Nokia Makes Music Buy

Nokia paid $60 million to acquire digital music
distributor Loudeye as part of a plan to deliver
what the top cell phone maker called “a comprehensive music
experience to Nokia device owners during 2007.”

Shareholders of the Seattle, Wash.-based Loudeye will receive $4.50 for
each share of the company stock.

The deal, expected to close by the
end of 2006, is subject to a number of factors, including stockholder
approval and Loudeye retaining its employees, customers and cash,
according to a statement from the companies.

Aside from becoming part of Nokia, “it will be business as usual” for
the music distributor, according to a Loudeye spokesperson.

“Music has become a key experience for Nokia and Nokia Nseries
multimedia computers, and we want to be able to offer the best fully
integrated mobile music experience to our customers,” Anssi Vanjoki,
Nokia’s executive vice president and general manager for multimedia,
said in a statement.

The acquisition is Nokia’s attempt to break out of a hardware-only
mold, Mike Goodman, Yankee Group analyst, told

“They are
trying to be a lifestyle company.”

Vonjoki said people should be able to listen to all the music they
want, anywhere and anytime and at a reasonable price.

The Loudeye
acquisition will make it possible to deliver that vision to Nokia
customers in 2007, according to the cell phone executive.

Integrating Loudeye’s services will allow Nokia to compete with Apple
and Microsoft.

While Microsoft has announced its Zune iPod-like
device, “Apple is the only company out there with a truly integrated
service,” Goodman said.

The purchase of Loudeye makes Nokia the only integrated music service
for phones.

Loudeye, which already performs some back-office services
for Nokia, will likely be optimized for Nokia’s Nseries, according to
the analyst.

Loudeye, which powers online music stores, including MSN and MTV,
boasts 60 services in more than 20 countries offering 1.6 million

Loudeye CEO and president Michael Brochu said today’s
agreement is a recognition of the company’s “key role” in the digital
music market.

The announcement comes a day before Loudeye is scheduled to announce
its second-quarter results.

The digital media distributor reported a
$4.6 million loss for the first quarter of 2006. Digital media store
services account for 76 percent of Loudeye’s revenue.

In May, Loudeye
sold its U.S. operations for $11 million to Muze, a New York-based
entertainment services company.

In another move to link phones to music services, Verizon Wireless
unveiled its Chocolate handset, described as an MP3 player with some cell phone functionality thrown in for good

As previously reported, the carrier also dropped
subscription fees to its V-Cast download service, opting for a more
iTunes payment model.

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