News : Nokia takes on Apple in online software arms race

By Tarmo Virki, European technology correspondent

HELSINKI (Reuters) - Nokia Oyj is betting a wider and more tailored offering of media and software for its phones will prove attractive when its Ovi online store opens in May and goes head-to-head with Apple Inc's App Store.

The Apple store has proved the market for software supermarkets in the mobile world, with more than 500 million applications downloaded in only half a year.

Nokia's market is potentially bigger -- it says the Ovi store will reach some 50 million consumers when it opens, while Apple has so far sold less than 20 million iPhones.

But this does not in itself guarantee Nokia's success.

While hundreds of millions of people use its phones every day, Nokia has yet to match Apple's success in getting people to pay for software downloads, despite its smaller rival getting a later start. Nokia has also lagged Apple in introducing popular touch-screen phones.

Nokia says it will give 70 percent of all download revenue to developers, just like Apple, if consumers pay by credit card.

But developers will earn less per transaction if consumers opt to pay through their operators, an option that will initially be available in nine countries.

"Because of geographic coverage, credit cards will probably remain the main payment method," said Marco Argenti, vice president of media at Nokia. "Its going to be the default payment system across the world. (But) in nine countries ... developers can activate operator payments."

Thus far, in cases where consumers can choose between paying via their operator or using a credit card, more than 80 percent use operator billing, Nokia's own data from the usage of its N-gage gaming service shows.

ARMS RACE

The size of the market shows it's important for Nokia to get its online store right.

Research firm Strategy Analytics has forecast the value of the mobile content market -- including downloadable games, ringtones, wallpapers, video, mobile TV, text alerts and mobile web browsing -- to grow 18 percent to $67 billion this year.

But competition is growing and Microsoft, Orange and others have also announced new online stores.

"These companies are really entering the arms race," said Ford Davidson, chief executive of Seattle-based Dashwire, which makes software for linking cellphone content to the Web.

"Nokia is the dark horse in this race. They have an unparalleled distribution channel," Davidson said.

Nokia's Argenti said the company hopes to attract developers with a more liberal and faster approval process for reaching the store, while it aims to lure consumers by creating a personalized offering.

Nokia said it will decide on publishing submitted applications or content within a week, and it will also approve content from developers that goes head to head with its own software offering.

"The store takes into consideration your location, your habits and your connected people's habits, and your purchasing habits, showing the most relevant content to you," Argenti said. "The recommendation side is missing from the others."

But the rush by companies to open software stores will not only mean tougher competition. For developers and consumers, it will mean a rise in the number of applications using different, and non-compatible, software platforms.

In addition to the Symbian operating system used by Nokia, there will be software based on Microsoft Windows Mobile, RIM Blackberry and Google Android platforms.

"It's going to be full of marketplaces. This is going to make our life even more complicated," said Christophe Hocquet, chief executive of European mobile networking firm Kiboo.

(Editing by David Holmes)