JupiterResearch: Nokia to Buy Loudeye/OD2

A couple of JupiterResearch analysts comment on Nokia's (NOK) acquisition of Loudeye/OD2. David Card posts that "of the European digital music stores, Loudeye OD2 didn't score so well when Jupiter was testing reputations among the European digital music value chain, but it does have the market share."

Card writes that Loudeye has "not much presence in the US (after merging with OD2, it sold off the old US encoding business). Over here, so far, the big guys have built their own or gone with MusicNet." Card concludes that:

I hope Nokia doesn't obsess over over-the-air downloads, and instead builds a slick system for incorporating existing MP3 collections . That's the secret of Apple's success, and will be key to any music phone story as well.

Fellow colleague Mark Mulligan notes "OD2 were the pioneers of the European digital music arena but struggled to keep pace with the arrival of Apple on the scene. It’s not been a great year or so for OD2, they had HMV and Virgin poached off them by MusicNet, MyCokeMusic closed down to be replaced with a strategic alliance with iTunes and they were one of the most poorly ranked companies by the industry in Jupiter’s Digital Music Vendor-Perceived Proficiency Rankings. All this amidst mutterings in the industry about their technology."

Mulligan then asks why have Nokia bought them? He opines;

Nokia are interested in the platform not the partners. This is all about boosting Nokia’s digital music footprint, primarily, though not exclusively, across mobile. Which adds further confusion to the already complex mobile music value chain: just about every stakeholder is aggressively competing to seize new territory: Nokia as a digital music provider puts them up against the mobile operators who have high hopes for music services driving increased mobile data revenues. But of course Nokia depend upon the operators to help subsidize their music enabled phones. Not to mention all of the mobile content aggregators such as Jamba getting increasingly aggressive in stealing market share. Something has to give somewhere: there is only so much pie to slice.

Mulligan concludes that "it will be interesting to see what happens with OD2’s very strong relationships with Microsoft (MSFT) and MSN following Nokia’s acquisition. Nokia’s majority holding in Symbian doesn’t exactly made them natural bedfellows with Microsoft."