Verizon Wireless became the first major U.S. carrier to offer ringback tones, launching a service analysts say-and carriers hope-may be even more profitable than ringtones.
Ringbacks are clips of music a caller hears instead of a traditional ring before the person being called answers the phone. The popularity of the application has exploded in some Asian markets, including Korea, where sales generated more than $100 million last year, according to the Yankee Group.
Verizon began offering the service to subscribers in Southern California and Sacramento, and expects to roll out the application nationwide next year. Subscribers must pay a monthly fee of $1 for access to the carrier’s 2,200-song catalog, and $2 buys one ringback for one year.
Carriers and content providers are salivating over ringbacks. Asian carriers are reporting increased average revenue per user (ARPU) of up to $2.44 monthly, and British analyst firm Ovum believes the ringback market could reach $24 billion by 2008.
Verizon customers aren’t the first in the country to get ringbacks-First Cellular of Southern Illinois teamed with Preferred Voice to offer the nation’s first service last month-but the second-largest carrier was able to beat the rest of the big operators to the punch. T-Mobile USA Inc. and Sprint PCS are rumored to launch ringbacks in the next several weeks, and other carriers likely will follow suit.
Unlike ringtones, which are downloaded to a handset, ringbacks reside on a carrier’s network, allowing users to choose different tones based on caller ID, a group list or the time of day.
“Ringtones are really a broadcast one-to-many sort of vehicle, but ringbacks are one-to-one, peer-to-peer,” said John Orlando, vice president of marketing for NMS Communications, which teamed with LogicaCMG to launch ringback service for Vodafone Netherlands customers a few weeks ago. “And the fact that anybody can use (ringbacks) on any phone is fantastic … When you’re taking a look at ARPU, you’re definitely looking at a much larger potential.”
Also, because the carrier directly controls the content, digital rights management issues are far more simple than with ringtones, which often involve a slew of players in the supply chain. And the possibilities for marketing are endless: a customer could record his voice over a ringback tone, for instance, or a company could use a ringback as an advertisement.
Carriers could even use their own messages as a default ringback, forcing users to buy a different tone if they don’t want callers hearing an ad for the service provider.
“You could record specific messages, including advertising messages,” said Adrian McAloon, director of marketing for Ztango, a messaging and content provider and subsidiary of Korea’s WiderThan. “We’ve had some people who’ve approached us for that. I think you’ll see that” as a marketing tool.
Meanwhile, while carriers are scrambling to provide songs for their customers’ phones, digital music companies are working to get users to buy music through their phones. Gracenote, a 6-year-old digital entertainment technology provider, has put its huge musical database to use for a song identification system for mobile users.
Earlier this year, Gracenote launched Mobile MusicID in several European and Asian markets, allowing users to identify a song by sending a brief clip over their handsets. The user is sent information about the song and artist, and-just as importantly-about how to purchase content.
Since launching the service in September, Korean carrier KTF has seen 70 to 90 percent of its subscribers use the application, according to Craig Palmer, Gracenote’s president and chief executive officer. Of those, he said, 20 to 50 percent have purchased something through the service.
“We’re already seeing the tremendously addictive qualities of these services blow away typical customer adoption and purchase rates for mobile services,” said Palmer, “and these offerings are only in their earliest stages.”
Gracenote plans to launch two new services this week, including its Media Manager, which will allow handset manufacturers, operators and service providers to market the transfer of music from PCs to handsets. The transfer could be made via a USB port or a wireless connection like Bluetooth.
While digital rights management issues continue to threaten consumers’ abilities to transfer digital music files, Palmer said most music fans will use such applications for content they’ve already purchased.
“(The transfer of digital music) is still wildly dominated by music you already have,” he said. “It comes from peoples’ existing music libraries.”
Gracenote said it plans to enter the U.S. market in the next few months. Last month, Shazam Entertainment teamed with Loudeye Corp. to offer a song identification application for AT&T Wireless Services Inc. customers.
Shazam is also providing the database for a new song identification offering by Verizon Wireless and created by Rocket Mobile, which is also developing an application that will allow users to mix their own ringtones.
“In all the focus groups we did, it was almost the entertainment part (of the application) that really stood out,” said Wayne Yurtin, Rocket Mobile’s CEO. “Verizon calls it a music application, but I almost feel like it’s an entertainment application. It’s fun.” RCR
