Ringing in the new year

15 Jan 2003

Significant increases in global sales of ringtones last year has the music and mobile networks looking that little bit closer at the potential for revenue from ‘mobile music’, with the phone networks in particular seeking to develop its average revenue per user (APRU) from the concept.

Whilst currently the vast majority of mobile music revenue is generated through sales of ringtones, industry observers say the market is likely to pave the way for the eventual uptake of more elaborate mobile music.

According to the Informa media group, global revenue from ringtones generated an income of US$71m last year – an increase of 58pc on the previous year’s total of US$45m. This represents sales of close to US$1bn. Research found that most of this growth came from the US and Europe.

The profits were divided between operator, label and artist.

Senior analyst at Informa, Simon Dyson said: “This is probably the only upside for the music industry at the moment.”

Widespread online piracy and copying of CDs has seen a dramatic fall in music sales over the past couple of years – a trend that is set to continue this year.

Failure by the music giants to face up to the demand for downloading songs has been blamed for the slump.

Thus the potential represented by mobile music is becoming all the more significant as both the mobile and music industries face their traditional sources being undermined, causing them to seek new revenue opportunities to make up for the leakage through fixed internet applications.

Data services including music are being examined to step into the breach.

However, according to Informa, there remain commercial and technical obstacles to a successful future of mobile music services.

It says that commercial negotiations are likely to be hampered by the vested interests of the music and mobile industries and technical obstacles include advanced handset penetration rates, network speeds and lack of digital rights management (DRM) implementations.

Speaking to siliconrepublic.com Tim Farrelly, MD of Midia distribution, which distributes the high-end ZEN MP3 players, agrees that personal digital entertainment is a very big growth market.

He says however, that given the currently limited form of the mobile phone and the fact that it doesn’t have anything like the 20GB capacity that MP3s have, competition between the two is unlikely in the immediate future.

In this respect he compares the two products with personal digital assistants (PDAs) and mobile phones – they overlap but are fundamentally different.

However, as memory capacity develops he does envisage the mobile phone becoming a player in this area.

A Vodafone spokesperson told siliconrepublic.com that ringtones were certainly proving a welcome new revenue stream for the company, proving popular with the 16, 17 and 18-year-old age bracket in particular.

As regards the expansion of the music mobile concept, they remained tight-lipped, but said they were watching with interest development in the area and said new content would be made available in due course.

By Suzanne Byrne