Everyone Wants a Piece of the Ringtone Pie
By Eric Lin, Mon Sep 13 23:30:00 GMT 2004

Every day that people in the music industry spend fighting over who will get how much from ringtone licensing fees, they're losing money -- literally millions of dollars.

The struggles between record labels and music publishers are already putting a hurt on the ringtone industry, causing dramatic price increase for new ringtunes made from original recordings of a song. The bounty recording companies are demanding for ringtune sales has settled at between 40 and 50 percent, and publishers feel as though the labels are trying to cut them out of the picture as much as possible. Thanks to US law, it is possible for a record company to pay a publisher less per sale for a ringtune than a monophonic ringtone.

Because they have enjoyed similar government protection, song writers (or more accurately the agencies representing them) are also trying to milk all they can from the ringtone teet. In the case of Usher's hit "Yeah," one of the seven people listed as author for the song nearly cost the hit all ringtone sales thanks to his delay tactics. Although the song was a huge hit early this summer, a licensing disagreement with author's representative kept it off the ringtone market until the single had fallen off the charts. The song had enough staying power that it still sold well once the ringtone was launched, but everyone -- including the one artist who caused the delay -- lost out from sales while the song was topping the charts.

In-fighting is not just creating short term losses for all parties involved. While writers, performers, labels and distributer squabble over who gets how much, there is a greater threat to the lucrative ringtone business looming. Once handsets can do double duty as music players, why would users pay for a ringtone when they will already have the full track on their handsets? While a few music executives polled by the Wall Street Journal see this coming, the industry as a whole seems too near-sighted. Based on current growth, Ovum just predicted the ringtone market in Western Europe will hit over $700 million in 2008 -- well after most handsets will be capable of playing music. In order to sell personalization content in the age of music handsets, artists and record labels would be wise to at least start with Ovum's previous recommendation that they look into personalization suites.