FEATURE: How the Mobile Music Industry Throws Away $1B a Year

How the Mobile Music Industry Throws Away $1B a Year
Retro Ringtones' Thomas Dolby Robertson offers some guidance on how the mobile music industry can trim waste and move forward.

According to several respected sources, the annual value of the ringtone industry exceeds $3.5 billion. To some it's staggering that consumers are willing to spend so much on cheesy ringtones, when they're reluctant to buy conventional mainstream music on CD.

Personally I don't find this number very surprising. For starters, the music industry has been hawking a very bad product. Songs played on the radio do not get back-announced; if you do hear a song you like, you're probably miles from the nearest point of sale; if you make it down to Tower Records you're asked to pay $20 for a whole album, just to hear that one song; and then you need to be a safecracker to figure out how to get into the CD's packaging.

Consider also that the money young consumers are spending on ringtones does not come from an existing monthly music budget-it's a fashion statement. If you're a 16-year-old city kid, you don't mind paying an extra $10 to get the cool Adidas logo on your sneakers. When you're standing around with your friends at the mall, or waiting on line for a latte at Starbuck's, your cell phone rings -- heads turn -- people check you out. Sure, you could have had the Nokia jingle for free, but instead you are happy to pay $2.50 for Outkast.

And don't forget that most young ringtone buyers have zero credit rating. They have no credit card. They're only used to buying stuff when there's cash in their pocket. A cool ringtone feels like something for nothing.

So I'm not amazed by the numbers-in fact I believe the ringtone industry will carry on growing by leaps and bounds. But what I am concerned about is the wastage that takes place behind closed doors. I estimate the wireless and music industries may be squandering over $1 billion year due to the lack of practical technologies and processes for moving content between the various players in the supply chain.

Today's ringtone supply chain is crude, arcane, and prone to errors. As content moves from composer to aggregator to record label to carrier, there are a dozen places where the data can become mislaid, confused or corrupted. All it takes is a filename's period or underscore in the wrong place, or a ringtone that's 1kb too large for a handset's memory. Matters get even worse when a carrier releases a new handset and forgets to update its specs, or when a publishing clearance didn't happen in time, or when the composer forgot to include the SYSEX header that tells a low-end cell phone which MIDI channels to mute. And none of these potential problems are easy to spot by 'eyeballing' a spreadsheet or a folder of ringtones.

So what happens next is that an unsuspecting consumer pays $2.50 to download his favorite Outkast track, and his phone says 'Error: file not supported.' He panics, thinking he's going to get billed for a tone he never received. He calls the customer support number for his network, and his call is diverted to the call center in India. They argue for 10 minutes and eventually the supervisor agrees to refund the $2.50. The call center logs the error in a long list, and eventually the carrier gets round to looking up who supplied the ringtone. The carrier complains to the aggregator; who complains to the record label; who complains to the composer, and so on, ricocheting back along the supply chain. Royalty statements have to be re-stated. At the end of it all, a new ringtone file is made and re-entered into the system with the same name as the old, broken one!

Cost per error? Probably in excess of $50, once you add up all the time for calls and emails. This one broken ringtone just wiped out a year's worth of potential profit from that subscriber. For a large global carrier with tens of millions of subscribers, this adds up to big bucks. And for the music industry as a whole-which is used to very short shelf life for its Top 40 music-it often means the ringtone misses out the narrow 3-week window of peak consumer demand, when the song is on scores of radio playlists and the video's in heavy rotation on MTV.

The mobile content industry is still very young, and the lack of infrastructure to support and streamline the supply chain is not surprising. But until better standards and processes are put in place, hundreds of millions in revenue is being lost every quarter due to errors that are completely avoidable.

Thomas Dolby Robertson is president of Retro Ringtones.