With ringtones no longer bringing in the kinds of revenue they used to, pretty much everyone in the mobile music ecosystem is looking for the next big thing.
Apple’s iTunes ecosystem aside, it’s slow going. The number of people who use their phones to listen to music creeps up a little with each passing year. Forrester Research estimates only 10 percent of U.S. mobile phone owners listen to music on their phones.
Reasons for consumers’ lack of enthusiasm about music on phones are plentiful, says Forrester analyst Sonal Gandhi. Until the latest onslaught of smartphones, phones historically were saddled with poor battery life, limited storage capacity and poor audio quality. Carriers only half-heartedly promoted their music offerings. And many mobile music offerings were based on business models, not on the user experience.
THE RIGHT MODEL
Warner Music Group (WMG) is seeing the effects. Over time, the company expects new sources of mobile revenue, such as over-the-air downloads, subscription services and access models to more than compensate for the shift away from ringtones. WMG says it is monitoring the progress of some newer services that are based on access models that bundle the purchase of a mobile device with access to music, such as Nokia’s Comes With Music and Vodafone Spain’s mobile access plan.
Earlier this year, RealNetworks CEO Rob Glaser said the company saw a good initial uptake in the Verizon V Cast service, but then that slowed, notably because “we’re in a very, very potent consumer recession right now, so any product out there runs into the buzzsaw of tight consumer pocketbooks.” He reiterated during the company’s second-quarter conference call that RealNetworks is in active discussions with carriers and labels in the United States and other parts of the world to do deals similar to the Vodafone Spain model, but that’s “not like an overnight thing” and involves the arrangement of new hybrid models. Vodafone Spain offers limited access to music as part of a roughly $16 per month unlimited mobile data plan.
Much of the industry is looking to ringback tones to pick up the pace. IDC expects ringback tones to overtake ringtones in 2010, becoming the single largest revenue source for mobile entertainment. The problem: Consumer awareness. Ringback tones, while generally believed to bring in more revenue for carriers and record labels because they’re so entwined with the network, are not blasted for all to hear, as is the case for ringrtones. On the plus side, ringback tones won’t disappear when a subscriber buys a new handset because they reside on the network, not on the phone.
MASH YOUR OWN
It’s not as though ringtones are going away, though. They’re still popular, but subscribers have found ways to bypass labels and carriers and sideload music, editing MP3 files and transferring user-generated ringtones to handsets. That where it gets dicey – when subscribers use existing songs to cut their own ringtones, or do mash-ups and artists’ rights come into play.
Nonetheless, countless programs exist for end-users to create their own ringtones. The demographic for ringtones is still Generation X and Y, and they’re comfortable enough with technology and software to take it upon themselves to make their own tones, notes SNL Kagan wireless analyst John Fletcher. He surmises that labels might start pricing ringtones lower, so for a dollar, an end-user can bypass the hassle of creating their own and just buy one.
Fletcher identifies four major categories for mobile music: ringtones, ringback tones, full-track downloads and streaming radio. While the music industry and others are bullish on full-track downloads and streaming radio like Pandora and Slacker are gaining popularity, he says he wouldn’t be surprised if the next big thing for mobile music two or three years from now ends up being something that nobody is talking about today. After all, who could have predicted the popularity of ringtones when they first came out?
As for application stores having an impact on mobile music sales, so far, they don’t seem to be. Based on an SNL Kagan study of the first quarter, about 60 percent of the apps were games and only 4 percent were music related. Of those involving music, the majority were more about turning the phone into a keyboard or a guitar rather than music streaming, Fletcher says.
In areas outside the United States, the adoption of music on phones is higher. Twenty-three percent of online adults with a cell phone listen to music on their phones in Western Europe, and in metropolitan China, India and South Korea, more than 50 percent do so, according to Forrester Research.
That’s not surprising because in some regions of the world, people are more likely to use a mobile phone to communicate than a PC, so their usage patterns extend into the world of entertainment, Gandhi says. Plus, the digital music market in the United States is ruled by Apple and it’s difficult for rivals to win converts.