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Have we heard last of the ringback buzz in the US?
Recent market data from The NPD Group shows positive signs that ringbacks can be big business. . . if the industry plays along

What a difference a year makes. Last fall ringback tones were the prime topic of interest among the major players in the mobile content industry at the CTIA Wireless I.T. & Entertainment show. This year advanced music services and video dominated discussions about the next great mobile content products; however, the lack of ringback buzz shouldn’t lull you into thinking that ringbacks are dead. In fact they are very much alive; and they still have the opportunity to fulfill their early promise.

Ringbacks: fulfilling their early the promise

NPD’s recent study — “Mobile Music: Who’s Listening?” — found that more consumers are interested in ringbacks than in any other mobile music service. Nearly a quarter of consumers are interested in ringbacks, by comparison interest in music on-demand, MP3 player functionality and built in satellite radio range from 15 percent to 21 percent. Even though the industry buzz has moved on to advanced mobile music products, more consumers actually have an interest in spending their money on ringbacks.

Another positive aspect to ringbacks is the fact that the product, by its very nature, promotes itself. Upon hearing a ringback for the first time, almost everyone responds with the same question, “What was that?” This ensures that every person who purchases a ringback becomes an instant sales person for the product, which helps create a vast viral marketing network.

According to NPD consumer information, consumers will purchase ringbacks more frequently than ringtones. In addition, callers will soon focus more on the actual song being played for them than on the ringback experience in general. This situation leads directly to the “DJ effect,” in which subscribers take ringback requests and actively program clips for each of their unique callers. This activity is dramatically different from ringtone purchase behavior.

Unlike other phone features, ringback tones are not handset dependent, which helps them gain wider reach. Products like full track downloads and mobile video are dependent on new advanced handsets making their way into the market. Ringbacks don’t have to contend with this market hurdle. The moment the carriers flip the switch on the network based platform, all their customers will have access to ringbacks.

The stage is set, but there are issues to address

To speed the acceptance of ringbacks in a big way, the industry must address several important issues, including the following:

Sprint Nextel and Cingular must launch their services. Since explaining the product to someone is a difficult task, experiencing ringbacks firsthand is the key to bridging the gap from early adopters to the mass market as a whole. There will simply not be enough ringback subscribers on Verizon, T-Mobile and regional carriers to drive mass adoption, without the reach of the remaining tier 1 carriers.
Record labels must ensure that the most popular songs and artists are available when they are hot. NPD research shows that the availability of a popular song is the top purchase consideration for ringtones (81 percent). We believe the same will be true for ringbacks.
Pricing models must become more customer-friendly. NPD research shows that ringtone purchasers prefer to pay once to own a ringtone (89 percent) versus paying for a package of ringtones or a subscription (10 percent). In addition, the biggest reason former ringtone users stopped buying was cost – 44 percent reported feeling that ringtones too expensive. The current pricing model for ringbacks in the US, a monthly subscription fee plus a fee for each clip, will prohibit mass adoption. A single-purchase pricing model, in line with that of ringtones, is more likely to be successful.
Carriers must educate the market on ringbacks. Hearing a ringback will provide an initial introduction to the service, but to take advantage of the deeper product benefits, carriers need to educate their customers on advanced programming options. Verizon started the ball rolling on this effort with their recent ringback tones campaign, but other carriers must follow, rather than taking the “if we build it, they will come” approach.

Ringbacks: From buzz to big business

The stage is indeed set for ringbacks to become the next mobile content phenomenon: Consumers are interested, the product has an inherent viral nature and there is a massive potential customer base ready to use them. That said, we still don’t know what will happen to pricing models and if anyone will launch a successful market education campaign. So the answer to whether or not we have heard the last of the ringback buzz in the U.S. — or if the promise will ever be fulfilled — remains in the hands of the carriers.

— Drew Hull, Research Director, Mobile Content