Hard cell for Warner ringtones

Bronfman sees potential in tiny tunes

NEW YORK — Ringtones and ringbacks — say what?

For Warner Music Group topper Edgar Bronfman, the ability to program a cell phone’s ringer to play a favorite song could be the very thing to rock awake the beleaguered music biz, which has been hit hard by piracy and sluggish retail sales.

Appearing at the 32nd annual UBS Media Week Conference in Gotham, Bronfman said the company will continue to aggressively chase this new market, which has exponential reach considering the shift to wireless — especially overseas, where land lines have become almost ancient history.

Speaking in broad strokes, Bronfman also painted a picture of a future that could see the company bypassing traditional routes to bow a new release on, say, Verizon Wireless.

“We’re not so dependent on being a hit-driven business,” said Bronfman as he briefed investors on the health of Warner Music, acquired from Time Warner earlier this year in a $2.6 billion buyout.

Proclaiming the music biz has stabilized, Bronfman was less willing to talk about whether or when he would try to take Warner Music public, saying only the conglom hasn’t filed final registration materials with the Securities and Exchange Commission. He also put off questions about whether Warner Music might consider joining up with EMI, saying sometimes a company has to be “a horse with blinders on” and stay the course.

According to Bronfman, analysts estimate consumers in the U.S. will spend $122 million-$318 million on ringtones and ringbacks in 2004; overseas, that number jumps to $3.5 billion-$5.2 billion.

Many of the ringtones and ringbacks are instrumental, meaning Warner Music would get only a publishing license fee. For recording labels, significant revenues will be realized when consumers actually use the song itself as a ringer — known in this nascent biz as a “mastertone.”

Warner Music has signed several key deals to up its presence in this new arena. Last week, Warner Music Intl. and Ericsson inked a far-reaching mobile music distribution agreement for 28 markets throughout Europe, to be distributed via Ericsson’s M-USE service.

Under the deal, Ericsson will have the right to distribute the more traditional ringtones, as well as new formats including mastertones, artists’ logs, artists autographs and ringback tones. Warner Music content already is part of Ericsson’s M-USE service in Austria and Sweden.

Tech milestone

Bronfman told investors attending the UBS confab that Nov. 11 could prove a watershed day in the history of mobile music ringtones. On that day, U.K.-based Vodafone turned on its third-generation (3G) mobile phone service for millions of customers in Europe, making it easier to download and stream enhanced content.

Stateside, Warner Music last month signed an unprecedented deal with mobile technology company M-Qube to offer cellular jingles directly to consumers from its labels’ Web sites and those it creates for its artists. M-Qube’s technology allows users to download ringtones directly to their phones.

Deal includes both instrumental ringtones and those made with master tracks — i.e., mastertones — that include artists’ vocals. While many labels offer ringtones on an ad-hoc basis, M-Qube pact has been the most comprehensive.

Almost at the same time, Warner Music inked an expanded deal with Verizon Wireless to offer Warner music as Verizon’s newly launched “Ringback Tones,” which replace the standard ring callers hear with clips of real music. The program is initially being offered to Verizon Wireless customers in Southern California and Sacramento.

Flat year on year

Also at the conference, Bronfman said Warner Music will likely finish this year flat over 2003 in terms of revenues. He wouldn’t reveal other numbers, since they are to be reported next week. He said revs have been climbing throughout the year as the company restructured and CD sales improved, but that the fourth quarter is proving sluggish.

Bronfman said he is proud of the restructuring, which has included installing a new management team and achieving roughly $250 million in cost savings, whether through the layoff of about 20% of the company’s workforce or combining parts of the Atlantic and Elecktra labels.

Bronfman conceded the company had a soft release sked this year, particularly in the pop and rock categories. He said the 2005 sked is more weighty, but didn’t give many specifics. He also said the company would continue to pursue dual CD-DVD releases.

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