Nokia and US digital media firm Loudeye – the company that acquired On Demand Distribution (OD2) in June – are to work together to create technology that will allow music fans to download songs over the air to their mobile phones.

Unlike Apple and Motorola, who recently announced plans to bring iTunes music to Motorola phones, but have no intention to allow mobile phone users to download music directly from the iTunes Music Store, Nokia and Loudeye will collaborate to the develop technology with a view to helping mobile phone firms increase their music business.

Jupiter Media analyst Mark Mulligan told BusinessWeek: "The big difference is that it puts operators at the forefront, which is incredibly key. Operators, facing sagging income from conventional voice calls, are eager to find sources of revenue growth. They see wireless downloads of music and other digital content as a potential goldmine."

Poor pick up

Orange, mmO2, and others have already launched music-on-demand services that offer downloadable songs over the air, but they haven't really taken off yet, probably due to high costs and slow networks.

Another reason, suggests BusinessWeek, may be that music phones generally offer poor audio quality, limited storage, and short battery life. "Handset makers are working to fix these problems with better sound technology and more built-in memory. Analysts predict there will even be mobile phones with built-in hard drives, à la iPod, by the second half of 2005," notes the report.

Informa predicts that sales of MP3-enabled phones will more than double, to 25.3 million next year, and hit 116 million by 2008.

According to Strategy Analytics, ring-tone sales last year topped $3.6 billion globally. Downloadable mobile music could be far bigger, topping $17.6 billion annually in 2009, the firm estimates.