Some details are starting to emerge about Nokia's Comes With Music phones, which will come with the right to download music at no extra charge. According to a report yesterdayon PaidContent.org, Nokia will pay Universal Music Group $33.50 per handset for the first 2.5 million sold, with the rate dropping after that.
It sounds like the download model will not be strict all-you-can-eat, but instead will be similar to eMusic--users will be able to download a limited number of songs over a certain time period, and those songs will be theirs to keep. It's not clear what happens when the period's up--the latest reports say that Comes With Music will not be a subscription model, so perhaps users will just be able to add a la carte downloads after their time expires.
As I've said before, any music service that's limited to a particular label will fail--music buyers don't shop by label, and often don't even know (or care) which label their favorite artists are on. So assume that Nokia signs the other majors and a few big indies for the same rate. Glenn at Coolfer estimates that such a deal would cost Nokia $116.32 per phone.
Hypothetically, imagine Nokia or the carriers subsidizes some of the cost to get the program rolling, and charges an extra $80 per phone. Most cellphone contracts are two years long, so it would make sense for the free music download period to last the same amount of time. So the last variable would be number of songs. How many songs would they have to offer to convince you to buy a Comes With Music phone?
My next phone's probably going to be an iPhone--the interface, apps, and browsing are excellent, and I seldom purchase music from iTunes anyway, so the $0.99 per song seems fine. To be swayed to buy another phone, I'd want enough content to fill it--say 1,000 songs. Otherwise, I'll just stick with my current MP3 players. But the labels are probably imagining a number closer to the $0.99-per-download paradigm that still rules the industry--say 100 songs.