AT&T lets customers set the tone

Hoping to reverse a widespread trend for declining ringtone sales, AT&T’s announcement today of two new music applications, mSpot’s Make-UR-Tones and Remix, has the potential to reinvent the market – if customers aren’t already doing it for them.

AT&T is acknowledging that the old content models of mobility are changing. Polyphonic renditions or the first 15 seconds of songs carriers ported for purchase as ringtones aren’t making the cut anymore. Consumers are seeking more personal, unique mobile experiences. If a sleek handset is a fashion statement, then the ringtone is becoming the statement of personality. Nondescript AT&T chimes just don’t capture a person’s sense of self like your favorite verse from “Party like a Rockstar” (the number one ringtone purchase on AT&T’s network last year).

The new service, using a technology designed by mobile media company mSpot in October of last year, lets users customize a one- to 30-second ringtone from a portion of a any of the 250,000 songs in AT&T’s library from a variety of music labels.

While ring tone sales have been on the decline, solely music-devoted devices like the iPod have rapidly been losing out to wireless handsets doubling as music players. According to a report released this week by MultiMedia Intelligence, more than 500 million mobile phones were shipped worldwide in 2007, a number 300 million higher than regular portable music players. The company expects that the music phone market share to grow to more than half of the 941 million handsets shipped worldwide by 2011. As such, AT&T also announced the mSpot Remix mobile player, which connects with a PC over the AT&T network, providing access to stored songs and playlists. The songs can be saved to the phone’s memory card to be played over the air away from the network connection. AT&T also today announced that it will expand its Napster Mobile application, making it available to 12 million customers outside of just those who own the SLM by Samsung.

AT&T’s announcements today are a great step in the right direction, but the services still may be not be positioned for the same success as iTunes saw with ringtones for the iPhone. That is primarily because the carrier is expecting customers to cough up $7 a month to create only three ringtones, with each additional song costing $3. The Remix service will cost another $10 on top of that, regardless of how many of the up to 75 allotted songs you download.

Customers might want personalization, but not at $17 a month on top of all the other add on services they are already paying for. Yankee Group studies show that most customers usually won’t pay more than $12 for add-on mobile services. For both new services, a pay-per-use model or cost built-in to the existing data plan would seem to be a much more logical step. At almost $20 a month, it will be interesting to see if price or personality wins for AT&T customers.

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