April, according to the report.

Nokia would not confirm or deny the subscriber figures. It said the service has rolled out rapidly around the world. “We take a long-term view of Comes With Music rather than seeing it as a short term promotion,” the company said in a statement. Nokia said the service has rolled out in 13 countries; Music Ally’s report and figures analyze nine countries.

Music Ally did not reveal its source for the numbers, saying only that it was “passed details of the uptake of“ the service. It said that in April, its analysts ran figures to confirm that there were 23,000 active users of the service in the U.K. at that time.

The analysts have a few theories for why the service should be doing so poorly. “On paper it looked like a fantastic consumer proposition and good value for money,“ Music Ally wrote in the report.

But the marketing message may be too complicated for consumers to understand, it said. “The marketing messages, the advertising positioning and the in-store sales strategies were failing to support each other and not weaving into a compelling whole,“ the report said.

The service may also be too advanced for developed markets, it said.

“This is not to say that [Comes With Music] is doomed—just that Nokia may have to decide whether it can really afford to continue marketing a service in the hope that eventually consumers catch up with it,” Music Ally said.

The company has been trying to branch out into various kinds of services, such as Comes With Music and its Ovi services, including photo sharing, e-mail and maps. It has had mixed success. In August, Nokia said it had signed up 1 million users to its e-mail service. But earlier this year, it shut down a Seattle office that was developing an online sharing service as part of a decision to lay off 450 people in its services unit. It also halted investment in the Ovi Share photo sharing service and shut down Mosh, a social-networking site.

The Music Ally report about Comes With Music came on the same day that Nokia reported a 20 percent decline in sales for the third quarter and an $833 million loss. While the company said it held onto its 38 percent market share, it has been steadily losing share over the past couple of years.

Likely in response to its poor earnings report, Nokia on Friday announced some management changes. Rick Simonson, chief financial officer, will become head of mobile phones starting Nov. 1. That will put him in charge of Nokia’s lower-end phones, which account for about half of the company's devices and services sales. Timo Ihamuotila, who is currently global head of sales, will take over as CFO on Nov. 1.