Mobile ringtone sales boom

Downloading a special ringtone on your mobile phone so that it plays a tiny rendition of a pop song instead of ringing is a booming market. Ringtone sales were at $3.5 billion worldwide last year, up 40% from 2002, according to ARC Group consultants.

Europe and Asia lead the way, but in America the Yankee Group, another consultancy, raised its estimate of last year’s ringtone sales from $50 million to $80 million. Sales of ringtones, costing up to $4 each, have overtaken CD singles. Many artists now make more money from the former. Ringtone sales also outstrip legal Internet download services, such as Apple’s iTunes, which generates under $100 million a year worldwide.

The appeal of ringtones, to teenagers in particular, is that they act as a fashion statement. Sound quality is improving fast: latest mobiles support polyphonic playback and allow actual music clips, called true tones, to be used as ringtones. Instead of a plinky-plonk rendition of Britney Spears hit Toxic as your ringtone, you could have a brief sound clip of Britney herself.

Mobile operators and record labels sense a huge opportunity here. Anyone can make a ringtone out of a pop song, provided they pay royalties. But true tones require record labels to license master recording. They will only do so to trusted partners, such as mobile networks. The dubious firms that dominate the ringtone business — many of which began life as providers of porn phone lines — may be squeezed out. Already in the US, Verizon Wireless has partnered with BMG and EMI. In Europe, T-Mobile is collaborating with Universal and Sony.

The success of true tones will give record labels and operators a larger slice of the market. Will it also spawn an entirely new, far bigger, market for mobile-music downloads? It is not a big leap to downloading a whole song for playback through headphones? In a couple of years — as new 3G networks are switched on, mobiles get smarter and music playback is more common — there may be a thriving market in music downloads to handsets that are also personal jukeboxes. Martin Fabel, analyst at AT Kearney, says mobile downloads could account for 20-30% of music sales by 2006.

This is music to the ears of record firms and mobile operators. Mobile-music downloads, they hope, will command a mobile premium over fixed-line services such as iTunes, which charges $0.99 per song.