Tech Update: Ringtones and Spotify

According to an article on digitalmusicnews.com, researcher IBISWorld says that ringtone revenues in the United States are at $750 million, down from the 2007 peak of $880 million.

The shift can possibly be attributed to a mobile consumer base that prefers full-track downloads as substitutes, as well as the uploading of unpaid full-length tracks that can be easily converted to ringtones.

Though the ringtone business is still alive and well, IBIS predicts that it will be completely gone in 15 years.

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Advertising Age contends that Spotify might not be the music industry’s great savior, at least not without overcoming some difficult odds. The much-hyped Swedish company is gearing up for its U.S. launch and provides a technology capable of streaming music as quickly as most players can load an mp3. The Spotify business model includes both free (ad-supported) and an ad-free subscription service (price not yet determined) with access to all recorded music. If successful, it could offer a new way going forward to monetize digital music, as well as provide Apple’s iTunes with some viable competition.

However, the piece points out that subscription-based services in the U.S.—such as Rhapsody and Napster—haven’t fared incredibly well. Rhapsody leads the pack with under 800,000 subscribers, and Napster slightly above 700,000. Ad-supported digital music has also been slow to catch on, but shows some promise: Pandora has raised $56 million and CBS paid $280 million for last.fm in 2007.

But this could also pose a barrier for Spotify, because these ad-supported companies have millions of users for leverage with Fortune 100 agencies, and Spotify will be starting at zero.