Ringtone market comes to the end of its crescendo
By Victoria Shannon
You couldn't tell by the
increasing cacophony that mobile phones send up every time a call comes in, but
after years of double-digit growth, the global ringtone market is coming to the
end of its crescendo, according to a variety of measures.
In some parts of the world, ringtone sales are actually declining, and the
former ringtone kings, like Jamba of Germany and Musiwave of France, are
reorganizing their businesses to focus on more profitable ways for consumers to
personalize their cellphones.
A couple of years ago, in the midst of the ubiquitous "Crazy Frog" wave, there
seemed to be no upper limit to the sale of the €2 and €3, or $2.90 and $4.35,
snippets of music that blast out of cellphones. Billboard magazine created a
"hot ringtones" chart in 2004 to track their popularity, and at one point in
2005, analysts predicted an $11 billion ringtone business by 2010.
But the market changed in unexpected ways. For one, more mobile phones were
being made with the ability to create or record their own tunes. For another,
record labels actively promoted so-called "master ringtones" - excerpts from the
original pop recordings - for about the same price as the knockoffs but with
higher royalty fees. And digital music stores like iTunes began packaging and
selling ringtones alongside their 99-cent singles.
All three trends lessened the need for - and profitability of - ringtone
aggregators, like Jamba, the Berlin-based marketer behind the "Crazy Frog"
Jamba, known as Jamster in the United States, is still selling ringtones, but it
has broadened to take on music, video and information services as well as
graphics and games. The company was bought for $273 million in 2004 by VeriSign,
which subsequently sold a controlling stake to News Corp. in 2006. VeriSign in
November said it was looking to dispose of its remaining stake.
Similarly, Musiwave, the other ringtone powerhouse of headier days, last month
announced that it was being purchased by Microsoft for $50 million to help the
software company with its "connected entertainment" ambitions. Openwave Systems
had bought the company, based in Paris, for $121 million in 2005.
Granted, there are still pockets of growth. Cheap chirps remain on the ascent in
non-Western countries, said Paul Goode, a senior analyst based in London with
M:Metrics, a market research company based in Seattle. Mobile network providers
are pushing "ringback" tones, which play over the phone as you wait for a call
to connect, particularly in Asia.
But in most of the countries that M:Metrics tracks - Britain, France, Germany,
Spain and Italy - the percentage of mobile phone subscribers buying a ringtone
in an average month has fallen consistently over the past 12 months, to a low of
3.4 percent in Britain in October. In the United States, it was 9.3 percent,
higher than the 9.0 percent of last October but below its January 2007 peak of
Mark Mulligan, vice president at JupiterResearch in London, puts the ringtone
share of the overall "mobile content" market in Europe at about 29 percent this
year, down from 33 percent last year. The value of European ringtone sales is
expected to be about $1.1 billion this year, about 10 percent higher than 2006,
while the value of mobile games sold will be $550 million, about 33 percent
above a year earlier, Mulligan said.
Ringtones still get the occasional headline, like when fans downloaded the
delicious "Why don't you shut up?" retort from the prime minister of Spain to
the president of Venezuela last month.
Jonathan Medved, chief executive of Vringo, said he believed his company had the
next big thing in the ringtone wave: video ringtones. Vringo, based in Israel,
offers sports clips, cartoons, music videos and other shorts so that your call
shows the animation of your choice when it rings on your buddy's phone.
That would fit in with the ringtone pattern so far. "Ringtones are personal, and
they are driven by hits," Mulligan said. "Although many markets have reached
saturation, there are still ringtone buyers who change their tunes once a week."