April 12, 2008 / 6:03 AM / 11 years ago

Ringbacks underline mobile, music biz divide

DENVER (Billboard) - If a ringback tone launches on a network and nobody hears it, did it ever really exist?

With the exception of ringtones, no single mobile music application has yet to score an obvious home run with mobile users, even though the number of mobile music products has exploded in recent years.

And while there’s been much discussion about how ease-of-use, need for innovation, pricing and so on contribute to the problem, one of the overlooked issues is that of marketing. Talk to any mobile industry executive or major-label representative, and they’ll tell you all about how excited they are over ringback tones, mobile video, full-song downloads and such. But ask them to take out their checkbook and pay for some advertising around these services and you’ll soon be facing empty air.

Mobile music is the bastard child of mobile and music industry parents, and neither wants to take full responsibility. Both want to make money on mobile music, but both want the other to pay for advertising and marketing needed to generate consumer interest.

Each has its own “legitimate” child that dominates their attention. Both industries make far more money on other products and as such direct their marketing dollars there.

The wireless industry, for instance, is overwhelmingly dominated by voice minutes. Take a look at your mobile phone bill. Unless you’re a teenage text-message fanatic, the bulk of that bill is covering your talk time, not for content and services.

CTIA-The Wireless Assn. revealed at its annual conference earlier this month that what it calls “data revenue” now makes up 17% of carrier revenue. That’s an impressive 53% increase over the year before. But data revenue to a wireless operator is any cash earned from something other than voice minutes. That includes text messages, corporate e-mail applications, photo messaging, etc. According to data from research firm M:Metrics, only about 15% of mobile users even buy ringtones, and far less buy full songs, ringback tones and other products.

Record labels to a degree are in the same boat. This is an industry built on selling records, and as such its marketing core competencies are based on promoting new music and selling albums, not educating fans on a new technology. Digital music revenue in total contributes roughly 30% to labels’ overall revenue pie. Mobile makes up about half that total, with ringtones making up about 75% of the mobile figure. So at best, all other mobile music applications combined contribute maybe 3% to a label’s bottom line.

Spending more on marketing may bump these figures for both industries, but how much can you justify spending on such a niche product?

The argument could be made that mobile music is more important for the music industry — which desperately needs new revenue channels — than it is to the wireless industry — which is making loads of cash of voice minutes. And therefore, the music industry should shoulder the brunt of the marketing effort.

But wireless operators don’t make it easy to do so. Take ringback tones. With ringtone sales sliding, ringback tones have been pegged by the music and mobile industries as the next growth area.

First, there’s pricing. A ringback tone costs about $2 a pop, of which the label gets a cut. But operators charge an additional $1 per month to maintain the service, of which labels don’t see a cent. Why, labels argue, should they spend their dwindling revenue marketing a service in which they don’t share in all the proceeds?

Then there’s branding challenges. Each operator calls its ringback tones service something different — AT&T has Answer Tones, T-Mobile uses CallerTunes, and Sprint likes CallTones. Only Verizon Wireless simply calls them Ringback Tones. The same situation occurred with master ringtones (TrueTones, RealTones, etc.), but labels could simply refer to them using the familiar “ringtone” moniker. Ringback tones take longer to explain.

Finally, ringback tones are a network service, not a device download like ringtones and games. Because ringback tones operate within the network, only the network provider can sell them. That means labels can’t work with third-party content providers like Thumbplay or Jamster to market and sell them, nor can labels sell them from artists’ Web sites directly, like they do with ringtones.

“Everybody calls it something different, and the only way to get it is on the deck,” RCA Records director of mobile marketing Sean Rosenberg says. “How do we message this to our fans?”

Fortunately, ringbacks are a viral application that in a way market themselves. Call a friend with one and you immediately get the idea. Other mobile music services aren’t so lucky. For them to thrive in a digital entertainment market growing increasingly more competitive, mommy and daddy are going to have to start providing a bit more nurturing to their neglected love child.


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