Ringtone market hits a high note.
By ELLIOT SMILOWITZ

Napster, once the most popular illegal music sharing service and then the biggest-name in subscription music downloading, seems to have cornered a third market in the music industry: ringtone sales.

The company announced this week it has sold more than 100,000 ringtones since it began offering them May 9.

"Napster continues to prove the enduring strength of its brand and the appeal of its music subscription service," Chris Gorog, the company's chief executive officer, said in a statement.

Unlike Napster's music-downloading service, which charges a flat subscription fee, Napstertones -- as the ringtone service is called -- charges between $1.99 and $2.99 for each download.

Dwango Wireless of Seattle is providing wireless service for Napstertones, which are available for download via Cingular and T-Mobile cell phones.

Mark Nagel, director of Premium Entertainment Services for Cingular, said his company's relationship with Napster has been beneficial for customers.

"The advantage of third-party companies is that customers get access to a wider variety of products," Nagel told United Press International.

Nagel said Cingular offers several other third-party ringtone stores, such as Rolling Stone and Blingtones, as well as its own in-house ringtone retailer.

Bob Bentz, who runs a ringtone-based blog at CoolRingtones.Blogspot.com, said Napstertones' success was not surprising.

"The business is growing so rapidly," Bentz told UPI. "Only 26 percent of North Americans have ever text messaged or downloaded something on a mobile device, so there's still a huge upside for the market."

Mahi de Silva, senior vice president and general manager of wireless services for VeriSign, the company in Mountain View, Calif., that owns the Jamster line of wireless products, said Napster's sales have not adversely affected Jamster's ringtone sales.

"We don't see Napster at all as a competitor," de Silva told UPI, noting Jamster is focused on advertising for impulse purchases and does not sell products by having links to Jamster products on cell phones. Consumers purchase Jamster items by sending text messages with keywords in them.

Richard Conlon, vice president of marketing and business development at Broadcast Music Inc. in New York City, told UPI his company projects the ringtones market will surpass $500 million in retail sales in 2005. He noted sales reached $245 million in 2004, and $68 million in 2003.

Napster, in its news release, also said "access for most major (cell phone) carriers is expected during summer 2005, giving a broader range of mobile music fans the opportunity to enjoy ringtones."

De Silva agreed demand for ringtones has yet to reach its peak.

"The global market for all mobile content is still growing," he said, noting there has been consistent growth, not only from developing wireless markets in the United States and Latin America, but also in more mature markets in Europe and Asia.

The market has grown enough in the past year that Billboard Magazine, in its weekly music charts, added a Hot Ringtones chart in November.

Geoff Mayfield, director of charts and senior analyst at Billboard, said the Hot Ringtone chart has helped the nation take notice of the ringtone industry.

"The chart helped validate how big it really is," Mayfield told UPI.

On a regular basis, Mayfield said, the number-one ringtone sells significantly more units than the number-one single on the Hot 100 songs.

The May 28 Billboard Hot Ringtone chart contained mostly hip-hop songs, though one conspicuous item stood out at number eight: the Super Mario Brothers theme song.

"The early adopters of the technology were 13-to-30-year-olds, who tend to be more into hip-hop music," Bentz explained. "It will change as more 30-to-50-year-olds pick up the technology," he added, and predicted country, rock, and pop music would increase in ringtone popularity in the future.

Mayfield disagreed, saying adults would not consider it a priority to find a ringtone to use.

"Adults do not need to have a song to brand them," he said.

The ringtone market is a three-way battle, with cell-phone service providers competing not only with third parties such as Napster and Jamster, but also with record labels. Island/Def Jam Records, for example, is one of several record companies that sell ringtones of their bands on their Web sites.

Bentz said the service carriers have been the most successful, because "they have the best form of advertising" by being able to place their own products prominently on the phones.

"Verizon is doing extremely well, because they have what's called a 'walled garden' on their products, where they don't allow downloads from outside companies," he said.

Nagel said sales from Cingular's in-house ringtone store outnumber third-party ringtone sales on Cingular phones.

Conlon said the carriers have an inherent advantage in selling their products. "They have their customers locked down already," he said, adding that customers are likely to buy ringtones from the big-name service providers instead of the "generic market."

While the ringtone business is booming, legal music-downloading services are faltering. According to the British newspaper The Register, Apple's iTunes Music Store fell 30 million sales short of its goal of selling 100 million songs in the first year after its April 2004 inception.

Conlon said he did not think ringtone sales have any effect on music sales. "It's a companion product to the music," he said.

The quality of ringtones has grown as mobile phone technology has improved. The evolution began with monophonic tones, which Bentz likened to "one finger playing a piano," and evolved to polyphonic tones, which Bentz called "a full orchestra playing a song instrumentally."

The next step has been real tones, which literally are clips of songs. Bentz said real tones have not yet taken off in popularity, because record labels are asking too high a percentage of the cost of a ringtone download. As a result, many companies are selling what he termed "clone tones," which he described as "garage bands playing popular songs."

As soon as a pricing mechanism emerges so "everyone can sell real tones and make money, that's what will happen," he said.

Mayfield said the Billboard Hot Ringtones chart keeps track only of polyphonic ringtone sales, but Billboard is developing a chart it will debut later this year to track real-tone sales.

Conlon said despite the existence of clone tones, illegal piracy is not a problem with ringtones right now.

"It's a closed system," he said, "so it's more secure than the Internet."

Conlon added that he thinks some small amount of piracy could occur as the technology advances. "Ultimately there will be some kind of slippage in the marketplace," he said. "It will not be an enormous problem."