|By Steven Borne||
|October 6, 2004 12:00 AM EDT||
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?
Ringback tones replace the standard ringing sound heard when a call is connected and you're waiting for the other person to answer. Rings are replaced with content such as music, jokes, or funny quips that entertain waiting callers. One way to understand ringback tones is that, like ringtones, they replace a run-of-the-mill sound with something fun and creative. Ringback tones are selected and controlled by the person being called.
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?
Why do ringback tones have a brighter future than ringtones? One reason is that they work with any phone, old or new, wired or wireless, because the service resides on the network rather than on the phone. By comparison, only wireless subscribers can use ringtones, and even they're limited by factors such as the phone's audio quality and memory - assuming that their phone can handle ringtones at all. Everyone who calls a ringback tone subscriber will be exposed to this service, unlike the case with ringtones, which are heard only by the called party.
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:
- Flexibility: Customers have the right to use the content multiple times at their discretion. For example, they can specify for whom, when, and how often the content will be used. The carrier is the secure middleman ensuring that the content owners are duly compensated.
- Service: The network provides a simple and highly customized service for every call made to your number. The carrier provides a continuous service by matching each caller to the correct content and then playing the unique content for each call, versus the generic ring from the network switch.
- Storage: The carrier holds and maintains each customer's collection of ringback tones, so all customers receive their own space on the network for content storage. This is for all of their ringback tones, not just those that are active.
- No limitations: Unlike ringtones, ringback tones aren't limited by users' devices. Ringback tones reside on the network, so they'll work with any wired or wireless phone. As a result, users know that all of their callers can enjoy the service. Ringback tones are not a niche play.
Creating Bundled Offerings
One obvious benefit of self-provisioning is that giving users multiple ways to tailor the service improves the chances they'll use it regularly, which, in turn, drives more revenue. Less obvious is the fact that self-provisioning tightens the relationship between carrier and customer. By driving traffic to, say, a carrier-owned portal, there's a better chance that users will be exposed to additional services that they otherwise would have missed if marketed through traditional channels, such as billing inserts.
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
Many carriers view ringback tones as a must-have from a competitive standpoint. For example, once one carrier launched the service in a Pacific Rim country, others quickly followed, largely because calls met with a standard ring now seemed ho-hum to users. In Israel, when anyone calls an Orange customer they can be entertained with Funtone, a ringback tone service provided by Comverse and offered under Orange's Funtone name. This service offers a personalized greeting and custom content from a wide variety of recording artists, from Avril Lavigne to Dido to local Israeli music. In Europe, at least one global carrier subsidiary has launched a ringback tone service. These are just the first seeds and by the end of 2004 there will be many more live services launched across Europe and the U.S.
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.
Once the initial investment is made, carriers and their partners have the ability to add features and services whenever they want, without requiring additional changes to the switch. A basic offering can first be deployed to build usage. Next, carriers can add additional personalization and customization features that help drive content consumption and use.
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.
Ringback tones have the potential to be a much greater revenue generator than ringtones because it's a service for the entire customer base that offers carriers more control and features to drive content consumption. Like ringtones, ringback tones highlight the revenue opportunities created by taking something that was once one-dimensional - the plain old telephone ring - and making it a dynamic and personalized part of the communication process.
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