Full-track, over-the-air downloads have yet to gain any serious traction, and ringtones are so 2006. But when it comes to mobile music applications, U.S. carriers increasingly are looking to ringback tones to boost data revenues.
Ringback tones-music clips that a caller hears instead of a traditional ring before the person being called picks up the phone-continue to garner attention, according to new figures from M:Metrics, even as the U.S. ringtone market plateaus. The number of U.S. ringback subscribers more than tripled last year, the market research firm found, exploding from 2.4 million subscribers in January to nearly 8 million in November.
The application continued to gain ground in Europe, as well, growing at a rate of roughly 150 percent in Germany and the United Kingdom in 2006.
Meanwhile, ringtones remain popular, but not as lucrative. Nearly 7 percent of all U.S. wireless subscribers have made their own ringtones, M:Metrics found, as the percentage of users purchasing ringtones slipped from 10 percent of mobile users to less than 9 percent.
The contrasting trends underscore a key difference between the two mobile music applications: Ringtones reside on the handset, allowing users to create their own original ringtones or use music clips from existing music libraries instead of downloading them from their carrier or a third party. Ringback tones, meanwhile, exist on the network, granting carriers full control of the content-and barring off-deck content providers from moving into the market.
“Since it’s impossible to hack a ringback tone, this growing market is not threatened by piracy and end-user savvy,” said M:Metrics entertainment analyst Jen Wu.
Asian carriers have reported impressive uptake of ringback tones, with some operators claiming the application has boosted average revenue per user by as much as $2.50 per month.
Verizon Wireless became the first major U.S. operator to launch ringback tones, offering the service in a handful of markets in November 2004, before rolling it out nationwide. T-Mobile USA Inc. quickly followed with its CallerTunes; Cingular Wireless L.L.C. has since launched Answer Tones and Sprint Nextel Corp. was last of the top-tier carriers to the party with Call Tones.
Ringback hurdles
The ringback market faces several hurdles. Only the calling party hears a ringback tone, for instance, while an entire roomful of people can be exposed to ringtones simultaneously. And subscribers may never hear their own ringback and may be less inclined to buy a new one regularly.
Because they reside on the network, though, ringback tones offer several compelling features. Users can program different ringtones for different callers, different times of day or different days of the week. The business model for carriers is also attractive: most operators offer subscription ringback services, demanding a monthly fee plus a per-song charge from subscribers. Verizon Wireless, for instance, sells use of ringback tones for one year for $2 each to consumers who pay a $1 monthly subscription fee.
Music to carriers’ ears
Perhaps the most encouraging thing about the U.S. ringback market, though, is an overall lack of consumer awareness: more than 60 million American wireless users have never heard of the application, M:Metrics found. While ringback growth may never match the hockey-stick uptake seen by ringtones, the application may eventually be more popular-and far more lucrative-than its older sibling. Indeed, IDC predicts more than 5 million U.S. users will become ringback buyers this year, with 15 million Americans using ringback services by the end of 2007.
“Ringbacks are emerging as an important element of the broader wireless music marketplace,” according to IDC analyst Lewis Ward, who urges carriers to couple low-cost subscriptions with “near-term content expiration” offerings. “While most consumers are still unaware of service availability, our research suggests that this situation will change in the coming years, and that over 40 million domestic consumers should be availing themselves of ringback tone services by 2010.”
