January 30, 2004 12:59 PM PST

Record label runs ring tones around wireless carriers

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Walt Disney-owned Hollywood Records has struck a deal with Xingtone, a digital content provider that delivers ring tones and pictures directly to cell phones without paying wireless carriers a cent.

Under the deal, Xingtone takes care of online distribution of free ring tones and images of Hollywood Records artists The Polyphonic Spree, Hilary Duff and Josh Kelley, as part of the record label's marketing push to music fans that own cell phones.

Xingtone has become known in the industry for a $15 software application that lets people create ring tones on their PC, then delivers them directly to any cell phone with an Internet connection. The Los Angeles-based company's tools cut out cellular carriers, which usually put all digital content through an approval process, play a central role in its distribution and take a share of the profits.

But Xingtone also works with wireless carriers. It has partnered with about a dozen companies to create online ring tone stores, where the song snippets sell for about a dollar each.

With this week's Hollywood Records deal, Xingtone enters a new market: record labels that want to deal more directly with cell phone subscribers and to take a bigger piece of the ring tone and wireless music business, which brings in $4 billion a year.

Xingtone founder Brad Zutaut said he's in discussions with two other major record labels that want to augment their marketing efforts through Xingtone. The companies are also exploring whether to open ring tone stores, he said.

"The carriers' real hope is that we curl up and die," Zutaut said.

Representatives from Hollywood Records, which is owned by Disney's Buena Vista Music Group, didn't return phone calls seeking comment on whether its plans include an expanded set of ring tones, graphics and other material. A representative for the Cellular Telecommunications & Internet Association, a trade group that represents cell phone service providers, was also unavailable on Friday for comment.

 

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