HITS Daily Double
"In other parts of the world, the people who are really making money are the publishers—in some cases, it’s compensated for their lost revenues in CD sales."
——Fabrice Grinda, Zingy CEO/Founder


Does an Industry Fellowship of the Ringtones Signal a Revival?
If you ask some prominent people in the entertainment and technology worlds, you hold the future in your hand—it’s the same device you use to scream at your underlings.

Sony Music recently purchased wireless company Run Tones, which will serve as the foundation for the label giant’s Mobile Products Group. Self-described "mobile entertainment provider" Zingy has inked a pact with Microsoft to vend musical ringtones and other goodies. Other labels, publishers and related music entities are scrambling to squeeze new revenue out of the burgeoning wireless world.

Is this a new cash frontier, or just the Internet bubble revisited?

Hey, who do we look like, Miss Cleo? But one thing’s for sure: There’s already a market for music ringtones. Young consumers seem increasingly ready to use their phones as an entertainment platform—and unlike the Net, no free/"pirate" economy yet exists to compete with it.

In Sony’s case, Run Tones will help the Mobile Products Group furnish not only ringtones, but multimedia access that can exploit and promote all kinds of entertainment properties.

And if Zingy CEO/Founder Fabrice Grinda is exemplary of wireless-industry ambition, that’s just the beginning.

"We started with ringtones because it’s easy to explain—there’s significant demand for teens and young adults, who drive this market. Seeing that explode in Asia, we launched the product a year ago in the U.S., and we’ve had nearly two million users download a ringtone, and about half of those are paid," Grinda points out. "In other parts of the world, the people who are really making money are the publishers—in some cases, it’s compensated for their lost revenues in CD sales."

Once the bandwidth becomes available, we could become the means of music distribution, he adds. "A year or two from now, we’ll be using the master as a ringtone, so labels will be earning licensing money as well as promoting product. What we’ve done in the meantime is tell the labels, we know everything about our users, and they are rabid buyers of music. What’s really driving our ringtones isn’t sound quality—it’s the status conferred by the content. If we could’ve paid five dollars to be perceived as cool in high school, we would have."

In my case, it would’ve cost a lot more than that. But point taken. The immediate status of a hip ringtone is one of those identity markers most kids leap on.

"So we have a unique option to work with major labels," insists Grinda. "We tell them, we’ll promote your upcoming releases by preparing and giving away a ringtone and contacting our user base and those of our partner companies and letting them know about it. In exchange, we get cool content for our users. We give it away to build our audience, and pay the licensing fees out of the marketing budget. Now about 15% of our users come back every week because of that."

Grinda says ringtones will account for a mere $20-30 million in domestic revenues this year, compared to $300 million in Japan and $1.5 billion in Europe, but believes this is only because the foundation for a wireless-entertainment business is just now coming into focus here.

"We believe the U.S. market will multiply by ten in the coming year, as gear, content and cell-phone penetration all increase," Grinda says.

Ultimately, Grinda believes, consumers could both download and access digital music with their phones—and the convenience of wireless access (and presumably integrated billing) could trump any pirate economy.

It’s an inviting prospect, but then again, a visit to the starry-eyed predictions of 1999—paid downloads! Celestial jukeboxes!—would explain a certain wariness.

In any case, don’t call me for answers. I’m on with my mom.