Motorola (MOT) said on Monday it had signed a deal to use Windows Media technology from Microsoft (MSFT) in a new range of music phones that would sell alongside its iTunes phone developed with Apple (AAPL).
Motorola Inc., the world's second biggest mobile phone maker behind Nokia (NOK), will launch between one and three Windows Media phones in the second half of 2006, said Chris White, the company's senior director of global product marketing for music handsets.
Motorola, which launched its first iTunes phones last year, will keep Windows Media phones as separate products, he said.
"The iTunes phones will remain a separate line of products," White said at 3GSM, the world's biggest mobile phone trade fair.
At stake is the emerging market for legally distributed digital music, which Apple Computer Inc. has opened with its iTunes music player. Apple has sold 1 billion tracks since iTunes launched.
Microsoft Corp. is trying to break into the digital media market with Windows Media software, which is incompatible with Apple's, to compress, transfer and protect media.
Motorola said the new Windows Media phones have been requested by many operators which want to open their own music stores. Microsoft is willing to sell technology that enables this to operators, while Apple has its iTunes music store to protect.
Motorola aimed to take a bite from Apple's digital music success when it announced more than a year ago it would start producing iTunes phones.
But the resulting product has proved a mediocre success due to limited storage capacity as the phone was not allowed to compete with Apple's popular iPod players, which can store thousands of songs and which are essential to Apple's recent financial success.
The iTunes phone's bulky design and the fact that operators cannot sell and transfer songs directly to the phone also hampered its take-up.
Support of mobile telecoms operators for a handset is crucial, because they choose a limited number of phones they will subsidize and offer to their subscribers — in most markets around the world, only 10 to 20 percent of phones are sold in retail stores without operator subsidies.
"We're developing these [Windows Media] phones in parallel with operator requirements," White said.
The Windows Media phones will be able to download music over the air, sold by operators, and also directly from a computer.
"This is important for consumers to get broader and wider access to digital content," White said.
Amir Majidimehr, in charge of Microsoft's digital media activities, said the advantage for consumers was that they could now buy online songs either from a PC or a mobile phone and transfer between devices without having to buy tracks twice.
Microsoft now has deals with both Nokia and Motorola. These two handset makers together produced more than half of the 810 million mobile phones that were sold last year.
Nokia announced a deal to include Windows Media in some of its phones last year at 3GSM. Nokia has helped set up mobile phone software firm Symbian, which competes with Windows Mobile, Microsoft's technology for handsets.
In addition to Windows Media, the Nokia phones will also contain an open standard for the transfer and protection of songs and video. Motorola said its Windows Media phones may also support this standard from the Open Mobile Alliance (OMA).
"It's possible that we may support OMA. This is not an exclusive deal," White said.
The OMA standard has suffered, however, from endless haggling over licensing terms in negotiations with key patent holders that have been gridlocked for more than a year.