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WHY RINGTONES WILL SAVE AMERICAN CIVILIZATION US Wireless Carriers Need a Lesson in Marketing Digital Music - Just Look to Japan. By Scott Murff
Fact: NTT DoCoMo's i-mode launched in February 1999, which means it's been about four-and-a-half years since Japan's wireless carriers first started schooling the world on how phones should be. They should look cool. They should shoot movies, control toys remotely and become addictive enough so that before you know it you've sent fifty wireless messages to someone who you hardly know. In Japan, the reality is that you might forget your wallet at home and still be able to function, but socially you wouldn't want to be caught dead without your mobile phone [and, besides if you forget your wallet at home after all, you can use your mobile phone to pay for stuff].
That's Japan. This is the States. Remember Japanese companies have five years of experience marketing wireless data services, while the capability and demand for such services is just becoming a reality in the US. Despite the ample time to learn lessons, it is still surprising the US has yet to catch on to how to market wireless services, especially when it comes to music.
The United States is the hands down leader in music. And, it is only second behind China in terms of wireless subscribers. Ringtones should be a natural win for wireless businesses, but so far it's nowhere near the billion dollar ringtone industry in Japan - nor is it on pace to match it.
Revenue breakdowns from Japan demonstrate ringtones as the most heavily purchased digital content over the phone, followed by wallpaper images. Why? An example of form fitting function. These two types of content enhance the physical presentation of the phone. More specifically, ringtones and wallpaper make a standard phone look better and sound better by virtue of just holding the phone in your hand.
I once caught a brilliant comment from one of the engineers of the original camera phone in Japan - he thought that the reason camera phones succeeded as opposed to features such as an integrated MP3 player was because the manufacturer had integrated the camera into the carrier's network to allow you communicate by sending picture via phones. Because the MP3 function did not interact with the carrier's network, in the end if offered no more than if you had simply taped an iPod to the side of your phone. I thought this was an excellent contrast to ringtones, because it reinforces why ringtones have been successful so far. Consider that MP3s probably sounded like a win on the design board. Free music is what people wanted, and MP3s were the vogue digital format which would be perfect for memory intense handsets. Not so.
The ringtone business took everyone by surprise in Japan (no analyst envisioned modifying your ring as the giant product it is). An MP3 is a heavy 3-5 Mb high-fidelity file, most likely costing the user nothing. On the other hand, a huge demand was created for monophonic ringtones, weighing in at a tenth of the file size and selling for more than a dollar a piece in most global markets. Music on its own is not enough of a "killer app" without adequate delivery, and consumers are prepared to spend billions for bleep if you get it right.
If there is so much evidence in support of ringtones, why is the US ringtone market the way it is? The responsibility lies with US carriers. One thing that surprises me is how seldom the wireless carriers in their national advertising properly market ringtones. Like it or not, ringtones make money and yet most wireless advertising fails to push the data services people pay for or want the most. Pay attention the next time you see a carrier advertise data services and see what they're focusing on instead.
The barrier for American ringtones goes beyond marketing. Some carriers are hesitant to allow third-party companies to field their own ringtone service brands instead opting for a carrier-branded selection. That's certainly a far cry from NTT DoCoMo's encouragement of hundreds of unique content providers listed on its menus.
In addition, some delivery mechanisms for ringtones in the US are at times awkward. There are intermediate software components, alarming messages like "Are you really, really sure you want to start incurring charges", and a clumsy menu offering. It's a far cry from Vodafone Live! content services and menu layouts.
What's most disappointing is that this is not about high-tech and hardware, but rather adopting the labor intense care required to nurture content services. NTT DoCoMo was built on 9.8kbps transmission speeds, capable staff and the guts to turn over 90% of revenues to no-named, self-financed start-ups. Many US carriers (and a few big European ones) have been unable to find the humility to help content suppliers get up an running in wireless market and treat as equal partners, not seeing that prepping and hand-holding are keys to getting third-party services up to speed. Call it the fear of wireless nation-building if you want.
Ringtones, wallpaper and other staples of wireless content are important to the US mobile industry. Perhaps they are more important than most carrier managers realize. Japan's billion dollar ringtone industry not only has made infinitely more than our MP3 companies in the US. Ringtones also supplied needed revenues countless Japanese wireless start-ups, many with minimal financing, to grow into offering increasingly advanced services.
Falling behind our European and Japanese counterparts does matter. The 1990's were all about the Internet and watching eBay and Yahoo! build new American brands around the world. The US wireless landscape is finally witnessing a fresh crop of new players such as Modtones pulling in US$15 million in ringtone revenues last year. Then again, Modtones is actually owned by Faithwest, a subsidiary of a major Japanese ringtone and chip company. Travel abroad and you will find an amazing array of innovation spinning out from wireless. We need to get our carriers on the same page and allow innovation to trickle down. US companies have a lot of work to be competitive with their European and Japanese counterparts. Take for example Japanese ringtone company Xing with $100 million in revenues this year. To compete in the world market the US will need to foster its own class of wireless content companies.
So for America's sake, download a ringtone. The next wave of innovation starts one wallpaper download at a time. As for American civilization, we can cover that next time. I gotta catch that Kobe Bryant trial.
Scott Murff lives in Tokyo and works at a wireless consulting firm. He misses the Internet music craze and wishes irrational exuberance was back in style. You can email Scott at scottmurff@hotmail.com.
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