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Ringtones Breed Tension Within Music Industry
By 2004, mastertones were the hot new thing. They had replaced polyphonic ringtones (multipitched tunes), which had replaced monophonic ringtones. Mastertones were compressed snippets of studio-recorded music. In order to offer them to the public, ringtone content aggregators needed to obtain both publishing clearance and permission from those who held the rights to the recordings. That meant negotiating with record companies.
According to Steve Gordon, author of the book “The Future of the Music Business” and an attorney who has represented both aggregators and record companies, the labels were peeved when they learned how much the publishers had gotten from the aggregators. According to multiple so-urces, aggregators had typically agreed to pay 25 cents per ringtone or 10% of the gross ringtone revenue, whichever was greater. So when the labels, which had been used to getting 40% to 50% of gross revenue from sales of digital music files, demanded a similar percentage, aggregators bal-ked, says Gordon.
Meanwhile, as ringtone sales were taking off, others started listening in. By the end of 2003, two performance rights organizations, ASCAP and Broad-cast Music Inc. (BMI) sent letters throughout the industry declaring that the playing of a mastertone on a mobile phone was a form of public performance. And they demanded to be paid. According to Richard Reimer, senior vice president of legal services at ASCAP, this amounted to 2% of revenue attributable to ringtones, 1.5 cents per ringtone, or a quarterly minimum fee of $500, whichever was greatest. “We monitor the market closely and regularly send letters if we need to,” Reimer says. “Most have paid.”
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