Nokia and Motorola tune into youth music market, but only one will succeed

Nokia and Motorola are attempting to lure music-loving, technology-savvy youth to their brands with next-generation phones.

Both hope to capitalise on the buzz around models such as Apple’s iPhone, all too aware that the next battleground goes beyond hardware.

Strategy Analytics director Neil Mawston says Nokia and Motorola intend to take on Apple and its iTunes service. “Handset revenues globally are reaching a peak, so vendors need to look beyond hardware. The main area of growth they have left is services,” he adds.

Last week, Nokia’s fight against the likes of Apple and Sony Ericsson’s Walkman models intensified with the addition of record label Warner to its music services.

Nokia users will be able to access tracks from major artists worldwide at Nokia’s music stores or through its Comes With Music service – expected to be introduced later this year – which gives users unlimited free song downloads for a year. Sony BMG and Universal Music Group are already signed up, while EMI is still in licensing talks.

And Motorola is launching a new strategy and strapline as part of a campaign to promote a range of music and camera phones (MW last week). It wants to build loyalty among younger consumers, introducing the strapline “We Generation” and a push to promote the social and sharing aspect of the handsets.

Yet industry experts believe Motorola faces an “impossible” challenge of trying to catch a resurgent Nokia, which is itself battling to conquer the high end as it has the mass market. Nokia is the world’s biggest handset manufacturer, with a market share of 39.5percent, ahead of Samsung (13.7percent) and Motorola (12.1percent).

Raise profile

They question whether Motorola can raise its profile. The handset maker scored a big hit when its high-end Razr model hit the mainstream in 2005, but has struggled since.

In March, Motorola confirmed that it will split into two companies next year, following months of speculation about the future of its handset division. As a result of the split, the brand’s mobile devices and broadband and mobility solutions businesses will be separated.

An industry insider says Motorola’s latest move is “too late”, a last bid to attract “window shoppers” to the brand.

He predicts it will be taken over by a Japanese or Korean manufacturer, exiting the market like rival Siemens. However, Motorola remains bullish about the potential of its new devices, with vice-president of marketing for EMEA Andrew Morley saying it is the “main area of growth” for the company. He adds that the brand’s music phone – the Rokr E8 – “resonates”.

Motorola plans to introduce three new models in a six-week period, including the Z10 movie phone, accompanied by a campaign with the line “We’re All Film Makers Now”, and the five mega-pixel ZN5 camera phone with Kodak. Morley says the brand chose Kodak because of its “strong connection” with youth.

Yet Mawston says Motorola’s new devices are only “a baby step in the right direction” and points to a weak portfolio of handsets. “The company needs to slash costs – production capacity is way higher than shipment,” adds Mawston. “It is compromising external design and services.”

Gadget-loving demographic

Both Nokia and Motorola see the need to change, and seem certain success lies in convincing a young and gadget-loving demographic to buy into their brands. Yet while market leader Nokia looks poised to stake a claim at the lower edges of the music market, struggling Motorola faces the unenviable task of overhauling its image before it can get started.