The Real Deal

David Murphy talks to Andreas Spechtler, Managing Director, Marketing for RealNetworks

RealnetworksA Spechtler DM: Andreas, I imagine a lot of people dont realise that RealNetworks is in the Ringback Tone (RBT) business, how did you get involved?

AS: I came from Sony Net Services, which was an e-commerce innovation lab within Sony that was founded in 2000. When the Sony Walkman as a standalone MP3 player, lost the battle to the iPod, the music service division in Europe was sold to RealNetworks, and the deal included a contract with Vodafone for music, including RBTs, in seven Vodafone operating companies at that time. Since then, we have increased our coverage in Europe to more than ten countries.

DM: So on RBT, they tend to be a bit of an unknown quantity, in the UK at least. Why are you so enthusiastic about RBTs?

AS: RBTs are a hidden champion in the Value Added Services (VAS) market, because the penetration is enormous. They can work on any handset because they are network-based, and from a content perspective, there is no piracy
And for some operators now, RBTs are overtaking standard ringtones in terms of revenues, as in Germany. RBTs are increasing, while ringtone sales are decreasing.
We have produced our own figures that show that if you have an operator with 10 million subscribers, and you achieve 10% service penetration after three years, with a monthly subscription fee of 1 (0.90), and a content fee of 1.50, then if the RBT subscriber buys, on average, 0.4 pieces of content per month, you are looking at 14 million of net revenue and 7.5 million of earnings after three years, and an ROI of less than one year.

DM: So if RBTs are such a money-spinner for a network, why are more operators not biting your hands off?

AS: Because they have too many other things to do and you need to involve the network guys to install the players, and you also have to convince their management that this is a good revenue stream.

DM: So how long does it take to launch an RBT service?

AS: Around six months. There are three elements to providing an RBT service: the network; the service platform; and the managed service around it. We provide an end-to-end solution and in return, we ask for a long-term commitment and a fair revenue share.

DM: And how many deployments do you have?

AS: We have four in Europe, four in the US, and 10 in Asia. The European deployments include Vodafone Turkey and Germany, and we will deploy with another Western European operator in a major market during 2010. And we are getting good traction in many regions, including Southern and Eastern Europe.

DM: Anything in the UK?

AS: RealNetworks has delivered a technical solution for 3 UK. But the problem with the UK is that no one is prepared to take a chance. Orange and 3 did it a couple of years ago, but it was a half-hearted approach. They bought a platform, but they never completed the
go to market model with a partner that could really ramp up the services

DM: Do you think maybe its just a cultural thing, that RBTs work well in some countries, but not in others?

AS: I have heard this argument many times, but its just one of the myths surrounding RBTs. There is no cultural barrier. The only barrier to RBT adoption is lack of awareness and promotion. When an operator really focuses on it and promotes the service, they can double the number of subscribers in a couple of weeks. SMS campaigns are particularly good at driving RBT sales.
RBTs are also pretty resilient. In mature markets, in tough economic times, RBT sales stagnate, but they dont slide, because people like the personalization service so much. Churn is much lower than for other services; its a very sticky offering, and I think this message is beginning to get through now. In a time where some revenue streams are falling, this is a chance for operators to come back with a solid revenue model with loyal customers and an attractive service.