How Ringtones Have Come And Gone As A Business


An interesting report landed in my inbox this week about the ringtone industry written by research firm IBISWorld. Apparently, the ringtone industry is all but dead. This got me wondering whether it implies that the cycles of  innovation and creative destruction are accelerating and getting even shorter for Silicon Valley.

What intrigues me is how quickly the ringtone business came and went. According to the IBISWorld report, it was indeed an unusually brief cycle. For a short moment, this seemd like the one bit of good news the music industry could count on. But no more.

According to the report (sorry, they didn’t provide a link to it online):

“Music ringtones practically boomed overnight, but with two consecutive years of decline it seems the industry is exiting just as rapidly as it entered,” said Toon van Beeck, senior analyst with IBISWorld. “And with the ringtone market already reaching its decline stage, its life cycle is only expected to last about 15 years.”

What changed so quickly? According the report, just about everything.

Usually there are three phases to a product’s cycle: growth, maturity, and decline. Ringtones skipped right over the plateau and went straight into decline as the chart above clearly illustrates.

There are two main reasons for this dramatic change of fortune that were cited by IBISWorld.

The first has to do with price. The report says:

“Surging demand of digital albums and singles, worth an estimated $1.94 billion, are the reason behind the eroding mobile ringtone market. Early ringtones were bought via text and cost consumers up to $5 a song. Today songs can be purchased for less than a dollar now that mobile phones can connect to the Internet and music can be stored on memory like a computer.”

The other has to do with evolution of devices and technology. Now that mobile phones, especially smartphones, have faster Internet connections and far more memory, it’s no problem to hold hundreds of full-length songs that can be used for ringtones:

“Mobile Phones are now truly wireless Internet devices and allow consumers to download full songs for ringtones rather than the 30-second versions available in the past,” said van Beeck. “Providers like iTunes and have revolutionized the way we buy and use music, driving consumers to hang-up on ringtones.”

As I mentioned, this is bad news for the ailing music business, which briefly could point to ringtones as a bright spot amid declining music sales.

But more importantly, it’s a reminder of the need to continue to innovate and experiment with content offerings and business models. If change is coming even faster, then the ability to constantly focus on what comes next will be vital for any company looking to maintain its edge and relevance. It’s a reminder that we may be living in an era that calls for continuous reinvention.


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