Gales Network • Brand building from the inside out

7 November 2007

Ringtones - Can You Hear Me NOW?

BIG IDEAS TOPIC: Ringtones as a Brand Extension
The Big Idea behind ringtones is that they represent the type of innovation and
extension that the entertainment industry desperately needs to survive and
prosper.

AT ISSUE: Are ringtones a customer rip off or valid innovation.
In a recent post to his New York Times blog, technology writer David Pogue
questions the sanity of anyone willing to pay more for a five-to-30 second song
snippet in the form of a ringtone than for a complete song download. Further, he suggests that "...record-company executives... [are]... rubbing their hands
together with glee and hoping that their young customers don't identify the
ringtone industry for what it is: the last great digital rip off." You can read his
entire post here.

BIG IDEAS VIEW: Any product that results in the creation of a $5 billion global
industry is probably pretty valid. For some time, consumers have been loath to pay for intellectual property, music in particular. The fact that cell phone users have become customers and already spent billions of dollars to legally purchase
ringtones suggests these snippets pass the market test. The right question to ask is whether or not the income from ringtones is at the expense or benefit of the Brand (in this case the Artist).

On the benefits side: Ringtones are widely desired and designed for one of the, if not most, rapidly expanding multimedia platforms, the ubiquitous cell phone. Ringtones allow consumers to deepen their connection and identification with the Artist/Brand. They meet the quality requirements of the Brand. They provide value for which consumers are willing to pay. They are derived from the primary product of the Brand. Ringtones extend the reach and frequency of the Brand and provide living proof of brand loyalty while creating more demand. On the expenses side: To some, ringtones represent "less music for more money."

On balance, the benefits have it.

Ringtones have a higher price point than full songs (I'll not debate the relative profitability of the two here). But that increased cost to the consumer is
compensated for by convenience and ease of use. Providing content for cell phones (thanks to carriers and handset manufacturers, not record companies) is complex. Hundreds of codecs are required to suit every worldwide system and piece of hardware, not to mention the complications of collecting payments from individuals around the globe. The average consumer would be challenged to add a custom ringtone to a cell phone without it first being "packaged" as a sound bite in the appropriate format and provided with an installation application.

There are examples of "portion sizing" in every industry. Does Coca-Cola chargemore for the little cans of soda than the big cans? Is the small bag of popcorn at a movie theater a proportional value to the monster tub? And why does a coupe (2 door) car command a higher price than a sedan (4 door)?

Industries, particularly in disposable income categories such as entertainment,
fashion and dining are under constant pressure to reinvent their product lines to cope with the increasingly truncated attention spans and accelerated appetites that drive Gen Ys, Xers and Boomers. Companies need to constantly conceive new products and services and validate them against their Brand promise and values.

The entertainment industry is struggling to find new products that meet the
demands of how customers want to consume (and pay for) music, tv shows, movies and books. Ringtones are not a rip off; they are a valid response to a market appetite. And they are a necessity for an industry in the midst of a profound paradigm shift. While not its total salvation, as long as ringtones enhance and support an industry's Brands they are a positive market component.

• • •

The Big Ideas Report separates the real issues (Big Ideas) from the noise, so that it’s possible to move forward with confidence or simply converse intelligently with others. We identify issues that have a material impact on your business, define them succinctly and suggest a position, so you can get going. Part fact, part opinion, part alchemy, that’s The Big Ideas Report.