Ringback tones: a sound investment for European operators, says Ovum

Smaller than the Asian market, but a definite opportunity

For immediate release. 24 August 2004. According to Ovum, the analyst and consulting company, the outlook is good for the European ringback tones market. The opportunity is not as big as in Asia, but operators should go for it as it represents a valuable addition to the existing portfolio of personalisation services.

Ovum's recent research into the mobile music industry shows that healthy growth can be expected for this particular form of phone personalisation over the next five years. Ovum forecasts that revenues will remain small this year at around $16 million in Western Europe, reaching a respectable $721 million in 2008. That is around 30% of total global revenues from ringback tones.

Competition is limited but differentiation is key

While operators will still be involved in complex business models with their partners, they won't be facing competition from third parties. Only network owners are able to offer this service.

As yet, there is little to differentiate the European service offerings. Most operators offer a basic subscription service at launch - with the exception of Telefonica, which only charges per event.

'Differentiation will be difficult to achieve, but this is one area where service providers will be able to take advantage of exclusive deals. For example, promotion of a new track by a top music group. There will also be opportunities to bundle the exclusive promotion with other personalisation applications such as mastertones and software skins,' comments Michele Mackenzie, Senior Analyst and Service Manager for the WirelessMultimedia@Ovum advisory service.

More challenges for operators to overcome

In South Korea, SKT's ColoRing service achieved 30% penetration in its first year of launch, and it currently generates around $8 million per month. Likewise, more than 100,000 Globe Telecom subscribers signed up in the first week when the operator launched in the Philippines earlier this year.

However, it should be remembered that not all of the services have experienced the same high rates of success. For example, NTT DoCoMo and M1 Singapore's ringback tones services have not done so well, and we have identified a number of factors that may have contributed to this:

• the ringback tone service is difficult to explain and market. It is not immediately obvious to the user how it works and is often confused with functionality on the handset to assign different ringtones to different callers for the benefit of the called party
• management of the service is complex. In addition to the complexity of implementing the solution in the network, service providers still need to manage their content providers, negotiate and manage licensing terms and conditions for the content, and ensure that there is a constant flow of new dynamic content
• tastes and preferences. There may be cultural differences to take into account across markets. For example, a service that appeals to the Korean market might not necessarily appeal to the UK market.

The European players

T-Mobile was first off the starting blocks in Europe, launching its Caller Tunes service in December 2003. There were no spectacular announcements within the first few weeks of launch, suggesting that it was taking longer to catch on in the UK market. At the end of June 2004 T-Mobile announced that it had achieved 500,000 subscribers across the UK, Germany and the Czech Republic. While this figure is much lower than some of the Asian operators' reports, it does show a healthy uptake of the new service and represents a valuable addition to an operator's portfolio of personalisation services.

Since T-Mobile's launch we have seen a wave of other launches by Vodafone Germany, Telefonica Spain and Tele2 Sweden. Many other operators are proposing to launch before the end of the year.

Related research

More information about the issues surrounding personalisation and wireless music is contained in the following reports authored by Michele Mackenzie and Dario Betti:

• The future of phone personalisation: music to your ears?
• Sound strategies: music on mobile phones
• Under pressure: mobile music downloads

Global wireless music forecasts will also be available in the coming weeks as part as Ovum's ongoing research into this area.

About Ovum

Ovum, the analyst and consulting company, is the largest European headquartered advisor on telecoms, software and IT services.

Resolutely independent, Ovum advises large corporates, IT and software vendors, IT service providers, telecoms operators, regulators, service providers and equipment suppliers. It analyses the commercial impact of technology and market changes and has a real strength in advising on the developments where telecoms, software and IT services interact.

Ovum takes a global perspective on leading-edge developments from our offices in Europe, North America and Asia Pacific. Its experts spot the short-term issues that will have an immediate impact on markets and organisations and advise on the longer-term 'visionary' aspects that form the basis of strategic planning.

More information on Ovum, its customers and its independence is available at www.ovum.com

For further information

Christina Bartsch, PR Executive
Tel: + 44 (0) 20 7551 9027
E-mail: christina.bartsch@ovum.com

Jeanne Monchovet, European PR Director
Tel: +44 (0) 20 7551 9238
Email: jeanne.monchovet@ovum.com