Music firms warned over ringtones

Ringtones by stars like Britney are popular with teens

Mobile ringtones have become a surprise money-spinner for music companies but firms must not become too greedy, analysts have warned.

A report published by analysts Baskerville/Informa Media forecast that ringtones would account for 12% of total music sales by 2008.

But music labels must rein in ambitions for unrealistically high royalties.

And it added that piracy, which has yet to hit the ringtone market, could also spoil the party.

More and more people are downloading ringtones to their mobile phones, with the craze particularly appealing to young women.

The findings, published in Baskerville/Informa Media's mobile music report, suggest that the music industry needs to adopt a more pragmatic approach to ringtones than it has taken to other ways of selling digital music.

"As the revenues in mobile music become more compelling, arguments over revenue shares look set to increase tensions," said report co-author Steve Mayall, an analyst with Informa Media.

Fragile business

Some mobile operators have argued that the music labels have become "over-enthusiastic" about the share of revenues they deserve for sample ringtones, with figures ranging between 25% and 55% of the price paid by end users.

Mobile piracy could decimate this still fragile business Steve Mayall, Mobile Music

There are also worries that ringtones could become the target of pirates.

Numerous websites are offering ringtones from artists without having the necessary licences to do so, said the report.

Some countries have established agreements about the collection of royalties but in some there are no procedures in place.

"Mobile piracy could decimate this still fragile business," warned Mr Mayall.

Downloading ringtones has become hugely popular. In 2003 the market was worth £1.6 billion and by 2008 it will rise to £2.5 billion, according to the report.

Youngsters like to constantly update their mobile ringtones. One single - Round Round by the Sugababes - sold more ringtones than singles when it was released last summer.

Despite this, ringtone sales are not expected to overtake CD singles sales any time soon.