Music Biz Cashes In on Ringtones

This New Yorker article gives some background on a new money field being ploughed by the music industry: ringtones for your cell phone.

Record labels, convinced that they have lost millions of dollars in CD sales to MP3 file-swapping, have been especially attentive to ringtones, and they love master tones. Polyphonic ringtones are essentially cover versions of songs: aggregators must pay royalties to the publisher, who then pays the songwriter. But master tones are compressed versions of original recordings, which means that record labels—the entities that typically own recordings—are entitled to collect a fee, too. That fee can be considerable: record labels get twenty-five per cent of every master-tone sale (though they must pass along a portion of their take to the performer and the publisher).

Les Watkins, the vice-president of Music Reports, Inc., a music-licensing and accounting firm, said: [...] "The aggregators accepted rates and terms that they really didn’t have to accept, and agreed to license the music in such a way that they’re overpaying by a tremendous multiple.