Alleged "security" holes in US and European digital content sites may potentially result in over $301 million worth of ringtones being "shoplifted" by 2006.

The shoplifting allegation was leveled by Seattle, Wash.-based Qpass, a digital media and services vendor. At least one mobile analyst, however, is skeptical of the allegation.

Qpass conducted a study of 100 US and European sites, which included 58 music and online entertainment sites and 42 mobile carrier portals. In Qpass' estimation, 31 percent of online entertainment and music store, plus 40 percent of carrier sites, were allegedly insecure. Users could "shoplift" music tracks from those unsecured sited and use them as free unpaid ringtones for their cell phones, according to Qpass.

The problem stems from those site offering users the ability to preview between 15 and 30 seconds of unsecured music before purchase; these previews could potentially be converted into ringtones.

A Qpass spokesperson did not directly answer a question about how many users may have actually used the previews to in fact make ringtones, though he did note that it is something that that the average computer user could easily do.

"The average computer user could very easily shoplift a ringtone by right-clicking on a ringtone preview, saving the file to his or her computer and then downloading it to a cell phone using a Bluetooth-enabled device," a Qpass spokesperson told internetnews.com.

The preview content on the "unsecured" site could have been secured using some form of a digital right management (DRM) enabled file format. Not coincidentally, Qpass has a solution for securing mobile content. The company also provides platforms for content delivery, service management, payments and the delivery of multimedia via the Web, SMS and mobile networks.

Though some might argue the lack of DRM is a technical oversight that could easily be corrected, Qpass' spokesperson said that the issue is considered to be a security hole. The alleged shoplifting of ringtones may have cost the industry $40 million since 2004, according to Qpass.

Jupiter Research has reported that ringtone revenues were $217 million in 2004 and are expected to grow to $724 million by 2009. (Jupiter Research has the same parent company as this publication.)

According to mobile research firm M:Metrics' May 2005 Benchmark Survey, 13.6 percent of U.S. mobile subscribers have downloaded a ringtone.

"Our monthly survey doesn't ask people whether they obtained their ringtones illegally, so we do not have direct data to support or refute their claims, which are obviously a clever way of promoting their product," Jaimee Minney, M:Metrics spokesperson, told internetnews.com.

Big Business
While Jupiter Research's revenue predictions for the ringtone market are impressive, if you look at it from a worldwide sales perspective, an even more startling story emerges: The ARC Group reported last fall that ringtone sales reached $3.5 billion dollars in 2003, or about equal to 10 percent of the worldwide music market.

The success of ringtones—which are often samples and reproductions of today's hits and other songs—has music conglomerates salivating at this new way to distribute and promote its products. And, perhaps, boost their disappointing revenues of recent years.

The market is so hot music industry mainstay Billboard Magazine even launched a chart to track the country's hottest ringtones, the first of its kind in North America.

The aggregated U.S. polyphonic ringtone chart debuted in the magazine's new Digital Entertainment special section last November. The magazine said at the time the new ringtone survey is similar to its CD sales charts.

Instead of monitoring airplay, however, the chart reflects the Top 20 polyphonic ringtone sales for each week, including song title, artist, previous week's position, and number of weeks listed.

Listen & Buy
Last month, Japan's number two wireless operator launched a service whereby subscribers could use their 3G handset to automatically identify songs they hear (in a bar or on TV, the radio, etc.) and purchase that song as a ringtone, full song, or album.

When a user hears a song he likes, he pushes a Search button (available on certain KDDI handsets) to find out more about that song. Called Listen And Search, the service automatically uses Gracenote Mobile's MusicID solution to retrieve a match from a database and delivers its name, artist, and album to the phone. Simultaneously, Gracenote connects the recognized song to a commerce solution for the retail opportunities mentioned above.

As with most new cellular technologies, it'll most likely be quite a while before a Listen And Search type service launches in the United States.