Ringback tones a failure in the United States – but why?


June 6, 2011 — 6:48am ET |

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Just a few years ago, analysts were predicting that ringback tones would take over the mobile music market. Ringtones had been selling successfully so why shouldn’t ringback tones–essentially reverse-ringtones, where a song or sound clip is heard by the caller rather than the receiver–achieve the same level of success?

The decline in mobile music sales is often attributed to fewer purchases of ringtones and full-track downloads, but little is mentioned of ringbacks, whose sales fell 26 percent in 2010. Ringbacks never entertained the same level of success as ringtones in the U.S. as analysts predicted, though they are extremely popular in Asia and parts of Africa. Will ringbacks progressively become more popular in the U.S., as with many other Asian technological trends? Or will they simply bypass North America, suffering a fate similar to that of mobile phone charms?

livewire mobile
LiveWire Mobile’s ringback tone program has been deployed in 23 countries and by 30 mobile operators worldwide.

According to some industry veterans, the ringback tone (or RBT) isn’t on its way out. LiveWire Mobile CEO Matthew Stecker told Fierce that “there is an $8 billion global business for ringback tones and those are dollars that customers spend and that probably divides itself up. A little more than half of that is in APAC (Asia and Pacific), probably about one-tenth is in North America and the other 40 percent is scattered throughout the rest of the world in terms of revenue dollars.” LiveWire Mobile, Stecker reported, claims $20 million of that pie in revenue.How RBTs work and what they sound like

Ringtones are audio files downloaded to a user’s cellphone. The audio file plays when the phone rings. RBTs, on the other hand, are not stored on a user’s phone but are managed by the carrier and stored in the network. RBTs can be heard by callers even if the user’s phone is not turned on. In addition, if a user upgrades his or her phone, the RBTs will not be affected. RBTs also can be manipulated to sound for all incoming calls or for a certain number of individuals, at certain times of day, or according to an array of other specifications.

Ringbacks can be used on any phone model or mobile carrier. One simply purchases a ringback tone through a third-party application like LiveWire Mobile or RealNetworks or the local carrier.

In the United States, most RBTs are priced similarly to ringtones, going for around $2 each and then 99 cents per month to continue using it.  RBTs also can be included in $5 – $10 bundles of songs, ringtones and wallpapers. Other pricing scenarios make use of monthly or yearly RBT subscriptions.

LiveWire’s Stecker said revenues from RBTs are split among third-party vendors like LiveWire, the mobile carrier providing the service and the record label that owns the license on the content (if it’s a music RBT). He declined to provide specific revenue splits, but said that “on a $1 sale we get to keep $0.05.”

Interestingly, most RBT users purchase songs or song clips; however, Jun Lee, the general manager for RBTs at RealNetworks, told Fierce that RealNetworks has sold a variety of other types of audio files as RBTs.

“In some countries, like India and Korea, jokes are popular, or cute voices by 5-year-old children, or barking sounds or funny sounds, like burping,” Lee said.

LiveWire Mobile’s Stecker has witnessed a similar phenomenon.

“In some parts of the world, we saw prayer tunes–where we have lucky numbers and special prayers of the day– that people feel are important from a standpoint of luck or blessing to put on, and we’re happy to accommodate that,” Stecker said.

Thus, revenues from such content depend on the licensing involved.

RBTs popular in India, elsewhere

RBTs are top sellers in Asia and in certain parts of Africa. Indonesia Finance Today reported 95 percent of the market for digital music in Indonesia comes from RBTs. The remaining 5 percent includes ringtones, full-song downloads and other services.

So why are RBTs so popular there? Many believe it’s because digital music is more difficult to obtain there than in the United States.

“I think if you compare the percentages against the U.S., the U.K. or Western Europe or even Japan for that matter, it is that there is very little availability of full-track downloads in these markets. If you look at the penetration of, for example, 3G in Indonesia, it is far lower than say Western Europe, North America or Japan. The major music services have relied [on] what can be easily delivered on less sophisticated networks, and those services are ringtones and ringback tones,” said Windsor Holden, an analyst at Juniper Research. However: “Just because you don’t have the 3G service, doesn’t mean that you will be able to successfully market RBTs to subscribers, but there have clearly been successful marketing campaigns of RBTs in China and Indonesia, and India is another market where they’ve taken off.”

Stecker said that while India is a similar market, in some respects, to Indonesia, the popularity of RBTs works differently.

“In India, for example, the penetration rates are very high and it turned out to be almost entirely as a result of the intense identification people have with tunes from Bollywood movies. They have a relationship with those songs across the continuum of the socio-economic strata that is very personal, very intense. It is very important for them to have a particular song from a particular movie playing,” Stecker said.

Ringback tone advertising

Ringback tone advertising is another phenomenon that has been popularized abroad but has yet to catch on in the United States. Ringback tone advertising consists of an advertisement playing for callers in lieu of a song. The service, which users opt-in to receive, awards callers points that can be redeemed later for additional minutes, text messages or other mobile services.

Turkey’s Turkcell, for example, offers “Tone and Win,” which it dubs as the world’s first ringback tone advertising platform, and reported over 200,000 users of the service in January of this year. The average Tone and Win subscriber earns 65 units/20 minutes a month. Rewards are based on the number of incoming calls users receive.

And while Turkcell has profited from RBT advertising, RealNetworks’ Lee doesn’t see that success translating to the U.S. market.

“The expectation is higher than what advertisers are willing to pay,” Lee said.

Juniper Research’s Holden explained: “I can see it being far more popular within markets where in you are more conscious of the need to receive more minutes on the end, it’s one of those markets where revenues are lower and your spend is lower. Within the U.S., where you get such large buckets of minutes and texts anyway, it’s difficult to justify that as a business model, but in cases where you could receive an extra 10, 20, 30 minutes or when your minutes bundles are smaller and your spend is lower and your available money to spend is also lower, then it can be a more attractive option.”

RBTs difficult to market

Marketing ringtones is simple. Marketing ringback tones, however, is another story. Artists and third-party vendors can promote ringtones on commercials and in print advertisements by displaying a number for interested users to text to download a specific song. Since RBTs are hosted on a carrier’s network, those types of advertisements do not work.

Lee explained that even if an artist or his label wanted to promote ringbacks of his song, he would have to advertise different information for each carrier.

RealNetwork's Popular Ringtones Chart
RealNetworks’ reported its top 10 selling ringtones for April 2011.

Users looking for a Vanilla Ice ringback tone, for example, would need to text a different number if they subscribed to Virgin Mobile than if they belonged to AT&T (NYSE:T). Some vendors only sell RBTs for certain networks. For example, LiveWire Mobile works with Virgin Mobile U.S. Cellular and a number of other carriers but not AT&T. The Virgin Mobile user could purchase “Ice Ice Baby” or another track through LiveWire Mobile but the AT&T user would need to look for a vendor that supports AT&T ringbacks or purchase the track directly through the AT&T App Center.Lee emphasized that for ringback tones to become more successful, this process needs to be streamlined. “That would make the label’s life a lot easier,” he added.

If that process was sorted out, Lee said, “Lady Gaga or Snoop Dogg can use Facebook or Twitter or [a] CD jacket to promote their ringback tone very easily. [This is] one of the goals we are promoting to the carriers in the U.S.”

Measuring RBT revenue in the United States

In April 2009, Broadcast Music Inc., a music performing-rights organization, predicted that RBT sales would surpass $235 million in the United States, a 15 percent increase from its 2008 estimate of $205 million. In an interview with Fierce, Richard Conlon, senior vice president of corporate strategy, communications and new media at BMI, said that RBT sales were $195 million in 2009 and around $181 million in 2010.

“Back when I did the CTIA conference last October, which was the last time that we did a thorough analysis of the RBT market, we saw the ringback tone market actually begin to mimic what happened in the ringtone markets. We have seen ringback tones resale on the downtick,” said Conlon, explaining that interest in RBTs has been replaced with interest in other services, such as smartphone apps.

Much like sales of ringtones, sales of RBTs peaked several years ago and have declined since.

“We are seeing almost an identical curve in retail growth that the ringtone market had,” Conlon explained.

RealNetworks’ Lee cites a different reason for the decline in RBT purchases. “According to our survey, people subscribe or buy ringbacks tones and wallpaper when they get a new phone,” he explained. Users purchase add-ons in the first several months after buying a new phone and then become “busy with other stuff.”

Smartphones represent another roadblock for RBT sellers. With the increasing popularity of smartphones and apps, users have a larger variety of add-ons to choose from. Carriers, in addition, have a larger variety of product add-ons to promote and therefore spend less time touting RBTs.

RBTs recede as streaming music, Internet radio move forward

VCast Apps
Verizon’s V Cast store markets its ringback tones individually and in themed multi-packs called “Jukeboxes.”

RBT providers, however, do not seem worried. RBTs are still, after all, a multibillion-dollar industry. And carriers continue to look for new ways to expand how they can attract and retain mobile music subscribers.”People are looking at what they really need from a mobile phone and they don’t need other people to listen to their musical tastes. But also, I think in the music industry, there are far more attractive services in terms of streamed music services, and now we are moving into the area where there are the cloud music services, which is a significantly more attractive and sophisticated … [way] in which to spend your dollar than a music service you can’t actually listen to,” said Holden.

“Products come and products go,” BMI’s Conlon added.

Verizon spokeswoman Debra Lewis, who declined to discuss Verizon’s sales of RBTs, said the carrier is looking to other music services.

“What I’d say is that we have relationships with a lot of different streaming music providers: Pandora, Slacker and Rdio, [which] just launched a new app with our V Cast apps store. Ultimately consumers get to choose what they like and which is the best,” she said.

Read more: Ringback tones a failure in the United States – but why? – FierceMobileContent http://www.fiercemobilecontent.com/special-reports/ringback-tones-failure-united-states-why#ixzz1P8Pe3Ye1
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