Are Cell-Phone Ring Tones Cannibalizing Music Royalties? - InformationWeek

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Are Cell-Phone Ring Tones Cannibalizing Music Royalties?

As if the music industry doesn't already have its share of digital headaches, it may have a new source of potential copyright infringement to contend with: cell-phone ring tones. A British Internet monitoring startup calls the downloading of musical ring tones "another Napster in the making" and says the industry may be losing more than $1 million a day in related royalties.

Envisional Ltd., which sells software and services for monitoring intellectual-property rights violations online, discovered the potential infringement while doing an MP3-related research project for the International Federation of the Phonographic Industry. Co-founder and chief operating officer Ben Coppin says the company decided to pursue the ring-tone research on its own. By configuring its software to search for indicators that a site offers ring-tone downloads and then identify the related files, Coppin says the company found hundreds of sites that each are enabling hundreds of thousands of downloads of musical ring tones daily.

Coppin says record labels are entitled to 7.5 cents for each download of a ring tone that uses copyrighted material, but industry sources couldn't confirm that figure. Envisional arrived at its estimate of potential losses based on analyst research indicating that very few of the sites in question are paying the required royalties. Coppin says he considers his firm's estimate to be "rough," but adds that "our feeling is that it's fairly conservative." He says Envisional has had discussions with multiple, well-known music labels about taking the research further.

Webnoize Inc. analyst Ric Dube says customized ring tones are becoming big business, particularly in Asia and other regions where cell phone usage is pervasive enough that users are looking for ways to distinguish their cell phones' rings from others. The downloading of copyrighted ring tones, Dube says, could present a revenue opportunity for the labels.

Meanwhile, Gartner analyst P.J. McNealy says concerns surrounding musical ring tones aren't about to take on the magnitude of file sharing, at least not until streaming technologies allow actual recordings--rather than tunes made up of simple tones--to be effectively downloaded for use with cell phones. "I don't see the [Recording Industry Association of America] launching a round of lawsuits," says McNealy. "They have bigger targets right now."

For related stories:The Backstreet Boys Are On Line 2 MP3.com, Qualcomm To Deliver Music To Cell Phones

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