No matter what you call them-ringtones, true tones, master tones, hi-fi ringers-mobile music downloads are producing huge revenues.
After a few years of market trials and quiet experimentation, ringtones took the wireless industry by storm last year with 50 Cent’s “In Da Club.” The 30-second tune handily outsold digital sales of the single and established ringtones as a bona fide business model.
Global mobile ringtone sales should reach $4 billion this year, according to a report released by consulting firm Consect. In the United States alone, consumers are expected to spend more than $300 million on the content in 2004, more than doubling last year’s revenues.
And those figures pale in comparison to other markets. The industry will generate $500 million in Korea alone this year, according to the study. Western Europeans will spend a jaw-dropping $1.5 billion this year.
The reason U.S. numbers aren’t higher, content providers say, is because of digital rights management issues.
“If you look at the U.K., for instance, there’s one licensing body that covers all the rights” to a song, said James Eberhard of 9 Squared Inc., a Denver-based ringtone provider. “In the U.S., you have to go out to each individual music publisher and acquire rights. If there are six or seven people writing a song, you have to get clearance from each one of those publishing companies. It just becomes a real nightmare.”
The biggest hurdles usually involve hip-hop tunes, Eberhard said. Songs often involve several artists, each of whom has a different recording label. And those labels aren’t necessarily high-powered firms in Los Angeles office buildings.
“Sometimes you can be calling a home phone number (to reach an artist), and his grandmother is handling all the calls,” Eberhard said. “You have a lot of up-and-coming artists, and all the sudden their music takes off, and they don’t have the business put in place.”
Some established labels have hesitated to embrace the mobile market, as well, unwilling to relinquish rights to carriers and content providers. Earlier this year, a hit single from hip-hop star Usher took weeks to go mobile, reportedly due to an intractable publishing company representing one of the tune’s seven songwriters. By the time the label acquiesced, the song had fallen off the charts, and hundreds of thousands of dollars in potential revenues were lost.
Even some artists are declining to allow their music to go mobile.
`”‘There are some artists who won’t license their work that way,” said Jarad Carleton, an analyst with Frost & Sullivan. “When the artist has full rights to the work, the record company has to abide by that. There’s nothing they can do.”
Meanwhile, some fear the music industry is repeating the mistakes it made a few years ago, when it failed to control the sale of music online. While the labels dragged their feet, savvy music lovers were creating services such as Napster that provided free downloads, and burning discs on their home computers.
Advancing technology presents an even bigger problem for the industry than the Internet did. Unlike, say, a CD, digital music can be played in several forms on a growing number of devices.
In the future, a consumer who purchases a song may be buying the right to play it on a single device. The right to transfer music between a phone and an MP3 player, for example, might require an additional purchase. Add the coming technology of peer-to-peer file sharing, and the issue gets even more complex.
“I think it all comes down to value, and what the customer perceives as value,” said Randall Cardinal, chief technology officer at CSG Systems, which provides billing systems and customer care for telecommunications firms. “A customer might pay a premium to have access over multiple devices.”
But if that premium is too high, consumers are sure to find ways around it, Cardinal warned.
“Smart people and early adopters here are going to force … service providers to get the content they want on handsets for fair value,” he said.
And the clock is ticking. Analysts agree that the sale of ringtones at today’s prices -usually $1.50 to $3-probably can’t continue for more than a few years. But as technology allows for a better listening experience on more devices, mobile music revenues are sure to grow. It’s just a matter of how well the industry can capitalize.
“In general, I see things getting more complicated rather than less complicated (in digital rights management),” said Greg Opie, mobile industry manager for CSG. “Relative to the content available on the Internet, there’s a dearth of mobile content available. A lot of money is being left on the table.”
