Nokia aims to take bite out of Apple with online music launch

Nokia unveiled an array of new mobile products designed to steal a march on the iPhone yesterday as it launched an online music store to challenge Apple's dominance in the digital music market.

The world's largest mobile phone manufacturer's initial plan to enter the music market was deemed conservative by some observers, unimpressed that the new music store was not substantially different to what is available from other providers.

The company has long been linked with a move to challenge Apple's near 80 per cent market share in the digital music market based on its hugely popular iPod music player. With Apple's iPhone set to launch in Europe this year, Nokia has unveiled its own music-oriented handset, the N81, which has been designed to steal Apple's thunder this Christmas by allowing customers to download songs directly on to their handset.

As well as the stylish N81, which has eight gigabits of storage capacity and was described by Nokia as a "jukebox in your pocket", the company launched a series of lower-end handsets also aimed at the digital music market.

With 1 million of its devices sold every day, Nokia believes it can make a mark in the burgeoning market for digital content, and argues that customers want to download music directly on to their phone, not via a computer as is the case with iTunes.

At the gala event held in London's Old Billingsgate Market yesterday, Olli-Pekka Kallasvuo, Nokia's president and chief executive, said the industry was "on the threshold of one of the most opportunity-rich markets of all time," as he launched the Nokia Music Store which in time expects to offer "all the music in all the world".

It is surely no coincidence that the venue that Nokia chose for its global launch was the same as that Steve Jobs, Apple's founder and chief executive, used three years ago to announce the launch of iTunes in Europe.

Nokia, one of the most recognised brands in the world, also unveiled a new brand – "Ovi" which is Finnish for "door" – as an umbrella term for its digital content services in the mobile internet, music and gaming sectors, a unit that will become increasingly important for the handset maker.

Nokia has been working on perfecting its digital music product for years and last year bought the digital music distributor Loudeye, the company that acquired Peter Gabriel's OD2 system. Ben Wood, a research director with CSS Insight, said Nokia's move was "a logical next step". He added that Nokia's revenue from services such as downloadable music will be dwarfed by its enormous profits on mobile phone sales over the coming years but added that content that is tied to handsets will help maintain loyalty among customers upgrading handsets.

Other analysts were less impressed with the launch. Paul Jackson, a principal analyst with Forrester Research, said: "It is a shame that Nokia did not take this opportunity to use its strong industry position to push the envelope and offer something more radical."

The launch of the Nokia Music Store has not been without controversy after Orange threatened to "de-range" the N81 unless the Finnish mobile phone giant agreed to trial the service with its network partners.

Network operators such as Orange have invested in their own download stores and have expressed concern that customers using the Nokia download service could be hit with large data charges when using the store.

Mr Kallasvuo said that Nokia is "truly trying to cooperate with different operators to support and help them manage their strategies" and that its music store launch would not be in "contradiction" to its main customer's own services. Mr Wood said: "If this is successful, operators won't have any option but to work with Nokia."

Mr Jackson questioned whether Nokia's service was that different to the 250 legitimate download services already competing with Apple. "This service isn't sufficiently differentiated to make a major impact in terms of convincing consumers to either start using legal download services or ween them off Apple's service and dedicated music devices.

"We further don't believe that the phone will be the interface that consumers will opt for to purchase music (or, as Nokia suggests, entirely replace dedicated music players) – the PC is the best experience and mobile will be for isolated buys," he said.