April 2004 No 1



Mobile phone ringtones are music to writers' ears

Richard MallettBy Richard Mallett, Director of Media Licensing, APRA

If Abba were writing their classic song today, "ring, ring" would just not do. Mobile phone ringtones are doing to the humble phone ring what CDs did to vinyl records. No longer satisfied with a "one tone fits all" approach, purchasers, driven by the desire to personalise their mobile phones, come back time and time again to update their ringtone of choice.

And damn the cost.

That's good news for music publishers and songwriters. In fact, one and a half million dollars worth of good news in APRA/AMCOS licensing revenue from ringtone services, this year alone.

Ringing in a change

APRA/AMCOS has licensed ringtone services for three years. What started as a novelty product has grown into a multi-million dollar industry.

The market started as an internet-based product, however, most ringtones are now sold via '190' telephone lines. The move to 190 services has increased our licence revenue. The scripts for the 190 services keep callers on the phone. This increases the cost to the callers and, hence, the licence fees paid to APRA/AMCOS.

It is ironic that kids are prepared to pay $10 for a ringtone, but generally will not pay for a download of a CD from the internet. This could be because the billing process for ringtones is simple - the cost just gets added to your phone bill and you don't need a credit card to buy one. This is great news for publishers and writers and probably not so good news if you are the parent of a teenager!

Telstra is also a big winner from the popularity of ringtones as they take up to 30% off the gross before remitting call-revenue to our licensees - rest assured that our licence fees are linked to the gross figure.

Another significant cost for licensees is the price of placing the many advertisements that they take out in magazines such as Picture, People, Dolly, Girlfriend, Ralph and Take 5. To monitor the sector and identify new players and business trends, APRA/AMCOS purchases these publications. We have also developed relationships with Telstra and TISSC (Telecommunications Information Services Standards Council). These organisations have helped us with the issuing of take-down notices and code compliance.

Ringtone licence fees and revenue

AMCOS: $10 'fixation' fee per licensee per work used as a ringtone (fee is non-refundable and cannot be offset against future 'mechanicals').
For each ringtone sold, the greater of 10% of the price paid by the consumer or 15c.
APRA: For each ringtone sold, the greater of 1% of the price paid by the consumer or 1.5c.

(Note that rates are the same for NZ except the minimum fee is in the local currency.)

The APRA fee is for the communication of the tone from the server to the handset. This use is essentially the same as the transmission of a song within a digital download service. The fee does not apply to the playing of the ringtone on the mobile phone - that is generally not considered to be a public performance.

This year we expect that combined APRA and AMCOS revenue from ringtones will exceed $1.5M. Unfortunately our ringtone revenue actually understates the true market size. This is because the holding companies of many ringtone services are based in the UK and are licensed through PRS/MCPS (APRA/AMCOS' equivalent copyright societies in the UK). APRA and AMCOS work co-operatively with PRS/MCPS to check the licensing status of new ringtone providers and to provide local information to help in their policing/auditing of these services.

Better quality sound

While ringtones are delivered to a mobile phone via an SMS attachment, the actual work is stored as a midi file. Initially these midi-files were in a monophonic format - hence the tinny sound we all know and love!

New generation ringtones are stored in a polyphonic format and relatively speaking, sound better. Polyphonic ringtones are more complicated to order because of their file size and this slowed their initial uptake. However, as licensees generally price them higher than monophonic tones we derive a higher average licence fee per sale. With more and more polyphonic-compatible handsets available, polyphonic sales now represent 30-40% of revenue.

It may be that ringtone revenue falls off in the future although we are hopeful that the introduction of 'trutones' will provide another fillip. Trutones replace midi-files with actual sound recordings and have already been launched in Australia, although they are only compatible with a small number of handset-types. Interestingly, the first Australian service to launch has used cover tones because they have not been able to secure licences with ARIA or the record companies.

The future

While there has also been much press talk about digital download services extending to mobiles or viewing music videos via your cellphone, we expect that the next new phone-based music service will be 'ringback' or 'calltones'. These will be launched sometime this year.

Calltones are heard by the person calling your mobile phone instead of the normal tone they would hear before you answer. You can allocate different tones to different incoming phone numbers to personalise the application. Calltones have been available in Korea for two years and have reached over 35% market penetration. If a calltone service does commence and takes off here, it has the potential to exceed licence fees from ringtones.

APRA/AMCOS' ringtone licence fees, combined with APRA's expected revenue from music on-hold means that the combined forecast communication/reproduction licence fees from phones will be over $3.0M this financial year. An amazing position, when you consider that only six years ago revenue from phones was $0.

The provision of music over telephony services - what we see already and what may be launched in the future - is now very important to the income of writers and publishers. Especially when viewed against the large changes that are affecting the traditional record business, and the fact that the industry as a whole is looking to develop new revenue streams from the exploitation of copyrights.



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Changes to APRA Board Committees
Qantas reporting
Publisher interviews: update
Ring, ring: the happiest sound of them all
Update: CMS and Mechanical Rights
Update from Mechanical Distribution
Awards a kick start for young writers
Music in a dramatic context
Welcome to New APRA/AMCOS Members
What’s Coming Up