So some mobile carriers are running around and delaying the launch of Motorola's new iTunes phone. Why? Well, carriers are used to a LARGE (think 50% or greater sometimes) revenue share on today's hottest mobile content: ringtones. Of a market that's worth nearly $4BN worldwide, 50% is a pretty nice share. What's the problem? Well, the average ringtone can cost anywhere from $2-5.
Anyone who's used Rhapsody, Napster or iTunes recently *must* wonder, "Why are people paying $3 for something that's a vague approximation of the full song I can buy for $1?" Good question. So, clearly we have some basic economic forces that are going to affect ringtone pricing pretty seriously in the near term. What else? Well, if you look closely at how the $1 for youriTunes song get's broken, Apple's only making 15 cents or so. So, if the company that's building all the technology and hosting the infrastructure's getting 15% of a $1 transaction, and carriers are used to making 50% of a $2-5 transaction, we can pretty quickly see that there's a bit of a disparity here.
Also, there's the cost of delivering the media. A typical ringtone is about 30K, whereas a full-length song is about 100 times bigger. So... the actual cost of delivering the content to a handset is a whole lot larger as well.
What does this mean? Well, in the near-term, there'll be a lot of push-back towards getting full-length audio delivered to handsets, especially given the price-point. Long term, I think the more interesting trends to watch will be the per-unit pricing for ringtones, and the percentage of the revenue that carriers are able to obtain.
The next few years promise to be *very* interesting in the mobile content world. Stay tuned.