Record labels are facing a new online threat to their newest income stream. A new piece of software is being marketed in the US and Canada which lets music fans create their own ringtones from MP3s stored on their computer. Some fear the software, called Xingtone, will kill a burgeoning new revenue stream for the labels before it has even taken off.
The record labels to date have benefited little from the ringtone explosion, because with the standard or 'polyphonic' tones only the publishers receive any royalties. However the next generation of ringtones, so called 'real tones', used 30 second snippets of actual songs, therefore the owners of the recordings - ie the record label - also benefit. With this in mind, and with the continuing popularity of buying ringtones, many in the major labels have been getting very excited of late about the potential of huge revenues to be made through the sale of realtones.
However, with Xingtone music fans can simply make their own realtones from their MP3 collection, and send their creations to their mobiles at the touch of a button. The software retails for just $15, and once downloaded can be used infinitely, even with illegally downloaded MP3s. If the system catches on it could seriously jeopardise the success of the young realtones market.
Ted Cohen, EMI Music's Senior Vice President Of Digital Development And Distribution, told the San Jose Mercury News: "It's problematic, because it has the potential to eviscerate the business model early in its development."
Xingtone does have some friends in the US industry. Hollywood Records has entered into a number of promotional partnerships with the company and Artemis Records included the software on the most recent album from Sugarcult. The labels hope that the option for fans to make their own ringtones from the albums they buy will provide an incentive to buy the CD, and then allow fans to promote their favourite music to their friends.
However senior players at the majors, who are increasingly counting on the potential income of ringtone sales in their financial projections, will become increasingly concerned if the software is taken up by a mainstream audience. They may look to the mobile firms to block the downloading of home-made ringtones onto handsets on the basis that the telephone operators also stand to lose out on ringtone sales. Whether the mobile firms, who also make money on the air time required to move tracks from PC to mobile, will play ball remains to be seen.