The Ringtone Industry Parties Like It's 1999
By Mike Masnick, Tue Feb 01 03:00:00 GMT 2005

Everyone knows that ringtones are a big business -- and will play a role in the mobile world for a while. However, a few trends suggest that those in the "ringtone industry" are blocking out the challenges they'll need to face to keep this cash cow mooing.

The ringtone market has been a huge success around the world. The International Herald Tribune has a short, but sweet, article that hypes up the market to no end. It doesn't really add much new for those who have been following the space for a while, but what's most interesting is what the reporter leaves out. The entire article is almost devoid of any skepticism about the market or about the challenges it may face. There's a short paragraph at the end that mentions "a few skeptics" who worry about the faddish nature of ringtones, but the reporter brushes aside that skepticism by saying that "most others" disagree, and that ringtones are "a lasting part of the culture."

It reads like a typical bubble-era article hyping up the Internet and dot coms, as changing the way things are done with no proof, other than the fact that people "say so." As with the dot com bubble, of course, there is a kernel of truth in these concepts, but that doesn't mean that the ringtone market doesn't face some serious challenges -- and brushing those challenges off as being from culturally clueless clods is going to lead to problems for many companies hoping to succeed in the space.

No one thinks the ringtone market is simply going to disappear. It's obviously become a big part of the culture for many people -- often in the "under 25" demographic. It's also resulted in offshoots, such as the ringtune (a clip of the actual song, rather than a recreation of the song) and the ringback tone.

While some have expressed serious concerns over the fact that many of these ringtunes cost much more than simply downloading a full song, the IHT article suggests this isn't an issue at all. Instead, the reporter explains it away by revealing that, with ringtunes, not only does the songwriter have to get paid, but the record label that owns the "performance rights" has to get its cut. The excuse "well, someone has to get paid," tends not to sit well with customers -- especially when they know there are other options available. The recording industry has used that excuse for years with traditional music downloads, and that certainly hasn't stopped people from using file sharing to access unauthorized music.

The recording industry and the mobile industry are both ignoring reality if they believe that users won't discover other ways to get the ringtones they want, without paying huge fees. Already, there have been attempts to create file sharing applications for mobile phones, and there are applications on the market today to help users get around the fee wall by creating their own ringtones out of music they already have. It doesn't take much effort to see how subscribers are going to wonder why they need to pay nearly $7 for a ringtone, when they already own that song for a $1 download and can make a ringtone out of it for free -- or the one time cost of a piece of software.

So far, the market has been successful in convincing users to pay up for these sorts of things -- but there's clearly a market imbalance. While ringtones may have become "a lasting part of the culture," paying a small fortune for them has not. Pretending otherwise seems to be asking for a repeat of what happened to the dot coms when the bubble burst. Those dot coms were right about what people wanted online -- but missed the boat on how to really make money off of it. It's looking like many companies in the mobile music space may be ignoring that lesson and are so thrilled with the big bucks that are already rolling in that they're paying no attention to the challenges they will face in keeping that money coming in.