Ringtones rescue mobile ops' ARPU

Anybody who thought ARPU was the Asian shopkeeper who runs the Springfield Kwik-E-Mart in The Simpsons might be surprised to hear that it is in fact related, after a fashion, to another cultural phenomenon - the mobile phone ringtone.

Increasing 'average revenue per user' is the Holy Grail for mobile phone operators who have turned their attentions from signing up more users to getting more out of their existing users. Times are hardly easy for these companies but using ringtones as a way to stem falling ARPU figures is about as difficult as shooting fish in a barrel.

The operators are ecstatic - with some selling ringtones in the UK for around £3 a pop. This is about as close as you can get to companies having a licence to print money (with the exception of that held by the Royal Mint). There are very few overheads and there is an endless chain of both supply and demand - as pop hits come in and out of vogue. This craze has fallen into the operators laps and they're milking it for all its worth.

In the past year mobile phone users have shelled out hundreds of millions of pounds downloading ringtones as and when the whim to change hits them.

So what does this all mean? Well it means a lot of people have way more money than sense but beyond that it means record companies are laughing all the way to the bank, because as with radio play, and MP3 downloads in this post-Napster era, they are raking in the royalties hand over fist.

The major labels made a princely $71m from ringtone royalties during 2002. It's enough to make you cry - especially when you remember the stories of near-poverty that we all had to endure when the record companies were running Napster through the courts and into extinction.

OK, so they never claimed that Eminem's daughter was having to go without shoes, or that Britney Spears was having to wait tables of an evening to keep the wolf from the door, but we were certainly given the impression that things were bad and that technologies, such as peer-to-peer networks, were to blame.

But it's worth noting that mobile phone ringtones, as revenue stream, have come along since Napster's launch.

You could say that popstars are getting more bling-bling for their brrring-brrring...

But how long before they turn their ire on the grey market trading in ringtones which are being created without permission and therefore without resulting royalties? The answer - it's already on their radar screens.