Revenue at our doorstep
By: Steven Borne
Oct. 6, 2004 12:00 AM
The search for "the next ringtones" has another contender, and this time everything seems to add up.
Question: Name a service that launched with only a handful of compatible handsets, provided AM-radio sound quality, was barely marketed, but still managed to become a multibillion-dollar industry in three years.
The answer: ringtones. In 2000, few people knew that phones were capable of more than just R2-D2 beeps, let alone sounds capable of creating a multibillion-dollar industry. But two years later, the UK ringtone market was already driving $71 million in revenue, according to the Mobile Data Association. Today, the worldwide ringtone market is worth more than $2.5 billion, according to an April 2004 Yankee Group study.
That success begs a question: Are ringtones as good as it gets?
What's a Ringback Tone?
A common trait is that ringtones and ringback tones both represent ways for service providers to tap new revenue streams. With ringback tones, service providers can leverage the things that helped make ringtones a hit, such as the ability to personalize and liven up something otherwise mundane. However, ringback tones provide a new twist: they allow users to express themselves to the people who matter most - the people who are calling. From an operations perspective, carriers can utilize many of the same ringtone management tools and content relationships. The difference is that ringback tones offer a much more lucrative business model.
Why Ringback Tones?
A key upshot is that a ringback tone service can immediately tap a service provider's entire customer base. It's conceivable that a customer could also have multiple ringback tones, such as one for their home number, one for their wireless phone, and one for their office number, regardless of whether those services are delivered by disparate networks.
A ringback tone service has the potential to generate more revenue per subscriber than a ringtone service. One reason is that with ringtones, revenue is earned only when a user makes the effort to download one. Aside from a handful of demographics, such as teens, few users tend to change their ringtones on a regular basis. Carriers are lacking the tools to encourage customers to consume additional content.
This is not the case with ringback tones, which empower carriers to be much more proactive in motivating customers to consume more content. Ringback tones are controlled and managed from the network, not from the user's device. The intelligence and control provided by the network creates a richer service that allows for unique content to be directed to individuals and groups, made specific for time of day, or customized for unique events. The ability to influence and motivate the purchase of content moves the carrier from back-seat passenger status to a driver of new revenue-generating services.
A network-based system with personalized Web pages enables easy customization and maintenance of multiple ringback tones. Unique content can be provisioned for specific people - such as classical music for dad or disco for mom. Time of day or one-time events, such as birthdays, can also be provisioned, or a mix of content can be assigned randomly. Intuitive Web portals encourage users to sample and then provision multiple selections of content. Downloadable clients such as BREW or J2ME, or IVR systems, provide other ways for users to adjust the ringback tones that they've selected for their family and friends without the need to go back to their Web provisioning page.
Users can also avoid "slamdowns," where first-time callers hang up because they're surprised to hear something other than a ring. For example, they can record a brief voice message before the music or other content starts, such as: "This is Sam. Hold on while I answer the phone." This feature has a side benefit - callers immediately know that they've reached the right person, something that a standard ring doesn't provide.
From a pricing perspective, ringback tones provide users with a better value proposition than a one-time download of a ringtone or MP3 file:
Creating Bundled Offerings
For example, while provisioning ringback tones, subscribers may be enticed to select a themed bundle that includes a movie theme song as the ringback tone, a sound bite from the film as a dedication, and a character's voice for a fun voicemail greeting. Wireless carriers may also include wallpaper and ringtones in their bundles. By providing a one-stop shop with a compelling value proposition, carriers can defend the ringtone revenue stream from online competitors that completely bypass them by delivering content directly to users' handsets.
Deploying Ringback Tones
Yet enterprises may prove to be the sleeper segment. According to Uri Admon, who is responsible for product marketing for Orange Israel: "We are very pleased with the take-up of Funtone. We've had so much interest from corporate customers, who see the value of the service for their business, that we plan to offer a version of Funtone specifically for them." Companies can use ringback tones to influence the mood and perceptions of incoming callers, or they can create customized ringback tones for specific customers. Companies can also create outdial ringback tones that play a corporate theme song, music for a new product launch, or other company-specific content whenever an employee dials out from a wired or wireless company phone.
What's more, carriers with older switches or multivendor networks aren't locked out of this market.
The first step in deploying a ringback tone service is to tweak the switch to allow for the interruption of the call flow so that instead of playing a generic ring, it connects to the ringback tone system. Intelligent network switches can be easily reconfigured to have the calling party receive the customized ringback tone. Here the advantage falls to the wireline carriers who long ago invested in upgrading their networks in order to supply a slew of smart or intelligent services (e.g., 800 number services).
Intelligent switches are not as prevalent for wireless carriers, who can choose to implement either a service node or a switch-based solution. Service nodes route the entire call through the ringback tone platform, but this circuitous path requires additional ports and trunks for each call, which can be an inefficient use of network resources. A few switches can mitigate the incremental costs if they have the ability to release the call from the ringback tone platform once the call has been completed. This is known as release link trunking.
A switch-based solution requires potentially expensive software upgrades to the switch. This solution is identical to the change a carrier would make in an intelligent network switch. However, a software change to a switch requires this capability to be added to the software release cycle of each switch vendor and then scheduled into the release verification testing in the network.
The success of ringtones and fun voicemail greetings has created an ecosystem of content suppliers that can be leveraged by ringback tone services. Unlike in the early days of ringtones, the content management tools have evolved to support revenue reporting, to import content from multiple sources, and to quickly generate the multiple file formats required for each user interface (Web sampling, IVR, handset clients). Carriers can now easily aggregate content from unique promotional events, local flavor, or new or existing relationships with the music industry. A few music providers estimate that almost one-third of their revenues in the near future will come from ringback tones and true tunes, actual music clips for ringtones. Content owners and creators are eager for carriers to nurture these fruitful distribution avenues, especially a carrier-controlled service that helps ensure that their revenue stream does not get circumvented.
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