The Disintegration of the Ringtone Business
Tuesday, August 10, 2010
Wimax Range mapI've never understood the appeal of having a special "ringtone" on a cell phone. It seems like a lifetime ago, but the masses craved ringtones and begged in the streets for them and ran wild when ringtones were made available to them via websites and whatever else. It was as if men were standing in the backs of trucks throwing them into screaming crowds reaching up to get whatever they could.
Now? Forget about it. Ringtones are dead:
Ten years ago, three brothers in Germany founded Jamba, jumping head-first into the global fad of selling ringtones, which ultimately grew to be a billion-dollar industry. Since then, the well-known mobile content company has taken a number of twists and turns. Long story short, Jamba was acquired by News Corp (NSDQ: NWS) to become part of Fox Mobile, and celebrated its 10th anniversary last week under a circus tent in Germany. However, it’s questionable these days how much celebrating should be done.
Last week, on the eve of Jamba’s party, News Corp. confirmed rumors of its intentions to sell off the mobile division, and Fox Mobile, like other ringtone providers, are left scrambling to find new business models as the clock runs down out their traditional revenue streams.
At the height of the ringtone business, carriers, music labels, artists and third party companies, like Jamba, Thumbplay and others, were making piles of easy money—selling a snippet of a song for three times what a whole track sells for today. John Fletcher, an analyst at SNL Kagan, said ringtone sales in the U.S. peaked in 2007 at $714 million, and today are closer to 2005 levels. “It’s been a depressing story for a couple of years.” As consumers have transitioned to smartphones, users can often load a full-track MP3 to their phone and designate a portion for a ringtone.
Fox Mobile and Thumbplay are two of the largest companies that specialized in ringtones and are now trying to reinvent themselves. But both companies have a long way to go to be successful. News Corp. said last week it was writing off $217 million from the value of its outdoor and mobile businesses, though it was not clear how that money was split between those two areas. News Corp. acquired Jamba in two chunks, for about $400 million. If it decided to put Jamba on the block, Fox wouldn’t likely make back that purchase price. Meanwhile, Thumbplay has raised roughly $61 million since being founded in 2004. Investors include Brookside Capital Advisors, Cross Creek Capital, Bain Capital Ventures, Redwood Partners, New Enterprise Associates and Meritech Capital Partners.
Who has that kind of free time on their hands? To sit there and slice out a piece of an MP3 and then make that the ringtone when your favorite booty call rings you up smacks of something out of another time. This is the age of austerity. When a cell phone rings, pray it is McDonald's offering you a night shift job at eight bucks an hour.
























