Nokia will launch a new service next year that allows people who buy certain Nokia phones to download music for free for a year after they purchase the device.
The company has signed a worldwide deal with Universal Music to offer the service and is in talks with other major labels, said Olli-Pekka Kallasvuo, Nokia's president and CEO, in a speech at the Nokia World conference in Amsterdam on Tuesday.
The service, called Comes with Music, will allow people to download as many songs as they want during the year after they buy the phone, and then keep the music after the year is up, Kallasvuo said.
He was joined by Lucian Grainge, chairman and CEO of Universal Music, who called the deal "a groundbreaking moment" for Universal. "There is no comparable service where music can be kept by the consumers even if their subscription lapses," he said.
The music industry has been criticized for complaining about illegal downloads while not doing enough to let people download music legally. Grainge said the deal with Nokia shows that Universal is "doing all we can to transform ourselves into a consumer-led business."
The companies would not discuss detailed financial terms of the offer. "It's called Comes with Music and I think that is fairly explanatory," Kallasvuo said. "You buy the [phone] and you have rights for one year of unlimited downloads."
Nokia spokesman Kari Tuutti said the service will be offered initially with Nokia's high-end Nseries devices, but eventually will come to a broader range of Nokia handsets. People will be able to download the music to both their phone and their PC, he said.
The cost of the service will essentially absorbed in the initial purchase price of the phone, but Nokia isn't saying yet if consumers will be charged a premium for phones that come with the service. Nokia will pay a portion of the revenue from the phones to Universal, Tuutti said.
"The music industry is making money on this and we hope to make money from this also," Kallasvuo said.
The service combines the world's biggest phone maker with the world's biggest music label. It will put Nokia more squarely into competition with Apple, which operates its iTunes service, and Microsoft, which has its Zune music player and online store.
The novel part of the Nokia service is that users can keep the songs after the one-year subscription period ends. That marks a new business model for the music industry, and goes a step further to loosening download restrictions imposed on users.
Universal's catalogue includes U2, Eminem, Amy Winehouse, Mariah Carey, Pavarotti and The Rolling Stones, Grainge said. Nokia may sign other labels by the time the service launches, scheduled for the second half of 2008.
Currently, Kallasvuo said, most people rip CDs from their existing music collection or download them from illegal services. Consumers need new services so that "the necessity, or the lure, of stealing music will go away," he said.
Comes with Music was one of several new services described at Nokia World. The company will also offer a service that lets people access files stored on their PC from their mobile phone, or from a secure online server if the PC is turned off. To offer the service Nokia has bought a California start-up company, Avvenu, for an undisclosed sum.
It also described plans to expand its Ovi Web site and turn it into a "personal dashboard" where users can manage and share digital photos and videos with friends, and access third-party services such as the Flickr photo service.