Will Ringtones Go the Way of the Beeper?

With worldwide ringtone sales reaching more than US$4 billion last year, some industry experts have speculated that phone tones will soon outsell CDs. Others, however, speculate that ringtones’ success will be shortlived, and that they will eventually go the way of beepers: virtually extinct.

The question of whether ringtone sales will continue growing at break-neck speed, or whether MP3-phones that offer consumers the ability to play full tracks will result in their demise is one of those industry debates over which time will be the ultimate judge. Here’s what we know for sure: At the moment, an increasing number of Americans are using their mobile phones to download ringtones and are paying a pretty price for them.

BMI, an American performing rights organization that represents more than 300,000 songwriters, composers, and music publishers, predicts ringtone sales in the U.S. alone are set to reach US$500 million in retail sales this year.

Ipsos-Insight reports one quarter of mobile phone owners have downloaded ringtones to their mobile phones. This translates into approximately 30 million Americans and marks a dramatic increase over the past 12 months, when only 5 percent of mobile phone owners had downloaded ringtones.

Reaping Financial Rewards

Matt Kleinschmit, a vice president with Ipsos-Insight, said in the past 12 months he has witnessed an incredible surge in many digital music behaviors, including paid PC-based music downloads and sizable growth in portable MP3 player ownership.

“What we’re now witnessing in the mobile arena is similar to what has already occurred in many places outside the U.S., and represents yet another opportunity for industries looking to monetize U.S.-based digital music distribution,” Kleinschmit said. “Through a combination of increased ringtone availability and the desire to personalize one’s mobile phone with their favorite or the most popular rings, the growth in this alreadyburgeoning industry will likely continue unabated.”

Indeed, companies are springing up to cash in on the musical phone trend. Roxio, a division of Sonic Solutions, introduced Xingtone Ringtone Maker software in June. Xingtone Ringtone Maker allows customers to convert and transfer portions of an audio file from their computer or a CD to their mobile phones.

Avanquest Software launched Ringtone Media Studio, a ringtone creation and image-editing suite, in July. And InfoSpace, Jamster and Zingy, to name a few, are peddling ringtones with their own twists.

Beyond the Hype

Despite the ringtone hype, Joseph Anthony, CEO of Vital Marketing, a youth and multicultural marketing agency, told TechNewsWorld that the ringtone craze is going to go the way of the beeper a decade ago.

“There is currently a demand for musical rings, but as MP3 and iTunes phones become available, there will be no need for this market,” Anthony said. “With new phones being able to play MP3-quality music, there’s not going to be any reason for consumers to pay money for a 10- to 30-second clip. Like beepers did, until cell phones became affordable, ringtones are filling a void in the market that will soon be replaced by better technology.”

Anthony said iTunes and MP3 technology will prove to be far more efficient than purchasing ringtones. He believes factors including the mainstreaming of iTunes, MP3 file price drops, and the user-friendly format will be so appealing to customers that the market will see the demise of the ringtone industry.

Ringtones vs. Full Tracks

Anthony is taking the “full track” stance that says customers won’t have a need for both full tracks and ringtones. The Ipsos-Insight study reveals that, while not yet widely available to the market, 6 percent of mobile phone owners report having downloaded full songs to their mobile phone, with smaller portions of the mobile population experimenting with downloading ring backs, short video clips and music videos.

“In many cases, these broader download offerings have just entered the market, yet we are already seeing leading-edge mobile users beginning to experiment with them,” said Kleinschmit. “This suggests that users may be increasingly seeking mobile entertainment content options beyond just music-related offerings, and points to the potential for broader multimedia-related services that could be offered from a variety ofdistribution partners.”

But will full tracks cannibalize ringtones? IDC analyst Lewis Ward told TechNewsWorld the answer is a resounding “no.” Ringtones, he said, are personal statements about the user. Full tracks, on the other hand, are more about personal music taste and selection.

Dueling Analysts

“Ringtones is an emerging young. Many people don’t even have a phone that allows them to download a ringtone or just haven’t ever downloaded a ringtone yet. So the idea that we’ve already hit some sort of saturation point is just not true,” Ward said. “We are certainly not forecasting the disappearance of ringtones based on the emergence of full tracks.”

But Anthony is not putting much faith into the predictions of multiple, well-respected analysts. He stands firm on his word. He believes ringtones and full tracks are the same market, because any full track can easily be transformed into a ringtone.

“Personalization is a big part of a consumer’s experience, the iTunes phone ultimately gives consumers more choices and the power to personalize their phone on a daily basis without additional costs associated with ringtones,” Anthony said.

Time will tell if ringtones will be singing so long or if two related digital music markets will emerge with plenty of revenues for everyone.

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