STOCKHOLM (Dow Jones)--Sony Ericsson Friday announced the launch of PlayNow Arena, an Internet site that gives users access to mobile music, games, and applications.
The phonemaker's attempt at increasing its exposure to the lucrative mobile music and gaming market is seen a key step for the company that made its mark in regions such as Western Europe with its music-focused sub-brand Walkman phones and camera-focuses Cybershot handsets.
The service will first be rolled out in the Nordic countries on Monday morning, and will initially include one million tracks from the largest global music labels, including Sony BMG, Warner Music, and EMI.
All tracks will be DRM free, or without digital rights management, meaning users can move the files around between devices and convert them an unlimited number of times.
The site will expand to other European countries later this year and be global in 2009, ultimately selling five million tracks.
Martin Blomkvist, Sony Ericsson's head of content acquisition and management said in a recent interview that offering digital music without rights or copying restrictions and games will help pull users toward the new site, providing a larger separate revenue stream, and stimulate handset sales.
"If we together don't work for finding ways to take away the obstacles of legal downloads, then, this industry from a digital perspective is going to die," Blomkvist told Dow Jones Newswires in an interview Wednesday.
Sony Ericsson, the joint venture between Sweden's Telefon AB L.M. Ericsson (ERIC) and Japan's Sony Corp. (SNE), has some 200 million handsets capable of playing mp3 music files in the market already.
All tracks sold in Sweden will cost SEK9 with credit card, and others are expected to cost on par with what rival Apple Inc.'s (AAPL) charges for a song track on its iTunes site, such as $0.99 in the U.S. and EUR0.99 in Europe.
Research firm Gartner expects the global mobile music industry to be worth $13.11 billion in 2011, far above the $4.43 billion in 2008. The gaming industry is expected to grow to $6.31 billion from $4.51 billion during that time.
CCS Insight analyst Paolo Pescatore said offering DRM-free music is a clear differentiator, setting it apart from protected files sold by rivals Nokia (NOK) and Apple.
Still, Blomkvist said that even with reasonable buying terms with the biggest music labels, after paying taxes and operators for using their systems, Sony Ericsson would hardly profit from selling music.
"Had we only done music, we wouldn't have done this," he said. "The way it is set up today, very few people, apart from the record industry, are getting rich on digital music. Generally speaking, the music today isn't generating a boat load of cash for us."
He didn't give specifics, but said the margin on mobile games is much higher.
Phone sales globally are slowing, leading many phone makers to look for new ways to make money. To help cushion the slowdown, and have customers come back for upgrades, many device makers are diversifying into content and services, such as offering music, games, Internet access, and applications.
Apple's latest iPhone offers a full range of such services; Nokia's Ovi portal is the launch pad for its offerings, and BlackBerry maker Research In Motion (RIMM) has carved out a niche with e-mail, and is branching into multimedia.
"This is a good first step for Sony Ericsson, but, honestly, if this is a relaunch of PlayNow, I would have expected a bit more," said CCS Insight analyst Paolo Pescatore. "On the whole, it appears they are being conservative with a wait-and-see attitude toward the market.