Growth in ringback tones energizes mobile market (Reuters)

DENVER (Billboard) - As the cash cow that was the ringtones market slowly heads to pasture, the music industry is turning to a new mobile stud -- ringback tones.

Ringbacks -- the music you hear when you call someone -- represent the only area of significant growth for mobile music-related applications in the last year. The number of mobile subscribers who reported purchasing a ringback tone increased 69% from February 2007 to February 2008, according to data from M:Metrics. By comparison, neither ringtones nor wallpaper images could keep pace with the overall market growth, increasing by only 4.3% and 6.2%, respectively, in the same time frame.

"The growth of ringbacks is among the fastest trajectory for growth of any services were tracking," M:Metrics analyst Mark Donovan says.

For a music industry that has long relied on ringtones to pad its digital revenue pie, this has several implications, both financial and promotional.

According to figures from BMI, U.S. ringtone revenue fell slightly more than 8%, or 50 million, in 2007, and is expected to fall another 40 million, or 7%, this year to 510 million -- a sharp decline from the peak of 600 million in 2006. Yet ringback tones are more than compensating for the decline. Ringback sales are expected to increase 50%, or 70 million, to reach 210 million this year.

And while total ringtone revenue is almost twice as large as that from ringbacks, research group IDC says global ringback revenue will outpace that of ringtones by 2010.

"Ringback tone revenues are now a steady, reliable stream," RCA Records director of mobile marketing Sean Rosenberg says. The label is the first to boast of gold-level ringback sales with the single "No One" by Alicia Keys, which surpassed 500,000 in sales in the United States alone.

While declining to provide specific data, record labels and analysts interviewed for this story point to Verizon Wireless as the leading operator driving the ringback tone market. Part of its success is credited to a more robust mobile music marketing effort compared with other operators -- but Verizon also stands out as the only operator that can bundle ringbacks with ringtone sales.

This means that customers choosing to buy a ringtone will receive a prompt asking if they want to also buy the ringback tone for the same track, and sell both in one transaction. As ringtones are still the dominant format -- Keys "No One" has sold 2 million master ringtones to its 500,000 ringbacks -- such bundling of the two results in greater sales.

RealNetworks WiderThan division, which powers Verizons ringback tone service, says bundling ringbacks with ringtones results in 30% more sales.

But beyond simple sales figures is how ringback tones are used to promote new releases and exploit back catalogs. While both are basically 30-second clips of longer songs, ringtones and ringbacks are fundamentally different applications.

Only those calling a ringback user can hear the clip, while ringtones are audible to anyone in the vicinity of the phone. Going further, ringbacks can be set to play only for specific callers, like the wife or best friend of the owner of the phone. Therefore, theres an opportunity to make the song a personal message.

That has not yet translated into a hit ringback tone outselling its ringtone counterpart. According to label sources, the format is still too young to support a breakout hit. Neither ringback tones nor the also-emerging mobile format of full-song downloads have taken hold in genres outside of R&B and hip-hop, which dominate the ringtone space.

The key to expanding the format is marketing. Sony BMG and Warner Music Group have had artists film "AnswerTones 101" videos for AT&T, explaining what ringback tones are and encouraging fans to purchase them. The videos appear on YouTube and AT&T Mobilitys Web site. After one such video by country artist Blake Shelton, the ringback tone for "Dont Make Me" became the No. 1 seller on AT&T for three straight weeks.

The music and wireless industries feel that more marketing around ringback tones is necessary, and often point to the other as responsible for doing so (see story, page 14). But both also feel that this is the year where that effort gets over the hump and propels the format to more mainstream attention.

"All that awareness builds up over time and is reflected in adoption," AT&T director of music and personalization Mark Nagel says. "I think its that time for ringbacks."

Reuters/Billboard