In a move that will expand eBay's (NASDAQ:EBAY) role in the red-hot ringtone market, Skype has secured music licensing rights with the publishing arms of Warner Music Group (NYSE:WMG), EMI, and Sony (NYSE:SNE).
Back in January, Skype inked a deal to peddle Warner ringtones for $1.50 a pop. Unlike digital downloads that max out at $0.99 a tune through sites like Apple Computer (NASDAQ:AAPL) and Napster (NASDAQ:NAPS), shorter ringtones have been able to command a premium because mobile phone users are willing to pay for the perfect tune to alert them of incoming calls. Earlier this year, InfoSpace (NASDAQ:INSP) announced that ringtones are generating twice the revenue of standalone digital song downloads.
Skype's popularity is booming. Later this week, it will lap the 100 million-user mark. The problem here is that many of these users were drawn to Skype as a free online voice chat platform, and they may be too thrifty to pony up for musical snippets. A collection of generic ringtones is already available for $1.20 a pop, and I can't imagine sales going all that briskly, save for a few clever name-based ones.
If the popularity of ringtones has been fueled by public vanity, one would think that the demand to pay up to have their home-based Skype ringtones personalized will be a hard sell at first.
Naturally, the greater potential here is for Skype to reach out to its registered users and sell more than just Skype ringtones. Complete digital downloads, mobile phone ringtones, and even music concert tickets may be logical revenue streams for Skype to peddle.
And that potential points to why history will vindicate eBay's costly purchase of Skype as money well spent.
eBay has risen 100% since being tapped as a Motley Fool Stock Advisor newsletter recommendation in June of 2002.
Longtime Fool contributor Rick Munarriz has bought only one mobile ringtone, and he's not in a hurry to buy another. He doesn't own shares in any of the companies mentioned in this story. T he Fool has a disclosure policy. Rick is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early.
