Editorial: One Digital Door Closes, Another One Opens

Posted in News on September 30, 2010

Next week we will release our annual projections for the mobile music market. Some in the industry will be surprised by the BMI data about revenues from ringback tones, songs that we hear on our phones in lieu of the “ring” when we place a call to a ringback subscriber. Once the darling of the industry, ringback sales leveled off in 2010. We project that ringbacks will generate $181 million in 2010 versus $195 million in U.S. retail sales for 2009.

We predict that ringback tones will replicate the lifecycle of ringtones, which crested in terms of revenue in at an estimated $600 million in U.S. retail sales in 2006 and ultimately gave way to ringbacks as the industry frontrunner. Interestingly, we also found that pre-paid mobile services targeting urban markets had a much higher sales volume of ringbacks per subscriber, selling more than three ringbacks per mobile subscriber in the first quarter of 2010 versus 0.5 ringback units sold by traditional monthly billed subscribers.

On another front, Nielsen recently reported that the digital single download market had tapered in the first half of this year. The report states that first-half 2010 sales were 630 million tracks, 0.7% off the first half of 2009.

But this story is not about decline, it’s about shifting form factors. Just as the ringtone market peaked in 2006, ringbacks came online and grew explosively. Over a four-year period, they generated a cumulative $725 million in gross U.S. retail revenues from 2007 to 2010.

Now, as ringback revenues ebb, new, longer-form mobile streaming and caching services are poised to drive the next wave of innovation and revenue. The ringtone and ringback story shows us that when one digital door closes, another one opens. For mobile, we see the movement to longer-form audio and audiovisual streaming taking off in the next 24-36 months.

While we can analyze these markets in an antiseptic and scientific way, there is something wonderfully messy and organic about the way the services roll out, peak and decline. That’s because these products’ lifecycles are as messy and organic as the human behavior that drives their adoption, use and revenues.

While specific services and applications may come and go, there is one constant: More people are consuming more music and more audio-visual entertainment than ever before. The Online Publishers Association recently reported that the share of time consumers spend with creative content online as a percent of total time online hit a new high of 37% this past summer. Clearly, in the 15 years since the launch of Real Player and the advent of commercial Internet-based streaming, the drumbeats strong and the march goes steadily forward.

If we can just keep our wits about us and tolerate the organic and sometimes schizophrenic behavior of the marketplace, we will continue to move toward a healthy, vibrant digital content economy.

As the next digital door opens, however, we must continue to work together with the digital services and amongst ourselves in the entertainment industry. We must ensure that this vibrant economy has room to grow and that fair and equitable compensation flows back to songwriters, recording artists, music publishers, actors, screenwriters, tv and film studios, journalists, authors and photographers and other content creators and owners. After all, they are the ones who create the reason to open the door in the first place.

Richard Conlon
Senior Vice President
Corporate Strategy, Communications & New Media

We would love to have your thoughts on the transition from ringtones to ringbacks to streaming music from your perspective as a songwriter, composer or music publisher. We look forward to sharing this discussion with the BMI community — and beyond. Email your comments to: