Ringtones falling

This blurb from a Fierce Wireless review of the recent CTIA show was particularly interesting:

Ringtones, once the biggest revenue-generator of the mobile content vertical, are now little more than an afterthought. Ringtone sales in the U.S. declined from $714 million in 2007 to $541 million in 2008--a 24 percent year-over-year drop--according to research firm SNL Kagan, which says the annual decline is the first ever posted for a U.S. mobile content category. In all, ringtones' share of total U.S. mobile music revenues fell from 80 percent in 2005 to 63 percent in 2008.

SNL Kagan credits the slump to consumers learning to create their own ringtones by side-loading edited MP3 clips to their phones and in turn bypassing operators' direct sales channels. "We're in the middle of a generational shift in terms of how consumers purchase content," said Robb McDaniels, CEO of digital media distribution firm INgrooves, during a Mobile Entertainment Live! conference panel last week. "It's pretty bad right now." So bad, in fact, that McDaniels cracked the panel, titled "View from the Top," should be retitled "View from the Bottom" to more accurately reflect the current state of the music business.

Read more: http://www.fiercewireless.com/special-reports/ctia-it-2009-scorecard-mobile-content#ixzz0URUR1ZV8

I think part of the problem was operators thinking that customers would pay $3.99 for a ringtone when they could buy the whole track for $0.99 if they even bothered to pay for that.