MMW-56 -- The Outlook for Ringtones in 2004

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J@pan Inc Magazine Presents:
M U S I C M E D I A W A T C H
Commentary on the week's music technology news
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Issue No. 56
Wednesday, February 25, 2004
Tokyo

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CONTENTS

++ FEATURE: The Outlook for Ringtones in 2004

++ NOTEWORTHY NEWS:
** Sony Cancels Plans to Release Two New MP3 Players
** Tao Group's APRE Ringtone Engine in New Sierra Phone
** Napster Sells 5 Million Songs

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++ FEATURE: The Outlook for Ringtones in 2004

In our last feature, we examined the state of "chaku-uta" (song tones)
and MP3 capabilities of the current generation of mobile phones. As
chaku-uta services have become hugely popular in Japan over the past
year, the big question now in the Japanese mobile music industry is
how long it will take before ringtones are rendered obsolete. In this
feature, we'll look at the impact that chaku-uta has had on the
ringtone industry and see what ringtone providers are doing about it.

At the Java Technology Conference held last week in Tokyo, one of the
top presentations was given by a Yamaha marketing manager in charge of
the company's domestic ringtone service. He began by showing how
Yamaha and several other major providers initially adopted a strategy
of attracting new subscribers by offering an ever-expanding array of
specialized services (aimed at particular genres and instruments) as
well as Java software "extras" such as programs for learning guitar,
practicing karaoke or remixing ringtones. This approach worked well
for nearly three years, as subscriber numbers jumped rapidly with the
launch of each new service.

However, by mid-2003, subscriber growth had leveled out, and it was
becoming increasingly difficult to support multiple services and
software applications. Each time a new model came out, the ringtones
and applis had to be adjusted to work properly for the model, and this
was creating a huge drain on resources. At the same time, chaku-uta
had established itself as a major hit. It was clear to most major
ringtone providers that they would need to set up services for this
market as well.

This has in turn led to an aggressive battle among the top 20 or so
ringtone providers to maintain their current share of the ringtone
market without adding much in the way of new services or software.
Rather, the major providers have been actively promoting their main
"portal" services through print and TV ads. They don't expect to add
large numbers of new subscribers, but are focusing instead on keeping
the subscribers they already have.

And they still have quite a few subscribers. While growth slowed in
2003, most of the top services still managed to register a net
increase in paying subscribers from January to December. Yamaha
currently has over 4 million subscribers, while the top service, XING,
still boasts well over 7 million. Of course, the hundreds of ringtone
services that are not among the top 20 have felt the sting of the past
year much more acutely, and many are expected to fold up their tents
for good this year.

So how will the major ringtone companies deal with the chaku-uta
threat this year? For starters, most have launched their own chaku-uta
services and are operating these in tandem with their ringtone sites.
However, their top priority will continue to be keeping their existing
customer base happy with larger song catalogs, lower prices and
campaigns linked to popular artists. While these providers are aware
that ringtones will eventually be eclipsed by MP3-like services on the
phone, they also know that it's not going to happen overnight, and for
the time being they will continue to enjoy healthy revenues from
ringtones.

Finally, what will these companies do when song tones and MP3 services
have taken away the bulk of their subscriber bases? As the Yamaha
manager pointed out in his presentation, most of the major ringtone
companies (XING, Faith, Daiichi Kosho, Yamaha, Roland) have at their
core a strong penchant for music technology development. They are
well-versed in MIDI and all of its mobile-based variants. In the
coming years, these companies will likely adapt to offer mobile
software that is more like their current offerings for the PC. They
will target singers, musicians and music students, and offer mobile
sequencers, mixers, effects and other programs that don't just play
songs, but also help people create, arrange and learn music.

-- Steve Myers

Link:
"Ready to Rock," from Feb. 2003 (Our first article on chaku-uta)
http://www.japaninc.net/article.php?articleID=1014

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++ NOTEWORTHY NEWS
** Sony Cancels Plans to Release Two New MP3 Players

In brief: Sony announced on Monday that the company is canceling plans
to start selling two new models of digital music players. The AZ-FS256
and AZ-FS1 MP3 players were announced last month and scheduled to go
on sale this Spring in Japan. The cancellation is apparently due to
problems with the FM tuners on the players.

Source:
http://biz.yahoo.com/ap/040223/sony_music_players_1.html

Link:
"Future Sony Shock" from the January 2004 issue of J@pan Inc magazine
http://www.japaninc.net/article.php?articleID=1258

============== EVENT =================
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"5th Annual Japan's Int'l Banking & Securities System Forum 2004"
Date: March 18 - 19
Location: Tokyo Stock Exchange (TSE)

This two day forum provides a better understanding of front, middle
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Also, leading solution providers will be presenting free Workshop
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** Tao Group's APRE Ringtone Engine in New Sierra Phone

In brief: Tao Group announced last week that the new Voq Professional
Phone from Sierra Wireless will feature the intent Java Technology
MIDP 2.0 runtime solution and an advanced polyphonic ringtone engine
MIDI profile supporting 64-voice polyphony.

Source:
http://tao-group.com/news_events/new_press_releases/press_release.php?Re...

Link:
MMW No. 52 looks at Tao Group's advanced polyphonic ringtone engine
http://www.japaninc.net/newsletters/index.html?list=mmw&issue=52

===================SEMINAR===================
Entrepreneur Association of Tokyo - March Seminar

Ms. Ruriko Nomura is the President of Hopes Inc., a frontier company
aiming to establish an educational consulting field. Her presentation
is entitled, "Starting a Business Without Capital." Come out and learn
about the opportunities in the Japanese business world that she
discovered.

Date: Tuesday, March 2nd Language: English
http://www.ea-tokyo.com Email: info@ea-tokyo.com
=================================================

** Napster Sells 5 Million Songs

In brief: Napster, revamped as a digital music store and subscription
service, announced on Monday that it has sold a total of over 5
million songs. Although sales are still far behind those of Apple's
i-Tunes store, Napster is nonetheless ahead of the music stores that
are only accessible via Windows PCs.

Source:
http://news.com.com/2110-1027_3-5163722.html?tag=st_lh

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Subscribers: 2,402 as of February 25, 2004

STAFF
Written by: Steve Myers (steve@thetamusic.com)
Steve Myers is president and chief enthusiast of Theta Music
Technologies, which specializes in the development of music-related
software applications.

Edited by J@pan Inc editors: (editors@japaninc.com)

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