Global market for cellphone ring tones is shrinking

John Odey,
Minister of Information/Communication

After years of double-digit growth rates, the global ring tone market appears to have come to the end of its crescendo, according to a variety of measures.

In some parts of the world, ring tone sales are actually declining, and the former ring tone kings, like Jamba of Germany and Musiwave of France, are refocusing their businesses on other ways to personalize cellphones.

A couple of years ago, there seemed to be no upper limit to the sale for a couple of euros, or $3 to $4 of snippets of music that blast out of cellphones. Billboard magazine created a “hot ring tones” chart in 2004 to track their popularity, and at one point in 2005, analysts predicted an $11 billion ring tone business by 2010.

But the market changed in unexpected ways. For one, more mobile phones were being made with the ability to create or record their own tunes. For another, record labels promoted so-called master ring tones excerpts from the original pop recordings for about the same price as the knockoffs but with higher royalty fees.

And digital music stores like iTunes began packaging and selling ring tones alongside their 99-cent singles.

All three trends lessened the profitability of ring tone aggregators, like Jamba, the Berlin-based marketer behind the popular “Crazy Frog” melody.

Jamba, known as Jamster in the United States, is still selling ring tones, but it has expanded into music, video and information services as well as graphics and games. The company was bought for $273 million in 2004 by VeriSign, which subsequently sold a controlling stake to the News Corporation in 2006.

Similarly, the ring tone provider Musiwave announced last month that it was being purchased by Microsoft for $50 million to help the software company with its “connected entertainment” ambitions. Openwave Systems had bought the company, based in Paris, for $121 million in 2005.

Cheap chirps remain on the ascent in non-Western countries, said Paul Goode, a senior analyst in London with M:Metrics, a market research company based in Seattle. Mobile network providers are pushing “ringback” tones, which play over the phone as you wait for a call to connect, particularly in Asia.

But in most of the countries that M:Metrics tracks Britain, France, Germany, Spain and Italy the percentage of mobile phone subscribers buying a ring tone in an average month has fallen consistently over the last 12 months, to a low of 3.4 percent in Britain in October. In the United States, it was 9.3 percent, higher than the 9 percent of last October but below its January 2007 peak of 10 percent.

Mark Mulligan, vice president at JupiterResearch in London, puts the ring tone share of the overall mobile content market in Europe at about 29 percent this year, down from 33 percent last year.

The value of European ring tone sales is expected to be about $1.1 billion this year, about 10 percent higher than 2006, while the value of mobile games sold will be $550 million, about 33 percent above a year earlier, Mr. Mulligan said.

Ring tones still get the occasional headline, as when the Dave Matthews Band finally authorized digital ring tone sales of its music, or when fans downloaded the “Why don’t you shut up?” retort from the prime minister of Spain to the president of Venezuela last month.

Jonathan Medved, chief executive of Vringo, said he believed his company had the next big thing in the ring tone wave: video ring tones. Vringo, based in Israel, offers sports clips, cartoons, music videos and other shorts so that your call shows the animation of your choice when it rings on your buddy’s phone. That would fit in with the ring tone pattern so far.

“Ring tones are personal, and they are driven by hits,” Mr. Mulligan said. “Although many markets have reached saturation, there are still ring tone buyers who change their tunes once a week.”

Inflation surges and job market sags in Japan

Japan’s inflation rose at the fastest pace in more than nine years in November while industrial production and household spending declined, signaling that rising oil costs might derail the economy’s longest postwar expansion.

Core consumer prices, which exclude fresh food, climbed 0.4 percent from a year earlier, the statistics bureau said Friday. Factory output slid 1.6 percent from a month earlier. Households cut spending 0.6 percent, the first drop since July.

The Labor Ministry said that wages fell and employment prospects worsened as job seekers outnumbered vacancies for the first time in two years

“Japan’s economy is entering into a new phase of accelerating inflation and slowing growth,” said Susumu Kato, chief economist at Calyon Securities in Tokyo. “The bank will probably keep rates on hold in the next two to three quarters,” he said, referring to Japan’s central bank.

The jobs-to-applicants ratio fell to 0.99 in November from 1.02 in October, the Labor Ministry said. Wages slid 0.2 percent from a year earlier. Pay has risen in only one month this year.

Core consumer prices rose faster than the 0.3 percent median estimate of 36 economists surveyed by Bloomberg News. Gasoline and kerosene contributed three-quarters of the gain, which was the quickest since March 1998, when an increase in the country’s sales tax pushed the gauge to 1.8 percent.

Food and oil costs are fanning inflation across Asia. South Korea’s consumer prices rose to a three-year high in November, and China’s inflation was the quickest in 11 years. Singapore’s consumer prices rose the most in 25 years.

“The gain was mainly due to rising oil prices and not because of higher wages and consumer demand,” said Mari Iwashita, a strategist at the Daiwa Securities SMBC Company in Tokyo.

Japan’s last bout of inflation amid slowing job growth was during a recession a decade ago. This time it may be worse for consumers: wages have fallen an average 0.5 percent this year. In 1997, they rose 1.7 percent.

“The economic slowdown since mid-2007 is now causing, after a time lag, deterioration in the labor market,” said Naoki Murakami, an economist at Goldman Sachs Group. “With employment now starting to slow, we see little likelihood of a recovery in consumption.”

Culled from Bloomeberg News