Beeline: MTS spoils copyright holders
Being late with the launch of Ring Back Tone service, Vimpelcom intends to insist on changing the existing procedure of payment interaction with the given service copyright holders in favor of mobile operators. Megafon stays by Vimpelcom's side, while MTS is against any changes. If the operators do not manage to agree upon the RBT unified format, then, according to experts, the given service promotion in Russia might suffer.
The service Ring Back Tone (RBT) has been already developing for several years. It enables the subscribers to play various ringtones to the calling party instead of the ordinary ring back tone. In Russia the turnover of the given service is estimated at more than $10 mln a month and about 6 mln subscribers are using it. RTB is available in MTS, Megafon and Sky Link networks, while Vimpelcom (Beeline trademark) is the only federal operator providing the service only in Samara. Vimpelcom intends to launch the given service across Russian in QII 2008.
However, Vimpelcom understands that it might be difficult to compete with MTS, whose RBT catalogue contains more music hits as compared to other operators. The reason is in various approaches to the service payment and interaction with copyright holders. MTS withholds an annual payment of 25-65 rubles per each tune (approx. $1), while the copyright holder receives the royalties owed during the given term. Megafon monthly subscriber's fee for the given service is 30 rubles. The copyright holder is paid only a stake of lump-sum payment of 30 rubles for every tune installed but receives no percentage of subscriber's fee.
The pattern used by Megafon is more profitable for operators. Sky Link adheres to the same pattern and Vimpelcom intends to operate under similar terms. "Such a scheme application is logical as the operator incurs the expenses to launch RTB, while the copyright holder incurs practically no expenses", - Zinaida Khokhlova, Vimpelcom CMO, says. She explains in long-term perspective Megafon's pattern is profitable to all parties. According to QuanTeq research covering the Big Three operators' subscriber base, the given pattern is clearer to subscribers, so that they are more willing to use RBT. MTS acts in the wrong way having accustomed copyright holders to receiving high earning within a short term, Mrs. Khokhlova believes.
"RBT sales with lump-sum payment results in more civilized market development and active promotion of the given service", - Marina Belasheva, Megafon PR manager, tells. - When somebody buys a disk, he pays for it only once and then listens to it as much as he wishes. The same should happen to RB"'. Mrs. Belasheva is sure the given service is popular with subscribers despite the fact that most copyright holders cooperate only with MTS: the operator gains a lot from its subscribers choosing not music but various teasing greetings for RBT.
However, MTS does not see the necessity to change the existing pattern of paying for RBT, as the company's subscriber base and share of proceeds from the given service in the total context service earnings is constantly increasing. "As for users, various payment modes for RBT do not differ significantly: anyhow subscribers pay for the service every month", - Paul Roytberg, head of Department for product and service promotion at MTS, says. - "The main difference between the two patterns is that MTS offers its subscribers with a more extensive catalogue of ringtones as compared to its competitors. Moreover, the given pattern is fairer regarding the music authors and singers, many of whom are interested in interaction with MTS".
The operators' disputed regarding RBT relates to various aims they wish to achieve when launching the given service, Kirill Shramko, general director of Mobicon (INFON trademark) content provider (Inphon trademark), says. "MTS is likely to be focused not on deriving the highest profit but on establishing competitive advantages in the form of RBT most complete catalogue", - Mr. Shramko says. "But the absence of a unified format for the service provision results in slowdown in its promotion, - Mr. Shramko adds. - We would like RBT to be used by operators on equal terms and with similar catalogue of ringtones. Advertising the service available to subscribers of only one operator is not profitable economically, so content providers prefer to advertise other services".
