Fortune (via moconews) is reporting that Nokia may shortly be launching an online music store and downloading service similar to Apple's iTunes. The service is based around technology gained with the acquisition of Loudeye is expected to be announced at an upcoming Nokia event in London. It is also likely the event will also be the venue for the launch of the latest in the Nseries range of phones. Read on for further information and analysis.

Nokia acquired Loudeye a year ago and things have since been relatively quiet. It is possible that the original Loudeye platform could morph into a more generic content and media delivery platform for mobile devices. Existing Loudeye based implementations have around 1.6 million tracks available and this is a likely number for the Nokia service at launch. 

It is very likely that it will allow consumer to buy and download music directly on their phone. This will offer Nokia a competitive advantage over some of its competition. The service will, presumably, enable consumers to purchase music and transfer it to their phone via their PC.

Traditionally such services have been provided by third parties, or (especially in the case of music) operators. Indeed one of Loudeye's primary areas of activities was and is providing white label music services to operators. However many operator services have met with only limited success with consumers preferring to buy music elsewhere.

We've commented in the past that Nokia music phones often suffered from the lack of an accompanying music store element when compared to other digital media players. In particular to compete with the music experience available on Apple's iPod and iPhone products an end to end user experience is a necessity. Inevitably such a service will be labeled as a response to the iPhone, although it has certainly be in the works for some time.

Nokia does have to pull off a delicate balancing act when developing services that compete with operators, which are and will remain their primary customers for the foreseeable future. At the same time services and software are becoming increasingly important as product differentiators and provided a complete experience is a key part of Nokia's strategy. Nokia has already taken the first steps in this direction with its Music Recommender (link works in Internet Explorer only sadly) service which is powered by the Loudeye engine. 

An informative comparison can be made with the acquisition of mapping specialist gate5 and their smart2Go software. The acquisition formed the core of what is now Nokia Maps. This software first appeared in the GPS enabled Nokia N95, and has subsequently been made available for other phones (both Nokia and non-Nokia devices). Perhaps we will shortly be seeing the launch of Nokia Music?