Ringing in Big Profits
January 31, 2004
The creative movers and shakers and marketing experts of the German music industry don’t have a lot to celebrate at the moment. One look at their profit figures from last year is enough to dampen the mood. The nation’s association for the recording industry estimates that turnover in 2003 declined by a fifth – a devastating figure.
On top of that, the problem with music pirating continues to rob the industry of profits – neither musicians nor producers earn a cent when a song is downloaded illegally.
The industry desperately needs new business ideas. One that’s emerged with big money-making potential for the record companies came not from the executives, but the ranks of teens mad for their mobile phones: ringtones.
In England, the market for trendy ringtones that sound like chart-topping hits became serious business in 2003. According to a report by the BBC, ringtones rang up sales of more than €100,000 ($127,000). That amount is expected to grow this year.
Lucrative business
Ringtones are typically monotone versions of hit songs – simple copies reminiscent of the synthesised sounds of the 1980s, but which are easily played on a mobile phone.
Customers can order the ringtones via SMS, or simply download them from an Internet site. A single melody costs around €2 in Germany, with the most trend-conscious teens changing their ringtones at least as often as the number one spot in the charts. In some cases, a new song title has more sales as a ringtone than it does as a CD single.
It’s a market that, to the delight of record and mobile phone companies alike, is becoming more and more lucrative in Germany.
“In mobile technologies, music is an area that is developing very quickly, and very successfully,” said Vodafone spokeswoman Bettina Donges. “It’s something that the music industry has really woken up to.”
But the channels of sale for ringtones aren’t dominated by the music companies. It’s the IT and mobile phone companies with their greater technological know-how who’ve cleverly stolen a march over the music industry. T-Mobile and Vodafone are among the biggest ringtone providers, while Bravo.de and Jamba.de are leading the way in sales via Web sites.
“We sold 10 million ringtones last year,” said Jamba spokesman Tilo Bonow. “That was a 300 percent increase over the previous year.”
In 2004, Jamba expects to make even more money. About a third of its €2 asking price goes to the music industry, and another third to the mobile phone operators.
Ringtone to realtone
T-Mobile prefers to keep mum about its sales figures, saying only that it’s still in negotiations with music companies. The Deutsche Telekom division has signed a contract with Universal Mobile, a division of Universal Music International, which has signed artists such as the Black Eyed Peas, Shaggy, and U2.
Through T-Mobile, Universal hopes to start selling so-called realtones to mobile phone users this year. Unlike the monotone ringtones, realtones are the original song – exactly as it’s heard on the radio or on CD. They could be the development that sees ringtones break out of the teen market and bring the music industry the big-time profits it’s been hoping for.