Ringtones: Becoming part of the artists’ rollout process
Despite slowdown, tones to pull in $510M in revenue
August 21 2008 - 5:59 am ET | Colin Gibbs | RCR Wireless News
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Hip-hop star T-Pain performs at the 2008 South Florida summer fest. Zed last week unveiled an exclusive deal to distribute ringtones from the digital-only label Nappy Boy Digital. T-Pain founded the label.
Photo credit:WENN
In an industry that constantly looks for the next big thing, ringtones are yesterday’s news. But the little snippets of music still generate billions of dollars.
Ringtone revenues are on the wane, to be sure: Broadcast Music Inc. (BMI) predicts the U.S. market will shrink for the second consecutive year, generating $510 million after reaching an all-time high of $600 million in 2006. The descent will be slower in Western Europe, according to JupiterResearch, where ringtone sales will fall from roughly $1.36 billion last year to $1.35 billion in 2011.
Analysts offer a host of reasons for the coming drop-off. Once novel, the little tunes have become passé after gaining mass-market traction. Consumers are less willing to pay $3 for a fraction of a tune when they can buy the entire song for 99 cents or less, and a quick Internet search can turn up dozens of ways for music lovers to create their own ringtones on the cheap — or even free. And as multimedia devices like Apple Inc.’s iPhone continue to move into the mass market, multimedia offerings such as games and location-based applications are sure to eat into ringtone revenues.
Still dominates in revenue
Nearly lost in all the talk about the alleged demise of ringtones, though, is the fact that the application continues to dominate non-SMS revenues in mobile data. Roughly 9.3% of U.S. wireless users purchase ringtones, according to the latest data from M:Metrics, outpacing those who used the phone to play music (7.9%) or simply access a downloaded mobile game (9.1%) or other application (5%).
And the music industry — which has been notoriously slow to leverage new media like the Internet or mobile — has learned its lessons in mobile. Many artists have come to view ringtones as a new way to make a buck as they reach out to fans, and record labels and their mobile partners have lowered many of the licensing hurdles required to make a ringtone out of a single. Because even the hottest single has a limited shelf life, and dated ringtones won’t do a fraction of the business that a popular new title will see.
Built-in from the start
“Mobile is basically built into everybody’s launch strategy at this point,” said Ted Suh, CMO of the U.S. operations of Zed, a Spanish content behemoth. “The whole digital revolution is really in stride. Basically the artists are realizing they have the ability to utilize the studio in the basement (to record music) and quickly get ringtones out into the hands of their fans.”
Zed, which bought its way into the U. S. market earlier this year with the acquisition of Monstermob Group plc and its Denver-based subsidiary 9 Squared, last week unveiled an exclusive deal to distribute ringtones from the digital-only label Nappy Boy Digital. The label was founded by hip-hop star T-Pain and serves as a direct-to-consumer conduit for emerging artists such as Tay Dizm, Jay Lyriq and Sophia Fresh; Zed also notched an exclusive pact to sell realtones from KOCH entertainment, whose artists include DJ Khaled, Kottonmouth Kings and BeBe Winans.
Those kinds of deals are sure to increase as artists continue to leverage ringtones as a lucrative way to reach fans and broaden audiences, and — perhaps more importantly — mobile expands to emerging markets such as India and China. And while ringtones will surely fade into the distance, ringback tones are well-positioned to offset, and eventually more than make up for, their older brethren.
“Ringtones and ringback tones are personalization products that use music and other sounds to say something about the user of the phone,” Juniper Research wrote earlier this year. “There is no indication that the demand for such products is diminishing, in fact new geographic markets are still developing and as advanced networks and handsets are rolled out, more technology demanding products will become available to a wider audience.”
And look for music companies and artists to pour resources into ringtones and ringbacks as CD sales continue their free-fall and full-track mobile services spin their wheels. Ringtone revenues may be living on borrowed time, but they have been for 18 months now. And while sales may be on the downslope, the application is still making cash registers rin.
“It’s just as important for artists and labels to have a song on iTunes as to have a ringtone. It’s not sheer promotion, eyeballs, it’s revenues, obviously. Clearly there are a lot of reasons for the labels to incorporate this.”
