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Ringing in new rev: EMI among music firms dialing into mobile.

LONDON

After years of shrinking sales, music companies are paying rapt attention to the mobile market because it offers the prospect of much-needed new revenue streams.

Among the music firms most determined to tap into these income sources is the London-based EMI Group, which last year struck an innovative first agreement with a mobile operator (indeed, its first with any telecom operator), inking a U.K.-only deal with Vodafone for the supply of ringtones. It also set up a technical partnership with agency New Visions, which creates and hosts the ringtones on EMI's behalf.

As both a record company and the world's largest music publisher, EMI Group has struck dozens of deals with online music wholesalers and content providers, including Vodafone. The music giant has also digitized a catalog of more than 175,000 tracks, which are now available for download.

EMI's interest in the sector rose after it started including instructions in CD sleeves on downloading ringtones.

"Considering that anyone can get a license to create a ringtone, EMI started oft really modestly in this market," notes Danny Van Emden, director of new media at EMI Recorded Music U.K. and Ireland. "But we've been surprised by the conversion rate (of CD purchasers responding to the download instructions), and that's why we decided to integrate with the networks."

The revenue arrangement is relatively simple with polyphonic (or monophonic) ringtones. The parties need to pay only for publishing rights because they aren't using the original recording. New Visions effectively plays the tune afresh from the written music.

The 12-month deal involves a 60/40 revenue split between EMI and Vodafone, according to Ben Taylor, the latter's spokesman for content.

So for each typical ringtone download costing $4.50, EMI gets $2.70. The music company passes a share of this to New Visions--which, in turn, pays the Mechanical Copyright Protection Society 15% of the gross, and another 5% to the Performing Right Society.

Vodafone customers who have phones equipped with GPRS technology--which provides speeds similar to fixedline Internet dial-up--can access ringtones via the company's Vodafone live! portal that sits on the phone.

"We provide the delivery network," says Taylor, "and other partners provide content. EMI provides music, for instance, while we have a deal with ITN for news content."

The two parties are now renegotiating terms to extend the relationship. EMI has signed a similar pact with the U.K. arm of the Orange mobile group and is working on deals with other operators, too.

The logic behind the recent flurry of dealmaking is simple; while piracy has been a drain on music industry coffers, projections by U.K. research company Datamonitor predict that the global ringtones market will grow from the $1 billion level in 2003 to $4 billion by 2008.

Next up on the mobile content horizon are the recently arrived real-tune ringtones, which are created from original recordings. EMI has to pay the artist royalties for these. Realtone examples include Kylie Minogue and Atomic Kitten.

Also, new arrangements are needed for more advanced services. In November, European operator O2 launched on its existing 2.5G network a service that allows users to download entire tracks and play them back. EMI is now negotiating with O2, and more sophisticated apps will be launched as nextgen 3G networks begin to roll out. These will enable downloading of musicvids.
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Title Annotation:Mobile Content
Author:Masson, Gordon
Publication:Variety
Date:Mar 29, 2004
Words:560
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