RINGTONES BECOME FIRST DOWHLOADABLE MUSIC SUCCESS STORY.
Source: Music Week
As paid-for internet music
services stumble, companies offering mobile phone ringtones are booming. Toby
Lewis investigates the implications for the music industry of a growing
Still considered by many to be annoying and worthy of ridicule, mobile phone
ringtones have begun to acquire a strange kind of prestige in recent months.
While some much-trumpeted paid-for web music services continue to stumble, phone
tones have stolen their thunder, capturing the public's imagination and becoming
the first music downloads to add real value to copyrights.
While recorded product languishes in a digital rights deadlock, the
comparatively straightforward ringtones sector has, since March 2000, had its
own legitimate rights structure, administered by the MCPS.
Anyone who has travelled on public transport since then will attest to the fact
that, as far as ringtone suppliers are concerned, business is good. And those
who have been left with half the Top 40 rattling around their brain after a
20-minute train ride can be reassured that they have evidently only been exposed
to the top end of the market, as retailers themselves are vehement that there is
a huge difference between a good and a bad ringtone.
"You should be able to recognise it as the melody of the tune," says musician
Antony Westgate, who through his firm Westgate Productions provides tones for
SomethingGR8.com. "If you can't, it doesn't work and should not be used."
But as pop mogul Pete Waterman complained on a recent investigation of tone
sharks by BBC documentary Hard Cash: "Some of them are rip-offs. Some of them
are blatantly nothing like the tune."
Gary Van Til of Mobiletones.com, which distributes tones and phone logos for the
Ministry Of Sound as well as several big football clubs, explains that the
substandard versions offered by some of his competitors are a product of both
inadequate tone programmers and financial corner-cutting. "Ringtone companies
must pay to send the SMS message containing the tune to each user," says Van Til.
"The odds are that a simple tone will cost one SMS to deliver, but a more
complex piece of work will require two."
It is a matter of taste as to which segment of the song is the most obvious
hook, leading the more conscientious dealers to provide the intro, verse and
chorus of some songs to avoid customer dissatisfaction. "For Smells Like Teen
Spirit by Nirvana we have four different versions," says Van Til.
Prices vary tremendously, from the equivalent of 80p per tone up to as much as 5
[pounds sterling] or 6 [pounds sterling] for those customers unlucky enough to
get lost in the navigation menu of a 1.50 [pounds sterling]-a-minute premium
rate phone line.
There are still some firms which attempt to provide products for free -- notably
YourMobile.com, which originally planned to subsidise services via advertising
and data mining -- but the cost of sending tones tends to preclude the practice
of giving away music in the time-honoured internet fashion.
Even before web hosting, site design, bandwidth or publishing licences are
considered, there is a charge paid by retailers to mobile networks of between 5p
and 7p for each SMS message sent. As Simon Wheeler of Beggars Banquet explains:
"We are doing an Ed Case promotion with iobox, and I originally wanted to give
the tones away for free, but iobox's business is in selling them. They would
have required us to pay five-figure fees plus charges to give them away, which
was outside our budget."
Many insiders argue that the high price of ringtones is restricting the
business. "A lot of companies say people don't care about the price but that's
rubbish," says Andy Mills, director of Ringtones.co.uk, which manages a branded
service for NME.com, among others. "We halved the price of our ringtones
recently and sales went up by 400% overnight."
Contrary to some recent coverage, reports of ringtones being "the next Napster"
seem to be unfounded. While there is a piracy concern, the main problem lies not
with consumers avoiding paying but with sites stealing ringtones programmed by
their own competitors.
"I'm pretty sure that I've found other companies selling ringtones that I've
created," says Ringtone.net's Andy Clarke, who was directly responsible for the
success of the Mission Impossible tone -- the first tone he ever made available.
On a darker note, though, the recent rash of advertising for ringtone firms in
the tabloids is evidence that a more shadowy side of the British economy is
jumping aboard the ringtones bandwagon -- often without the required licences.
"It's clearly big business," says Jim Doyle, a music publishing consultant with
Responsive Music Services. "Companies are taking out 50,000 [pounds sterling]
ads in the News Of The World and many of them are just moving from the sex-line
industry into the ringtones industry. If there was money in origami, these
people would set up a line to cash in on it."
Some observers suggest, however, that not even the bigger tones firms are all
quite as squeaky-clean as they might like to appear. One area in which artists
are arguably losing potential revenue is that of operator Iogos and picture
messages. Many firms offer fans the opportunity to buy an electronic graphic for
their handset representing their favourite act for around the same price as a
ringtone. Common favourites include the names and logos of Eminem, Dr Dre,
Coldplay, Limp Bizkit and 'NSync. But as there is no blanket licence available
for the copyright in logos, it is up to an individual seller to negotiate the
rights -- or not, as the case may be.
"What we do is write to every artist's press officer, and say, `we have made a
logo of yours, please let us know if you want us to take it down'," says Susanne
Sidwell, Smart Messaging product manager at iTouch.co.uk.
According to Sidwell, only a tiny fraction ever expresses an objection, although
whether this is a sign of tacit approval or plain ignorance is hard to gauge.
James Winsoar, whose site Tonez.co.uk sells logos taken from big name artists,
firmly believes the former to be the case. "The vast majority of artists are
quite rightly delighted that their logos will be offered as it will serve to
promote their band and effectively give them free advertising," he says.
But the music industry is not famous for allowing interlopers to profit from its
assets in the name of promotion, and there are those who believe that artists
need to educate themselves while the mobile content market is still in the early
stages of development.
"Mobile is going to be so important for the music industry, and ringtones are
just the tip of the iceberg," says Michael Ohajura, sales and marketing director
at SMS distribution specialist Materna Communications. "Bands are going to start
having to assert the rights to their name and image in this space, because when
3G arrives, there is a danger they could be ripped off."
Because there is at present no recorded audio playback involved in a ringtone,
the permissions required to sell one are based solely around a publisher's
copyright in the song. The MCPS provides a licence on behalf of its 19,000
member publishers, meaning that any company wanting to provide ringtones in the
UK can do so legally through an MCPS mandate.
As with the wider debate over music downloading and mechanical fees, there are
some who feel that the minimum 10p per download rate could be somewhat limiting.
"I think the MCPS charge might be too high," says Responsive Music's Jim Doyle.
"If the rate for a record is 8.5% of dealer price, and we equate that to retail
price, then in fact we have a royalty which is almost double its equivalent."
Julia Montero, Online Agreements Manager at the MCPS, emphasises that it is a
new market and therefore the licence fee is constantly under scrutiny. "The
present fee is what our members feel their copyright is worth," she says. Music
publishing expert Jonathan Simon of Moncur Street Music expresses his personal
opinion on the subject more forcefully: "Without the intellectual property in
question -- for which a royalty should be paid -- there would be no product to
MCPS has so far managed to maintain quite a strong front with publishers -- and
especially ringtone retailers, many of ad whom like to boast the MCPS seal of
approval as a selling point. To date, only one major publisher has chosen to
pursue a directly-negotiated deal with a ringtones supplier: EMI Music
Publishing, which infamously forged its own agreement with Nokia.
EMI director of film, television and media Jonathon Channon, is keen to play
down the significance of the move, noting that negotiations began well before
the ringtone craze started and should not be perceived as a slight on the MCPS's
subsequent efforts. "It's become very folkloric, but in reality all we did was
to pick up the phone to a major industry," he says. "To try to find a legitimate
use of our music in an environment with quite a lot of rogue operators seemed to
be a smart move, both politically and financially."
Where a problem did arise, Channon adds, is when Nokia wanted a different type
of material from the classic back catalogue material that EMI had originally
been providing. And it is when dealing with chart hits -- for which songwriting
rights can often be split between different publishers, sometimes in different
territories -- that the advantages to ringtone sellers and publishers of the
MCPS-style licence truly become apparent.
In addition to the MCPS mandate, all sellers must acquire a licence from the
Performing Rights Society (PRS), charges for which amount to 5% of revenue from
downloads, ostensibly to cover the transmission of the music embodied as a
ringtone from server to mobile phone. This licence is paid far more grudgingly
by ringtones distributors, many of whom complain they should not pay a
performance fee if it can be proved that customers have not heard a sample of
the ringtone before purchase.
"There are certainly questions to be dealt with," says Van Til of
Mobiletones.com. "I think we're paying a lot more in PRS per sale than a site
Mike Palmer, PRS broadcast sales manager, is having none of it: "We're simply
licensing the fact you're presenting music for the public. We don't even care
whether the ringtone is downloaded or not -- we don't take the risk of your
Is this level of controversy justified over something as trivial as a ringtone?
"I think it is to some extent a fad," says Derek Bell of Mobileringtones.com.
"At some point, we're going to reach saturation."
But Clare Melford, strategic development executive at MTV Networks Europe, which
is launching its own tone-selling scheme, points out that ringtones 2001-style
represent a mere stepping-stone to a wireless music future.
"Ringtones as they exist today will not last longer than 12 to 18 months.
However, they provide two very important functions: first, they get people used
to buying products through their mobile phone; and second they will be the
prelude to more impressive songs that [third generation phones] will be able to
play as ringtones. A corollary benefit from MTV's point of view is that they
associate the mobile phone with music and the purchase of music in the
Indeed, Universal Music Special Projects has already signed a contract with
French technology company Digiplug, a member of the Mobile Entertainment Forum,
to sell "customised ringer music recordings" with audio samples taken from the
albums of Universal artists including The Cranberries, Sting and Stevie Wonder.
And while Telstar Records, together with DX3 and iobox, recently trumpeted their
launch of "the world's first real music ringtone" featuring the full chorus of
BBMak's Top 10 single Still On Your Side, such high-bandwidth activities are a
long way from common reality.
Currently, says Carlos Rodrigues, head of new media at Telstar, there is only
one Nokia handset capable of playing audio samples and it is impossible to
receive the ringtone directly to the phone. "As the Nokia 9210 is also a
Personal Digital Assistant (PDA) you basically download the ringtone to your PC
and then sync it with your PDA."
The immediate challenge that the music and ringtones industries now face is to
enable music fans, particularly youngsters, to access ringtones of their
favourite songs without simultaneously introducing them to the controversial
world of premium-rate calls.
It is a dilemma that James Buckland, head of business development at GR8,
believes he may have solved, charging customers via scratchcards which can be
bought at newsagents and supermarkets across the country.
"We offer a simple, low-cost, fun item at 99p for one credit which buys one
ringtone or one logo," he says. "We can still afford to produce and distribute
the card while turning a profit -- and it will be a godsend for parents."
In the meantime, credible figures on the size of the UK ringtones industry as a
whole are near impossible to come by, with no small amount of sniping and
one-upmanship between the highly-competitive tone retailers. Sidwell says iTouch
is selling 30,000 ringtones a week at around 3 [pounds sterling] each. Derek
Bell at Mobileringtones.com is less bullish. "If we sell 10,000 ringtones in a
week, we have a good week," he says.
Most estimates, however, paint a picture of a market worth between 5m [pounds
sterling] and 30m [pounds sterling] in total for this year and, judging by the
80 new applications for an MCPS licence in April alone, the sector is still
So regardless of how irritating or irrelevant ringtones might appear, they are
already bringing funds into music business coffers, unlike many other areas of
the new media. And publishers have been right to grab the bull by the horns
early on. As EMI's Jonathon Channon confirms, "We see it as a very serious area
to generate revenue."
The ringing ... of cash tills
With ,prices coming in at up to 4 [pounds sterling], it is easy to view
ringtones as a license to print money. But a breakdown of the costs and the
revenue distribution reveals that margins are slimmer than they might initially
From each tone sold, the MCPS receives from 10p to 10%, whichever figure is
higher. In addition to this is the PRS' 5% cut, which reliably provokes
irritation among retailers. On top of this, if the ringtone is sold through a
partner site, there will generally be a distribution fee payable to the
affiliate, equal to between 30% and 50% of the net price.
From a manufacturing and supply point of view, a fee of 5 [pounds sterling] to
10 [pounds sterling] goes to the programmer who creates the tone itself --
clearly amounting to a negligible outlay if the tone proves popular. Then there
is the SMS delivery cost of between 5p and 7p, which stands to double for the
more complex ringtones which require two text messages to deliver.
When bandwidth, hosting, web design, on- and offline advertising and premium
line rental are all taken into account, it becomes clear that ringtones
re-sellers have more in common with their overhead-laden dotcom predecessors
than we might once have imagined.