Ring Tones Go Ka-ching
By DAMIEN CAVE
As the music industry continues to
struggle with shrinking profits, layoffs and consolidation, cell phones have
suddenly emerged as a financial jackpot. Customized ring tones -- synthesized
song clips that play instead of a normal ring -- now earn billions of dollars
for artists, record labels and the cell-phone industry. Add improved phones and
features to the mix, say some record executives, and music via mobile may
outpace what's now being sold through retail and the Internet.
"This is the most explosive growth area to come," says Craig Kallman,
co-president of Atlantic Records, which had a big ring-tone hit last year with
Sean Paul's "Get Busy." "If you can distribute through a cell phone, you have a
broader platform than what's ever been seen before."
Worldwide, the ring-tone market is already huge: Users of cell phones (primarily
ages sixteen to twenty-five in Asia and Europe) spent about $3 billion in 2003
on hits such as 50 Cent's "In Da Club" and OutKast's "Hey Ya!" along with
catalog favorites such as Lynyrd Skynyrd's "Sweet Home Alabama." That's ten
percent of the world's music market, and far more than the $100 million to $200
million that's expected to be spent this year on legal Internet downloads.
Ring-tone sales in the U.S. reached only $80 million to $100 million last year,
a fraction of the earnings in similar-size markets. But for labels, cell-phone
carriers and independent entrepreneurs launching a major push to expand the
business, sales are expected to grow by more than fifty percent in the U.S. in
2004, according to the Yankee Group, a market-research firm. By the end of this
year, seventy-five percent of the 155 million cell phones now in use in the U.S.
will have the ability to play custom ring tones. And it's not just synthesized
songs that are expected to drive the growth. Actual clips of master recordings,
with names such as "TruTones," "ring tunes" and "music tones," are already
available for about two dollars a pop. Carriers and Web sites that are now
popular with ring-tone buyers, such as MTV.com and Zingy.com, are expected to
eventually sell them, too.
"Anything to hit the Top 100 -- anything on an album in the Top 200 -- will be
available," says David Ring, vice president of the music-technology division at
Universal Music. "We can take advantage of what clearly is a new market
opportunity. People want to enjoy the latest music, and that's fantastic news
But while the cell-phone music market could reach $1 billion in the U.S. by
2008, according to the Yankee Group, the money may not beat a path to the
labels' door. New companies such as Xingtone are giving artists and music fans
the power to bypass the labels through inexpensive software that transfers song
clips from a CD to a cell phone. Sugarcult's new album comes already loaded with
a custom version of the software; other artists are making similar plans,
according to Xingtone president Brad Zutaut. So while actual song tones are
clearly an improvement over the Casio-esque versions, they also raise the
question of value: "When you get to the point of paying $2.50 for twenty
seconds, people are going to ask why they're paying so much for a snippet of a
song that they can buy for ninety-nine cents," says Adam Zawel, an analyst for
the Yankee Group.
Nonetheless, the industry remains optimistic, noting that ring tones are
especially popular among the age group that might otherwise be file sharing. The
industry also has high hopes for the arrival of ring-backs, which give
cell-phone users the ability to define what incoming callers hear instead of the
usual ring. "If it can be a consumer-friendly experience, the potential is
enormous," says Kallman. "I don't think it's a fad."
The Ring Tone Top Ten*
1. "Sweet Home Alabama," Lynyrd Skynyrd 2. "Hey Ya!," OutKast 3. "Milkshake,"
Kelis 4. Super Mario Bros. theme 5. "One Call Away," Chingy 6. "In Da Club," 50
Cent 7. "P.I.M.P.," 50 Cent 8. "Stunt 101," G Unit 9. "Holidae In," Chingy 10.
The Pink Panther theme
The Next Wave of Cell Phone Music
Now that ring tones have become a viable market -- earning about $3 billion
worldwide last year -- a fusion of music and mobile phones is catching on.
Entrepreneurs, investors, cell-phone carriers and the music industry are working
hard on new ways to make your cell phone a musical instrument. Here are some new
features on their way to your cellular:
Play "F**k It" for a cheating ex
Already available in South Korea, ring-backs give you the ability to decide what
callers hear before you pick up. No Doubt's "It's My Life" for when your mother
calls? Incubus' "Megalomaniac" for your favorite Republican? The options are
Expected arrival: 2005
MTV on a Mobile
Why be satisfied with just a song? Future phones will not only ring with your
favorite tune, they'll also show your favorite videos, from "Thriller" to
"Toxic." But don't drive while watching.
Expected arrival: late 2004/early 2005
The Cellular Jukebox
Dial into your music at home or in the car
Imagine plugging your cell phone into the car radio, which then accesses the
music collection on your hard drive at home. It will be possible, eventually. In
the short term, be prepared to manage your iTunes or Napster account with a
touch of the dial.
Expected arrival: 2007-2008
An iPod That Rings
Download and listen while in motion
Apple hasn't yet shown any interest in uniting with wireless carriers, but more
cell phones will soon be equipped with the ability to download and play digital
music. Nokia already sells a phone that comes complete with Jay-Z's Black Album.
And in August, Virgin Digital will launch an online service that offers cellular
access to 700,000 songs. Prices have not been set, but other carriers will be
sure to follow.
Expected arrival: August 2004