Siren Call for the Ringtone Industry
It was much before the advent of handheld Mobile phones that ringtones had started their journey, in what was to become a multi-billion dollar industry.[i] It all started in 1975, when the FCC allowed consumers to attach third-party devices to phone lines. From that time onwards, ringtone revenues have significantly risen in importance for Music companies, especially since internet made the single-track culture a norm vis-à-vis the full album sales model.
Industry Structure: The market comprises of polyphonic ringtones (mostly in '.mid' format), true tones (recorded snippet from the master-file of a music track in MP3 or AAC format), and Karaoke style tones. The primary channel for ringtone distribution is through online downloads. These online sellers may be cell phone operators, manufacturers like Apple, or independent websites. They get their content from other online/offline aggregators and individuals making song covers. Thus, the industry is moderately organized. On the other hand are the cell phone operators and major music labels that have the power to organize, re-organize, and bring regulation into the industry.
Within the ringtones market, the consumer interest seems to have widened beyond just ringtones, in the last decade. Ringtones comprised 81% of the worldwide mobile music market in 2006. The same has come down to about 50% in 2011, with interest shifting to full-track downloads and streaming music. [ii] Ringtones have essentially given way to caller tunes other formats of mobile music.
Value Chain: Ringtone sales are currently managed by cell phone operator and/or manufacturer stores (Ex: itunes, Ovi store). While record labels and publishers traditionally get 30% and 10% of the price respectively, cell phone operators get the lion's share.[iii] This model is still prevalent in growing mobile markets like those of India & China.[iv] However, internationally, music companies are increasingly gaining a stronghold in the content distribution value chain.[v]
Competitive environment: There is stiff and guarded competition in all aspects of the ringtone industry. From its production to distribution; songwriters, publishers, cover producers, record labels, independent online store operators, and telecom service providers all want a share of the ringtone pie. The industry is marked by IP infringement suits. The online ringtone (downloading) industry in itself is seeing tough rivalry between different types of players mentioned before. To compound the problem, the industry revenues have been falling with forecasts of its becoming dead in the next 3- 5 years.[vi]
Future Scope: The ringtone industry is still a profitable segment of the music industry, in spite of declining revenues, albeit in anew avatar. In fact newer formats of mobile music, like caller tunes, music videos, and mobile radio are gaining traction. Caller tune revenues in the US have nearly doubled between 2005 and 2010. The same trends will follow in the Indian market and new entrants can cash in on this early on. However, what new entrants must be aware of is that the industry is in transition and some of these trends could simply be 'reactionary'. Thus, in the long run, a new model based on incentivizing buying bundled music could reap benefits. For example the single 'Talk' from Coldplay's album 'X&Y' was pre-released as ringtone in partnership with Cingular Wireless, as a promotion for the upcoming album. What stands out most is the emergence of a new kind of alliance between record labels and ringtone sellers.
It is clear, at least at this point, that a new market structure is emerging and first movers have begun reaping benefits. There may not be a level playing field, but everyone is still a new entrant of sorts in this changing market.
Dear Sir,Indrani
PFA Group 4's writeup on the Ringtone Industry titled "Siren Call for the Ringtone Industry".
Thanks and Regards,
--
Regards
-Indrani
Apologies for a mistake. It was 1968 when FCC allowed Third party devices on phone lines. :) Forgot to change that.
ReplyDelete