Several articles recently about Nokia and others trying to develop a killer music-phone that can steal some of Apple's iPod thunder and raise profit margins. Good luck.

The convergence of camera+MP3 player+phone is much like the convergence of stereo equipment from decades past. Do I get separate components that each do one thing well or do I get a single unit that combines all of the features I need into one package? If the combined-unit experience is "good enough", it will be a hit. If not...

While the cell phone convergence situation is similar to stereos, the component functionality involved is much more diverse than stereos which makes convergence even harder.

First off, I think there is a misunderstanding about the iPod. The iPod isnt a music player; the iPod is one half of a portable music system. The other half is a PC that runs the iTunes software. Each half of the system does what it is best at and the two together create the best portable music system out there. Moreover, Apple controls both parts of the system and doesnt need to depend on other companies and gluing two products together.

Portable players are good for playing songs on the go. iTunes on a PC is good at finding music, recording music, and organizing music for playback. The competition has failed because they have gone after only one half of the system, usually the portable player half.

The big weakness of cellphone solutions is that they try (so far) to be the whole system and phones just arent good at the iTunes/PC half of the work. A tiny screen and no keyboard - are you really going to search for music and build songlists with that? Wireless of not, unless you have a 99 gallon drum of nerd-patience, you wont be happy.

Even without portable music features, cell phones already have two huge issues: ease of use and discoverability.

• My wife and I both have new camera phones. We figured out how to take photos but not how to get them out of the camera. That is ease of use.
• Nokia already has more music-playing phones than anyone else? That is discovery.

Adding music features only makes these two problems harder.

As I mentioned, I have the Motorola SLVR phone which includes a version of iTunes. It works pretty well as an iPod clone and mimics the iPod user interface which makes it easier for me to use, however downloading songs is more complicated than with a regular iPod. (It also doesnt include a "podcast" category. tsk tsk. Or have a regular headphone jack.)

I expect a lot more action in this area from Sony, Microsoft and even Apple. My advice too all of the contenders: Focus on your consumer software else Apple will continue to eat your lunch.

Music to Nokia's Ears

Finnish Company Bets on Growth In Multimedia Handsets

By CASSELL BRYAN-LOW

September 28, 2006

Nokia Corp. is ramping up its efforts to make handsets that also allow users to play music, take photos and watch video. Just don't call it a phone, insists Anssi Vanjoki, head of the Nokia unit that makes such devices.

Instead, he's on a crusade to create a new name for the devices: multimedia computers. "One thing people need to understand -- it is more than a phone," he says in an interview.

Nokia already sells more phones with music capability than any of its rivals, in part because basic music players come as standard in many of its phones and it sells almost twice as many phones as its closest competitor. But it faces stiff competition in higher-end cellphones with more music functions, a market where Sony Ericsson's Walkman-branded phone in particular has established a strong franchise with the gadget cognoscenti.

It is Mr. Vanjoki's job to make sure Nokia is a strong contender in that field. To do that, Nokia spends about $1 billion a year on developing high-end multimedia devices.

And the company recently made a strategic move to enter into the content-distribution business by agreeing to buy digital-music distributor Loudeye Corp. for $60 million. The acquisition will give Nokia a comprehensive download service that allows customers to download a song wirelessly to their phone or to their personal computer from a catalog of more than 1.6 million tracks.

There is much at stake for Nokia and the rest of the cellphone industry in music-enabled phones. The market for music devices is roughly $19 billion and about $44.6 billion for music-enabled phones, according to a 2006 estimate by iSuppli Corp., an El Segundo, Calif., market-research firm.

Some analysts predict that cellphones with built-in music players will over time steal sales from dedicated player devices like Apple Computer Inc.'s iPod. And, persuading customers to buy the more expensive -- and higher-margin -- phones is one way Nokia hopes to boost revenue in the face of slowing growth in developed markets.

Mr. Vanjoki says Apple only competes with "part of" his products. With the iPod, he adds, "you can't make calls [and] you can't download music wirelessly" from Apple's iTunes Store. Some analysts expect Apple to launch a cellphone, but the company declines to comment.

Nokia's cellphone rivals also are stepping up their offerings. And, many consumers still choose to carry devices like the iPod that are primarily music players and can have far greater storage capacity for songs for a lower price than handsets whose primary function is that of a phone.

"It's easy for Nokia to sell phones with music capability. Getting people to use them will be a much bigger challenge," says Ben Wood, an analyst at Britain-based research firm Collins Consulting Ltd.

Nokia certainly has the potential to reach many customers. It shipped 15 million phones with built-in music players in the latest quarter and expects to reach 80 million this year. Sony Ericsson, a joint venture of Sweden's Telefon AB L.M. Ericsson and Sony Corp. of Japan, in the second quarter shipped about 10 million phones with built-in music players, including its Walkman range. Apple sold 8.1 million iPods in its most recent quarter.

However, many of Nokia's music-enabled phones are able to hold only a small number of tracks and aren't realistic substitutes for specialized music players. From its multimedia lineup, which includes phones with features such as memory for storing songs and music keys, Nokia has sold about 10 million handsets so far this year.

He also must perform a delicate balancing act with carriers, many of which have invested heavily in developing their own music services. Nokia says it will allow cellphone service providers to offer music downloading under their own brands. Potentially more threatening for carriers is if the handset maker launches a Nokia-branded service, a move it plans to make, according to a Loudeye regulatory filing. Mr. Vanjoki declines to confirm those plans.