Nokia, ai Jumala! (Nokia, oh God!)

At the end of the 2011 World Rally Championship season, the WRC had a global promoter: North One Sport. All seemed reasonably well – Nokia had been signed as title sponsor, and surely more sponsors would follow soon. Not so long afterwards, all fell to rack and ruin. North One Sport’s parent company, Convers Sports Initiatives, went into administration (this followed the arrest of company head Vladimir Antonov on suspicion of fraud related to the collapse of Lithuanian bank Snoras, and the seizure of many of his assets). North One Sport, having tried to make out that all was AOK, had to admit that without Antonov’s money they were struggling. The FIA cancelled North One’s contract as WRC promoter.  A lot of folk involved in TV production for WRC through North One Television found themselves instantly out of a job. It was all a big ol’ shame.

What had North One left the WRC with? Well, there was that title sponsor, Nokia. Now, I’m going to start off by being fair to Nokia. They seem to have helped the FIA to maintain media coverage of the WRC – and not only through their own app. When World Rally Radio and iRally reporter Colin Clark found his contract with World Rally Radio and iRally producers Crown House Media terminated, just before Rally Sweden, it was Nokia who took pity on him and engaged his services to present video clips for the WRC.com website. A couple of rallies later, and the WRC.com website had its own live streaming radio service (with the original World Rally Radio lineup of Becs Williams and Colin Clark), and judging by the mentions of “powered by Nokia” and “WRC Nokia app” this was instigated and funded by Nokia.

So, a nice big company has come along and saved us, and they will see us right, surely? Or maybe not. See, Nokia weren’t actually doing all that well, even when the contract was signed. Remember the infamous “burning platform” memo issued by new Nokia CEO Stephen Elop back in Feb 2011? The WRC deal was done in June 2011 – could things really have improved that much in a few months? All that had happened was that Nokia had taken a big decision to use Microsoft Windows Mobile as its main smartphone platform. Nokia promised at the time to continue supporting their waning but successful platform Symbian and their Linux-based platform Meego, but soon chucked both out the window. This decision has been described by former Nokia internal analyst (now freelance analyst and utter fucking genius) Horace Dediu as pretty stupid. He suggests (in episode 34 of his podcast The Critical Path) that a far better option would have been to use Windows Mobile for the North American market only (where it suits carrier requirements), keep Meego for the European market and continue supporting Symbian for emerging markets.

Since the Apple iPhone disrupted the mobile phone market, rival manufacturers have been left scrambling to keep up; with Nokia struggling badly. It’s important, but difficult to get and hold a footing in the crowded smartphone market, as Horace Dediu pointed out in this piece on Finnish broadcaster YLE’s English news site from December 2011. Nokia’s Windows Mobile phone, the Lumia, though good, may not be good enough. Mobile industry blogger Stefan Constantinescu, in the same YLE article just linked, said that Nokia have no plan B. Essentially, if Nokia don’t sell enough Lumia phones, they’re up the spout.

Guess what? Nokia have not sold enough Lumia phones. Not nearly enough. And the latest figures, preceded by a profits warning, suggest they are approaching, if not entering, the spout: see some charts of Nokia sales figures on Asymco. Nokia, once number one mobile phone manufacturer, overtaken by Apple in Q1 2011, have been pushed into third place by Samsung. These charts of Samsung units sold and Nokia units sold, from guess where, Asymco, show an important contrast in smartphone growth between the two. Samsung have successfully sold more smartphones, converting “featurephone” ownership to smartphone ownership. Nokia haven’t.

Microsoft are funding Nokia, to the tune of $250 million a quarter in “platform support”. Horace Dediu’s calcuations show that, even if Nokia Lumia sales grow as fast as iPhone sales, by the end of 2014 Nokia will still owe Microsoft nearly $2 billion.

As this Business Week article puts it, Finland imagines life without Nokia. One ratings agency have downgraded Nokia to junk bond status (Reuters). Yikes!

And this is the main title sponsor of the WRC. What kind of horse did North One Sport hitch this cart to? OK, so the Nokia sponsorship worth only €3million over “multiple years” – I’m guessing three years. It’s not much compared to the billions of dollars that Microsoft are throwing at Nokia – but remember, Nokia aren’t close to being able to make that money back.

There’s a problem in that sponsorship works not just in terms of cash money, but in terms of brand cachet. Get yourself a fancy blue-chip sponsor, and other sponsors are more likely to get on board because you look like you’re going places. The WRC needs to attract manufacturers as well as sponsors: if the financial situation and media promotion of the sport appears to be improving, manufacturers will be willing to invest the big money (far, far, far more than Nokia’s million euros a year) needed to run a full factory team. When the championship has few sponsors, and the title sponsor has been given the sad trombone by ratings agencies, the future does not look rosy, and manufacturers will be reluctant to invest. It’s a simple positive feedback loop of confidence. When the WRC/Nokia deal was announced, manufacturers could easily be thinking the best of Nokia. When North One Sport collapsed, everyone with a concern for rallying did what they could to keep the championship alive. Now, though, everybody knows that Nokia are not at all healthy.

Essentially, there are two outcomes for Nokia. Either they go tits up, or they merge with Microsoft. In the event that Nokia ceases to be a going concern, the terms of the WRC sponsorship agreement would obviously be looked at. It’s possible that the deal would be cancelled, and then where would we be? Back to square one, and with our cart not even hitched to a lame old horse. I do hope this doesn’t happen.

With Volkswagen entering the championship next year, and Toyota looking certain to follow in 2014 or 2015, the sport genuinely does have a bright future. It would be great to have that positive feedback loop working the other way: flowing from manufacturer confidence, to get not only more sponsors on board, but to get some strong commitment to global media promotion. Let’s hope that the FIA received a good response to their call for promoters, agents or investors issued in February. That way, we won’t need to worry about what happens if Nokia do go to the wall.

 

Update (May 28 2012) Nokia continue to make losses. The sponsorship deal is cancelled. See my new post.