..ringback tones look secure business case but there is a wider lesson
A short while back, perhaps as far back as this time last year, ring-back tones were definitely going to be the next big thing. The main reason for the optimism was the startling rates of take-up and usage of the service in South Korea. For instance, SKT’s ColoRing service achieved 30% penetration in its first year of launch, and it currently generates around $8 million per month. European operators looked at producing a fraction of that and could see the justification, but the implementation and management of the service was complex. Not the least of the concerns were in rights management and keeping tones fresh enough to reflect the fast moving music market. There is also the issue of explaining to the user not just what ringback tones are but also how they can be used. But there have been service launches, T-Mobile, Telefonica in Spain and Tele2 Sweden have all launched (Tele2 most recently using a platform from market leader ECT). T-Mobile said that but the end of June it had around 500,00 subscribers for its CallerTunes service, which is certainly more than negligible. Analyst firm Ovum has released a recent report which more or less backs the investment case for the technology amongst European operators. It reckons that although service revenues will top only $16 million this year, but 2008 that number will be $721 million.
These aren’t bad numbers, and certainly operators have already shown they are in for a slice. One drawback may be that the services are run on a subscription basis. Selling subscriptions may be the best business case for operators — giving them a secure, predictable income. But is it the best suited for the target audience they are trying to hit — many of whom are happier with event or pay-as-you-go pricing?
This touches on a wider issue, of course. Another reason for subscriptions is that you know exactly who your customer is, and can tie in ringback tones with with promotions. The main imperative for operators to port customers from pre-pay to contract has been to increase ARPUs, decrease churn and provide some protection from the very attractive bundles beginning to appear from competitive, non-network owning, operators.
So in fact a service like ringback tones becomes as much a device to port a user from pre-pay to contract as it is to make money by itself. As with all such premium services, you have to be sure the service offers enough value to the user to change his behaviour.
We’re going to have more on this in the next issue of Mobile Europe, but for now, please mail me with your thoughts at: keith.dyer@nexusmedia.com