Sony Ericsson Launching PlayNow Arena; No "Boat Load Of Cash" From Digital Music

Sony ( NYSE: SNE) Ericsson ( NSDQ: ERIC) said today it is launching PlayNow Arena, the long-awaited upgrade of its online music store PlayNow, on Monday. The new internet site?which will debut first in the Nordic countries?adds games and other applications to the mix, and will start off with a million tracks from major music labels Sony BMG, Warner Music, and EMI, reports Dow Jones. They plan to eventually offer five million tracks to expand to other European countries later this year, with the hope of going global by 2009.

More importantly, all of the tracks?which will sell for 9 Swedish kroner ($1.43) when it first opens in Sweden--will be DRM-free, which the troubled handset maker is hoping will draw in more users, and help boost sagging phone sales. Sony Ericsson content boss Martin Blomkvist, however, noted that the sale of digital music wasn't going to make the phone maker rich, considering that after paying out to the labels, operators, and taxman, they would "hardly profit." He added: "Had we only done music, we wouldn't have done this," he said. "The way it is set up today, very few people, apart from the record industry, are getting rich on digital music. Generally speaking, the music today isn't generating a boat load of cash for us."

The comments highlight the difficulties that handset makers face in trying to generate revenues from services, rather than the phones themselves. Nokia ( NYSE: NOK), for one, has plowed substantial sums of money behind the notion that it's the applications and services that will be the main source or revenue, as handsets become increasingly commoditized. Other forms of content, however, may help balance out the dire margins from music. Blomkvist said that online games, for example, had higher margins, though he did not reveal by how much.