Ringtones of either variety cost about two dollars and are typically no more than twenty-five seconds long. Nevertheless, according to Consect, a marketing and consulting firm in Manhattan, ringtones generated four billion dollars in sales around the world in 2004. The United States accounted for only three hundred million of these dollars, although Consect predicts that the figure will double this year. Fabrice Grinda, the C.E.O. of Zingy, a company in New York that sells ringtones and cell-phone games, told me that in parts of Asia ringtones now outsell some types of CDs. “In 2004, the Korean ringtone market was three hundred and fifty million dollars, while the CD market for singles was just two hundred and fifty million,” Grinda said.
But America is catching up. […]
[…] Polyphonic ringtones are essentially cover versions of songs: aggregators must pay royalties to the publisher, who then pays the songwriter. But master tones are compressed versions of original recordings, which means that record labels—the entities that typically own recordings—are entitled to collect a fee, too.
That fee can be considerable: record labels get twenty-five per cent of every master-tone sale (though they must pass along a portion of their take to the performer and the publisher). “It’s an unbelievable mess,” Les Watkins, the vice-president of Music Reports, Inc., a music-licensing and accounting firm, said. “A lot of these aggregator companies were very early players, essentially beholden to the major record labels and the music publishers to get the rights they needed. And, in this country, the music business is a very mature and consolidated business—somewhat collusive, in fact. The aggregators accepted rates and terms that they really didn’t have to accept, and agreed to license the music in such a way that theyâ€™re overpaying by a tremendous multiple.”
This arrangement is unlikely to last. There are now Web-based companies, like Xingtone, for example, that will convert songs from your collection into master tones. Or you can do it yourself: some new cell-phone models can be connected to a computer by a data cable, allowing you to create master tones from MP3 files at home. However it is done, transferring music that you own to your phone is legal under copyright law.
Slashdot: Short History of Cellphone Ringtones