Nokia unveils broad strategy for enhancing mobile experience

Nokia made several product and strategy announcements today aimed at increasing the use of mobile phones for gaming, video, music, social networking and mapping. The company unveiled four new handsets – including a new version of the N95 with 8 Gb of memory and two variants of a new N81 design: one with 8 Gb of memory built in and another with a 2 Gb Micro SD card. In addition, it announced a new brand to act as a gateway to a range of integrated music, mapping, gaming and community services: Ovi.

The Finnish manufacturer also said that it would make a significant change to its Series 60 interface in 2008, introducing touch screen functionality into its mainstream mobile phone portfolio for the first time. At the heart of the new interface is a tabbed menu which cycles between contacts, music, photos and maps. This elevates multimedia elements to the top level of the menu structure for the first time, an area which has traditionally been reserved for the voice call log.

Nokia N81 linked to Nokia music store

Today’s launch represents a strong statement from the company that it is investing in building an integrated mobile multimedia business, where the device hardware, user interface and online services all form part of an overall Nokia experience. It also intends for Ovi, the online services brand, to act as a universal gateway to a wide range of web communities, ranging from YouTube to Facebook.

Nokia has gone through a significant re-positioning over the last 12 months, which will culminate in a new company structure in 2008, where devices, software and services are all integrated into a single division. This is intended to send a clear message to its competitors and others in the mobile value chain that Nokia sees itself playing a leading role in the consolidation of the mobile device as the user’s key multimedia interface.

This stance is already causing some friction with network operators, particularly in relation to Nokia’s newly launched music store, which will be accessible from both PCs and mobile devices. According to some sources, Orange has already raised concerns over this strategy and threatened to ‘de-list’ Nokia’s handsets unless it agrees to expanded trials to test the overall user experience of the music store. See this article from British newspaper The Independent for more.

Although Nokia’s executives used the London event to emphasise that they do not see the company becoming a content provider or media source in its own right, they are re-positioning the manufacturer to use its considerable resources and control of the design process to act as a gateway to an enhanced mobile experience. This will go significantly beyond the work Nokia has done in the past to build standardised hardware, operating systems and an interface layer around Symbian and Series 60. It will extend into deeply integrated mobile client software for managing music, video, photos, maps, contacts and games, as well as linking with web services that can be accessed from any PC.

The first generation of these services will roll out in Q4 2007, with parts of the new interface appearing on the N95 and N81. This will be complimented with the launch of some Ovi web applications, which will also be available on certain existing handsets, such as the N93, N95 and N73.

Gaming services will be marketed under the revived N-Gage brand. Instead of a dedicated N-Gage gaming device, Nokia will make an N-Gage software client available for a wide range of N-Series handsets, offering game downloads, trials and multiplayer features. Numerous big name publishers, including EA, Vivendi and Capcom have signed up to provide N-Gage games. Nokia itself will also act as a publisher, as well as operating the multiplayer gaming community. Existing N-Series users will be able to download the N-Gage application free of charge from November 2007.

Investors reacted positively to the announcements, sending the Finnish company’s shares up about 5 percent.

Nokia’s CEO Olli-Pekka Kallasvuo spoke at length about the importance of user experience during the London event. He stressed that Nokia had a responsibility to play a central role in driving adoption of new mobile services. The company is selling more than 1 million handsets a day and is uniquely positioned in the mobile industry to integrate multimedia into the mobile experience through hardware, software and services.

It has been trialing elements of this strategy for the last few months. Earlier this year Nokia released its mapping application for free, allowing users to sample GPS-based services on compatible handsets and linking into an online store where additional navigation features could be purchased separately. Nokia’s executives highlighted the success of this approach at the launch event today, stating that almost all users of the N95 – with includes an integrated GPS capability – were experimenting with the mapping service.

PMN believe Nokia will extend this model to all parts of its online service strategy. Client applications for music, games, mapping and community services will be integrated directly into handsets – along with appropriate hardware specifications – and the company will seek to build a revenue stream from acting as a gateway for purchasing additional features.

This will almost certainly put Nokia into conflict with network operators around the world, many of which have online service strategies of their own. While Nokia’s executives insist the operators can continue to make money from voice and data charges, the strategy positions Nokia as the key link with the web and multimedia services, leaving the operator as a provider of commoditised transport services.

Nokia’s huge market share (38.5% in Q2 2007 according to PMN’s Handset Industry Insight service) and the size of its existing user base (currently estimated at between 850m and 1 bn active users) give the company a unique opportunity to influence the development of the mobile market. Today’s announcements are the clearest statements to-date that Nokia intends to use all the options at its disposal to maintain its share of the value chain. This includes closer integration between the Symbian OS, Series 60 platform and the emerging range of Ovi on-line services. It will also extend to deeper ties between Nokia and content providers and, where appropriate, the concept of Nokia itself acting as a service gateway or publisher.

By leveraging its ability to control vital elements of the user experience, Nokia is increasing its chances of capturing a greater share of the premium value in the mobile services business. This is likely to happen at the expense of the network operators and act as a defensive buffer against big web brands such as Google and Yahoo, which are seeking to build their own position within the value chain by offering a range of services accessible from any device. The changes in hardware design, such as increased memory and the introduction of touch screens, are a clear answer to the threat from new manufacturers such as Apple and newer models from LG and Samsung.

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