Feb. 27 (Bloomberg) -- Nokia Oyj signed a deal to become the sole smartphone partner of Voddler Group AB, a Swedish online film service that plans to expand throughout Europe this year, plugging a gap in the handset maker’s service offerings.
Voddler’s movie and television streaming service, which includes a social watching element, will be a standard application on Nokia Lumia phones shipped to the region by the end of this year, Voddler Chief Executive Officer Marcus Baecklund said in an interview in advance of the Mobile World Congress in Barcelona, Spain. Nokia owns about 15 percent of Voddler through its venture arm.
Voddler, based in Stockholm, is among companies banking on the Internet soon becoming the dominant distribution mechanism for movies and TV shows after first release. Faster broadband networks, which came first to the Nordic region, are finally making a broader rollout practical, Baecklund said. The Nokia deal will save Voddler 100 million euros ($134 million) in advertising spending and speed up expansion, he said.
“Nokia will do the marketing part and I can build my brand and take 100 percent of the revenues,” Baecklund said. “It’s obvious they need to have a really good app.” Voddler plans to expand outside Europe with Espoo, Finland-based Nokia next year, he said.
Voddler has 1.3 million subscribers in Scandinavia, where it will introduce the Lumia app first. Spain will follow in April. Netflix Inc., the U.S. competitor which started service in January in the U.K. and Ireland, has shelved plans to expand further in Europe as it works through a cash shortage.
Nokia, whose mobile phones appear as props in movies such as “Slumdog Millionaire,” has struggled to build a video library to counter Apple Inc.’s iTunes. Nokia held discussions with studios as it started the Ovi Store app outlet in 2009, but never announced a movie service.
Development of the Voddler-Nokia tie-up began in the last few months of 2011, Baecklund said. It was overseen at Nokia by Bryan Biniak, who ran TV-data startup Jacked Inc. before joining the phonemaker in 2010.
Voddler’s expansion across Europe will intensify competition with Amazon.com Inc.’s Lovefilm.com DVD rental and video-streaming service, which now has more than 2 million subscribers in Scandinavia, the U.K. and Germany, as well as with Modern Times Group AB’s Viaplay and services from cable and phone companies.
Sharing Versus Centralization
Voddler says its technology, which combines central distribution and copy protection with peer-to-peer sharing to speed up streaming, offers higher quality than competitors’ centralized systems. Movies are available through pay-per-view streaming, though most of the catalog is offered free and supported by advertising. Viewing can be paused and continued across different platforms, including connected televisions and computers.
“The mobile device is an excellent device for remote control, planning and scheduling, but you prefer to watch on a big screen if you can,” Baecklund said. The Movie Night function will let users invite friends to a viewing, and those who aren’t physically present can watch the movie and chat on Lumia phones, PCs or televisions, he said.
Voddler is also readying Movie Night for existing apps for Nokia’s Symbian and MeeGo smartphones, he said.
“The endgame for us is the living room, and we are doing anything we can to widen the user base that will use the living room,” Baecklund said.
The subscription-TV market in Europe, Africa and the Middle East, including pay-TV, video-on-demand, mobile and video-streaming services as well as license fees, will expand 24 percent to $95 billion in the next four years, according to PricewaterhouseCoopers LLP. Internet-streamed videos are forecast to be the fastest growing segment.
Voddler has deals with most big Hollywood studios, though not yet with News Corp.’s Twentieth Century Fox, and with the British Broadcasting Corp. as well as local producers in Scandinavia. Its 5,000 titles from about 45 content partners include “Bridesmaids,” “Crazy Stupid Love,” the Harry Potter films and episodes of the “Big Bang Theory” TV series.
Studios are becoming more liberal about licensing as they find their release window and regional restrictions ineffective against illegal free download services, Baecklund said.
“The pirates get all the titles first and legal services like us have to wait,” Baecklund said. “And the longer we wait, the more revenue gets lost on piracy because everyone has already watched online.”
Voddler is holding partnership discussions with Spanish operators and Western Digital Corp., which makes connected entertainment boxes for TVs. It already works with Telenor ASA’s Bredbandsbolaget fixed-broadband unit and Hutchison Whampoa Ltd.’s 3 Scandinavia wireless brand in Sweden, as well as with Finland’s Elisa Oyj.
Elisa, Eqvitec Partners Oy, and Munich- and San Jose-based private equity investors Cipio Partners GmbH have also put money into Voddler. Investments so far have amounted to 25 million euros and the Swedish company will spend another 25 million euros to expand, Baecklund said.
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