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This note considers mobile phone ringtones.
It covers -
It
supplements discussion elsewhere on this site regarding
intellectual property, the economy
and networks.
introduction
Until the advent of the iPod the commercial provision
of ringtones was the most profitable online music sector.
Improvements in mobile phone hardware and in networks
has allowed fashion-sconscious consumers to 'personalise'
their devices by adopting a synthesised tune or - more
recently - a clip from a standard audio recording as a
replacement for the standard ring, beep or brrr.
Some of those tones were created specifically for the
ringtone market, predominantly female and under thirty.
Others recycle contemporary or even classical music recordings,
generally through licensing by one of the major record
companies.
basis and industry
Monophonic ringtones, as the name suggests, involve the
mobile emitting one note at a time. Polyphonic ringtones
comprise of note sequences that play simultaneously and
concurrently, so that the phone emits chords and melodies.
Both tones use MIDI files, essentially a set of instructions
for the mobile's synthesiser rather than a true audio
recording. RAF (Recorded Audio Format) ringtones - aka
'Realtone' or 'Trutone' - consists of a compressed digital
audio file similar to MP3 and encrypted for use only with
compatible handsets. It enables the user to have real
audio as a ringtone.
The ringtone market features competition between mobile
phone service providers, mobile phone hardware suppliers,
record labels and third parties such as Napster and Jamster.
Several record companies sell ringtones of their bands
on their sites.
In contrast to Europe, where many mobile networks provide
their own ringtone services (typically on a 'per download'
basis), the Japanese market is dominated by third party
content providers and many ringtones are downloaded directly
from the particular provider's site (with a fee being
charged to the consumer's phone account. Japanese consumers
have moved to a subscription based mechanism, with the
consumer paying a set monthly fee to download ringtones
on a regular basis.
Global expectations of growth centre on expansion of the
'ringback' market, expectations that are likely to be
misplaced. Ringback tones (aka caller tunes - or perhaps
more aptly bling tones) let the consumer decide what music
- typically a song - the caller hears when making a call,
in contrast to ringtones (where the recipient of the call
has the ability to choose the noise that signals an incoming
call). Ringback tones involve automated downloading of
a snippet of audio to the caller's 3G phone whenever a
call is made to a ringback device.
Visions that ringtone providers will be able to leverage
their operation to build large-scale mobile content businesses
independent of telecommunications companies are problematic.
In 2005 UK-based Itouch was bought by Japanese mobile
content firm For-side.com for £180m. Ten months
Itouch was up for sale, as For-side.com pulled back towards
Japan after a spree that saw seven acquisitions, including
the mobile entertainment unit of Finnish company Saunalahti,
and pressure from competitors such as such as Italy's
Bongiorno and US-based Infospace.
market size and demographics
Estimates of the current size of the ringtones market
and its future growth are contentious.
2004 Juniper Research and the ARC Group published studies
on the global ringtone market, claiming that it was worth
between US$1 billion and US$3.3 billion in 2003, supposedly
up to 10% of the estimated US$32.2 billion global music
market. Juniper claimed that the ringtone market peaked
in 2003 at US$1 billion, with a forecast that it will
halve by 2008. ARC, in contrast, claimed that the market
was $3.3 billion and would double by 2008. Most of the
current market was in Europe and Asia (principally Japan
and South Korea), with slower uptake in the US.
In mid-2005 Broadcast Music Inc. projected that the US
ringtones market would surpass US$500 million in retail
sales in 2005, following sales of US$245 million in 2004
and US$68 million in 2003. IDC Research had estimated
that ringtone sales in the US were almost US$17 million
in 2002, US$18 million in 2003 and US$375 million in 2004.
The 2005 Australian Mobile Phone Lifestyle Index by the
Australian Interactive Media Industry Association (AIMIA)
claimed that 30% of respondents had purchased a ringtone
in the preceding 12 months, with most respondents purchasing
an average of three ringtones and two games. The 13-16
year cohort purchased significantly higher numbers of
ringtones, logos, screensavers and accessories. Females
bought more ringtones; males among AIMIA's respondents
bought more games.
UK specialist Xingtone.co.uk claimed regional differences,
with residents of large UK cities or towns (72%) being
more likely to embrace ringtones than their rural counterparts,
although there was supposedly greater take up in Scotland
(26%) and Wales (23%) - ahead of London (18%) and the
Midlands (12%).
US-based PWS boasts that its customers downloaded 59 million
tones during 2002, with a UK competitor claiming that
it was providing 10 thousand downloads per day. Arc forecasts
that ringtone downloads will outpace the market for listening
to songs on mobile phones and other wireless devices.
Depending on whose crystal ball you've polished, 551 million
users worldwide might buy ringtones in 2006, with only
112 million users listening to MP3 files on their mobile
phones.
IP aspects
Intellectual property owners (including composers, record
companies and performers) have sought to share in revenue
from the ringtone market. Their participation reflects
national (eg the Australian Copyright Act) and international
legislation/agreements.
In Australia licensing has been undertaken by the AMCOS
and APRA copyright collecting societies,
not-for-profit bodies that act on behalf of intellectual
property rights owners.
The Australian regime involves discrete rights in making
and supplying ringtones: reproduction of musical works
and communication of those works to the public.
AMCOS authorises reproductions that include initial 'fixing'
of the work in ringtone file formats, reproduction of
that ringtone onto a server for downloading onto mobile
phones, reproduction of the ringtone onto a web page for
a 'preview' of the ringtone to potential customers and
reproduction of the ringtone onto a mobile phone. Licence
fees typically are a one-off $10 for the initial fixing
and 10% of the retail price of the ringtone (subject to
a minimum $0.15 fee per sale).
APRA authorises transmission of the musical work as a
ringtone from a server to a mobile phone and the communication
of 'previews' via a streaming media application. For monophonic
and polyphonic tones its fee is currently 1% of the ringtone's
retail price, subject to a minimum $0.015 fee per sale,
and for 'phonographic' ringtones (ie actual sound recordings)
the fee is 2% of the ringtone's retail price, subject
to a minimum fee of $0.03 per sale.
Similar arrangements are evident overseas. In 2001 the
US IP rights management group Harry Fox Agency (HFA),
which represents around 27,000 rights owners and has a
handle on much of the music in the US, announced that
it was licensing ringtones on behalf of copyright owners.
Hilary Rosen of the RIAA said
This
agreement removes a major legal roadblock for the new
online subscription services. The coming subscription
services may now begin licensing thousands of musical
works immediately. For consumers, this will essentially
mean they will have access to more and better online
music options, sooner.
HFA
plans to issue licenses for subscription services that
offer on-demand streaming and limited downloads. After
rates are set, royalties will be payable on a retroactive
basis from the start of those services. The RIAA will
make an advance payment of US$1 million toward the royalties,
with publishers having an opportunity to opt out of the
licensing agreement.
consumer questions
An industry that features high volume sales to youth demographics
of low margin ephemera has inevitably attracted some deceptive
or merely inept operators. In Australia and overseas there
are recurrent complaints to government and industry regulators
about poor practice, including non-delivery of service,
obscure terms & conditions or difficulty in gaining
release from agreements.
During 2005 for example the UK premium rate telephone
services regulator Icstis fined mBlox, the service provider
behind the execrable Crazy Frog ringtone. mBlox was ordered
to refund consumers who were unaware that they had signed
up for a subscription service (at up to £5 per week)
rather than a one-off product. Icstis commented that
while
a great deal of thought had been put into producing
the Crazy Frog advertisements, the same could not be
said about the terms and conditions ... the companies
concerned showed a careless disregard and unprofessional
attitude to consumers in failing to be clear on the
exact nature of the service.
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