The Indian Ringtone industry, a part of the broader MVAS (Mobile Value Added Services) industry, has seen tremendous growth since its inception. Fuelled mainly by Indian's obsession with popular Bollywood songs and their constant need to identify themselves through certain songs, the ringtone industry nearly breached the landmark of 5 billion in 2012. A breakup of the MVAS industry shows that it consists of the following types of services, in the given descending order of market share:
1) P2P: Person to Person. Eg: SMS
2) Ringtones & Caller Back Tones
3) Games and Data services
4) P2A: Person to Application
5) A2P: Application to Person
A simple look at the Ringtone industry will not suffice. A stake-holder analysis is required here, i.e., judging the industry from multiple viewpoints.
1) Music Composer: The music composers believe that they do not get their fair share of the deal. For instance, out the general price charged per ringtone by a telecom operator of Rs. 7-12, 60% goes to the operators, 25% to the music companies, and 15% to the government. But the music composers do not get even this share. This is because each composer makes individual contracts with different music labels, selling their copyrights in the process. Because of no organized unions for composers, the power usually resides with the music companies, as they dictate the terms of the contract.
2) Music Company: With the ever increasing penetration of the Internet & subsequent digitization of music in India, even these entities are starting to incur losses, as the customers can simply download ringtones from any number of websites for free. With lax cyber law enforcement, the demand for ringtones is simply being met elsewhere.
3) Telecom Operator: Nearly 200,000 ringtones are downloaded every day, with Airtel claiming that nearly one million ringtones in 11 different languages have been downloaded by their subscribers in the last five months. While the overall volumes look promising, but the growth rate seems to be on declining trend, which is definitely a cause for concern. Government rules also play a part here, as they can regulate the proportion of the revenue that can reside with the operators. (Eg: 20-30% in China).
4) Consumer: With rapid growth of smart phone usage in India, the MVAS segment will only continue to grow, as consumers aren't content with talking over phones anymore. But with freely downloadable content online, the Ringtone segment will have to keep innovating to give the consumers a reason to continue paying for the ringtones.
In conclusion, a new player may enter the Ringtone industry only as long as they can come up with a solid business model with sustainable revenue sources not just from advertising but from consumers as well.
Thanks and Regards,
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