Ringtone Shoplifters Hitting Unprotected Mobile Music Stores Could Threaten Industry

22 July 2005

A startling study conducted by Qpass of 100 leading U.S. and European digital content Websites revealed that more than one third of the sites are unsecured, allowing users to 'shoplift' music tracks and download them as free ringtones. The extent of the problem in US may have already cost the mobile and music industries an estimated $40 million U.S. since the beginning of 2004, and a further $123 million U.S. by 2007, according to Qpass.

Qpass attributes this problem to the need for the mobile and music industries to enable users to preview music before they purchase it, an important part of the customer purchasing experience. Two thirds of web sites tested offered preview music files between 15 and 30 seconds, the perfect length to convert into a ringtone.

Preview content can be secured by using streaming, embedded pre-listening or the use of a DRM-protected file format. The study of digital rights vulnerabilities on mobile music web stores was conducted as part of the ongoing development of the Qpass Content Delivery Platform, which offers a comprehensive solution for securing mobile content.

The Websites tested included 42 mobile carrier portals and 58 online entertainment and music stores offering full track music downloads. Out of the sites tested, 40 percent of carrier sites and 31 percent of other portals such as online music stores and entertainment sites were unsecured. Ironically, some of the sites surveyed specialized in selling ringtones, which are inadvertently giving away their products for free due to the security hole.

"This is the mobile and cyber-equivalent of test-driving a car and then not having to give it back," said Steve Shivers, Senior Vice President, Corporate Strategy and Development at Qpass. "When the trial is as good as the actual product, why should consumers spend money buying it? Consumers may not be aware that this ability to download 'free' ringtones is actually a violation of the music industry's digital rights. Unfortunately, the music industry has put its faith into the mobile industry to ensure its offerings are secured when downloaded to a wireless device. The amount of revenue loss to both the mobile and music industries is concerning due to what appears to be a complete oversight."

The ringtone market currently accounts for between 6 to 10 per cent of music industry revenues worldwide according to Jupiter Research and Qpass, making this a significant revenue leakage problem for the industry. Qpass estimates that more than 20 percent of mobile users worldwide have downloaded content to their phone to date and this figure is expected to rise. Ringtones are among the fastest growing types of mobile content. For the global music industry, increasingly under attack from declining CD and single sales, ringtones sales have provided an important additional revenue stream.

About Qpass

Qpass software powers the marketplace for digital media and services by efficiently managing the entire digital supply chain over any network and any type of device. The Qpass product line includes the Content Delivery Platform, Service Management Platform, Payment Server, and MultiMedia Album. Today this infrastructure powers a digital services marketplace for operators reaching more than 145 million subscribers globally, generating hundreds of millions in revenues. Qpass software works as an overlay to existing business systems including provisioning, billing and CRM, speeding service innovation and providing greater flexibility for new offers.

Qpass customers include mobile operators Cingular Wireless, T-Mobile International (UK, Germany, Austria, The Netherlands, Croatia and Czech Republic), Nextel, ALLTEL, Vodafone Ireland, and Boost Mobile; as well as leading consumer portals such as Yahoo! UK and Germany, uboot (www.uboot.com) and SMS.at (www.sms.at). Today more than 300 content partners and aggregators are integrated through Qpass software, providing access to more than 500,000 applications to consumers in the U.S. and Europe. Qpass global headquarters are in Seattle, Wash., with European headquarters in Vienna, Austria. For more information on the company, visit www.qpass.com.

Source: Business Wire