Two Mega-Deals Target Ringtones

LOS ANGELES – Ringtones are looking like a serious growth industry. The two biggest news events coming out of the CTIA Wireless & Entertainment conference here have been acquisitions of ringtones firms.

The day started with the news that News Corp.  had doled out $188 million for a 51 percent controlling interest in Jamba, a wholly-owned subsidiary of VeriSign. The company is known in the U.S. as Jamster and is best known for its “Crazy Frog” ring tone, which reached the top of the British pop music charts in 2004, much to the consternation of many musicians.

This was followed a few hours later by an even bigger money deal, as RealNetworks  purchased WiderThan, a provider of ringtones, integrated music services and other entertainment services for mobile devices for $350 million.

News Corp. said it plans to merge Jamba with its Mobizzo unit, which sells short video clips of TV programs.

The company will also make clips from its animated series “The Simpsons” available through Jamba and plans to use Jamba to build a link between subscribers of its MySpace social networking site and mobile phone customers.

WiderThan has some presence in the U.S. but it is well-known in Asia, particularly its native South Korea, where it was a spin-off from SK Telecom. It entered the American market with the 2004 acquisition of ZTango.

The two companies combined will have global coverage for music, games and video on demand.

“We’re most excited about the broad portfolio it gives us to bring to carriers around the world,” said
John Giamatteo, executive vice president of RealNetworks, at a press conference here at the CTIA Wireless & Entertainment show.

“It’s good to see how wide a relationship WiderThan has with T-Mobile and Verizon because Real didn’t have one,” he added. “If you look at the jigsaw puzzle of things we didn’t have and they did and vice versa, it offers some real synergy on how we approach customers around the world.”

Giamatteo said he sees RealNetworks becoming a one-stop shop of music, video, media delivery and games, but stopped short of saying the company had transitioned off the PC, where it started, and become a mobile services provider.

“I wouldn’t say we’re going to be a mobile company at this point,” he said. “We all see trends of convergence, and while Real had a very strong position on the PC through the Player and Rhapsody, this really give us a boost in expanding that out.”

The Jamba sale to News Corp. is expected to be finalized by the end of the year, the companies said. Due to the complexities of purchasing a Korean company, Real expects to close on the WiderThan sale in the first quarter of 2007.

Earlier this year, Jupiter Research projected revenue from ringtones will reach $724 million by 2009. That figure could well rise with heavy hitters such as Newscorp and RealNetworks now driving more distribution.

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