Piracy Spreads to Ring Tones

Xingtone threatens record label's new revenue stream

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The cell-phone ring-tone industry, which sold $3 billion worth of electronic song clips last year and generated $148 million for musicians and songwriters, may be under threat from its own Napster. Xingtone, a year-old software company, allows users to transform digital music files of any song on their hard drive into ring tones -- without paying the record label or artist who owns the rights to the music.

"It's troubling that a company that makes software would be profiting off the backs of artists when this business is just getting started," says Ted Cohen, EMI Music's senior vice president of digital development and distribution. The record labels, still struggling through a deep recession that they blame largely on online piracy, have hoped to make ring tones a huge new revenue stream.

Xingtone stands to profit from this growth. Artemis Records recently packaged the company's $14.95 software with copies of alt-rock band Sugarcult's Palm Trees and Power Lines, and Hollywood Records now sells exclusive Xingtone versions of the Polyphonic Spree, Hilary Duff and Breaking Benjamin songs.

Xingtone executives say it's fair use to burn or download a track and transfer it as a ring tone to a cell phone. "When people compare us to Napster, they get this thought that somehow you're searching this big database of Xingtone content," says Brad Zutaut, the company's co-founder and chairman. "There is no content. We're not Napster. Are we innovative and cool and all the great things Napster is? Absolutely. But we're not illegal."