America Get Ready - RingBacks are coming


BusinessWeek Online- 28th June 2004
By Olga Kharif

You know those rrring, rrring, rrrring sounds you hear before the friend you've just called picks up her cell phone? Soon, they could be history. Instead, you might dial the number and listen to Britney Spears singing Ooops!... I Did It Again while you wait for your friend to pick up.

Something like that might be your first encounter with a "ringback tone." Already in use in cell-phone-crazy South Korea, Taiwan, and other Asian countries, this new wireless service could be coming to the U.S. soon, perhaps in the next year. Ringback tones promise to give wireless users yet another way to personalize their phones beyond the already wildly popular ringtones, those tunes your phone plays when someone is calling you. In fact, ringbacks may help wireless service providers ring up even more cash than they're making now from ringtones.

That's a pretty sizable market: Last year, ringtone revenues came in at $2.3 billion worldwide, according to telecom consultancy Ovum. And, in the U.S., more people now download ringtones based on popular songs than they download the songs themselves from the Web's many music services, says Scott Hochgesang, vice-president for business development at Universal Music Group, the world's largest music company. "We like ringbacks equally well," he says, foreseeing a new revenue stream for the music industry.

YOUTHFUL PITCH. Indeed, according to Ovum, by 2008 mobile music content -- ringtones, ringbacks, and entire songs that could be wirelessly downloaded onto handsets -- could account for 28% of total music sales, including CDs and paid downloads. (That percentage assumes the overall music market remains constant at around $32 billion worldwide, which is likely given that music buying is actually declining in some countries.) Mobile music accounted for less than 1% last year, figures Dario Betti, a senior analyst at Ovum in London.

Many analysts think ringbacks could hold even more promise than ringtones. While lots of, well, let's just call them older folks may regard a cell phone as a necessary evil, for today's youth, it's a lifeline. And that's the market that holds the most promise of embracing ringbacks, says Adam Zawel of market consultancy Yankee Group in Boston. These cell-phone lovers will likely buy several ringbacks -- perhaps even one for every caller they're likely to get rung up by -- vs. just one ringtone per handset, he says.

Consider: Your best friend might want you to hear a song by your idol Britney. But she might buy a new Avril Lavigne ringback, with the lyric "don't try to tell me what to do," for when her mom calls. And a caller who owes her cash might hear Liza Minelli's rendition of Money Money from the musical Cabaret.

"We see RingBacks as a new and very significant revenue stream for operators" says Neil Flanagan, CEO of Alatto Technologies, a Dublin, Ireland based vendor of RingBack Tones solutions to wireless operators. "The market take up of RingBack will be very swift and be believe our unique full service offering based around the Parlay standard gives operators a very cost effective entry to the RBT space", Flanagan continued.

"It's a chance to put your personality onto the device," says Martin Dunsby, vice-president for sales and operations at wireless consultancy InCode Telecom in San Diego. "It's exactly the kind of thing that the industry needs to do to get away from commoditization [where every company's wireless service is the same]. This is going to be huge for the industry."

"A GOOD CONCEPT." Such prospects are making service providers giddy. "We believe the service is very relevant to the youth segment," says Mark Fewell, senior director of business development and media for service provider Boost Mobile, a new, youth-oriented division of Nextel (NXTL ) that now has more than a half-million subscribers. "The youth of today loves products and services that they can customize to demonstrate their own personality. We think it's a good concept and that it will be popular here."

Other service providers, including Sprint PCS, a subsidiary of Sprint (FON ), and No. 1 U.S. wireless carrier Verizon Wireless, confirm that they're also considering offering the service. And analysts say every major U.S. carrier is already in the process of buying the gear that enables it.

Indeed, ringbacks have already proved a success elsewhere. Korea's No. 1 wireless provider, SK Telecom (SKM ), was first to launch ringback tones in April, 2002. It now has more than 8 million ringback users out of its 30 million total subscribers, and SK is generating more than $9 million in revenue per month from the service. That's still small potatoes for SK, which has $7.25 billion in revenues, but it says ringback adoption is skyrocketing.

FEE STRUCTURES. Another Korean operator, Globe Telecom, has reported that 100,000 people signed up for its ringback service during the week of its launch in April, 2004. No wonder a Sprint PCS spokesperson says: "We are certainly watching this."

Says Roger Woziwodzki, director of wireless data products for Alltel (AT ), which has 12 million wireless and wireline customers: "My opinion is, this service is translatable to the U.S. marketplace. We're bullish." Alltel, which is still researching the service and doesn't have a roll-out date, believes the ringbacks will appeal to a broad range of demographics and to both wireless and regular phone customers.

Cost doesn't seem to be slowing ringbacks in Asia, where carriers have been able to charge users $2 to $5 a month for a subscription to the service, plus, say, $1 per each new ringback soundtrack. U.S. carriers will likely follow a similar model, says Yankee Group's Zawel. Such fees should push the worldwide market for ringbacks from $148 million last year to $2.4 billion by 2008, according to Ovum.

PASSING THE CALL. That's good news for software and hardware equipment vendors, including France's Alcatel (ALA ), U.S.-based U.S. Comverse Technology (CMVT ) and NMS Communications (NMSS ), Korea's WiderThan.com, and Ireland's Alatto Technologies. Depending on the number of subscribers that must be supported, hardware and software for a nationwide ringback rollout will cost from $2 million to $45 million, figures Hernan Giraldo, senior marketing manager for ringback tones for Alcatel in North America.