In what must be good news for the backers of Loudeye, digital music provider has sealed a deal to flog itself off to the mobile phone giant Nokia for $60 million. With Loudeye's recent sale of its US operations to Muse, the main focus of the purchase seems to be centered on Loudeye's floundering European business, On-Demand Distribution (OD2).

As we reported in June OD2 has been faltering in the face of competition from its rivals in the digital download space, with only its vague business model and the recent failure of formerly successful business ventures such as the MyCoke online music store. OD2 had also attracted controversy throughout its history by selling DRM WMA files that suffered from interoperability problems and technical issues.

So, the question must be - what exactly has Nokia bought? While Nokia is recognized as a pioneer in the mobile phone industry, the key successes in mobile digital music sales have been with networks such as 3 in the UK, so getting into the content area is likely to create friction between Nokia and its core market - the mobile phone networks. Nokia also has little experience in managing successful content operations, as evidenced by the failure of the N-Gage portable video game device. OD2's primary value for Nokia will be its existing relationship with the major labels and catalog of music, as the value of OD2's brand and technology seem almost no-existent.

With Microsoft's recent announcements regarding its plans to partner with European telcos and to launch its own portable digital music player its clear that competition is hotting up in this space for devices, technology platforms and delivery mechanisms. Although $60 million is small change for Nokia, the value of its purchase seems pretty dubious at this point in time.