SNL Kagan reportedly announced the results of its latest market research survey for the U.S. mobile music segment, and said its most significant finding was that since ringtone sales shrunk drastically in the previous year it has led to major cutbacks in overall U.S. mobile music revenues.

The research analysts firm claimed it is pertinent to point out that new ringtones are still being installed extensively by mobile owners, but not via direct purchase from their mobile services provider. Most handset owners have figured out how to download songs, messages, and instrumental versions on to their mobiles and then set these as suitable ringtones depending on the incoming caller’s ID – a method of transfer now popularly being referred to as “sideloading,” or “side loaded ringtones”.

The research firm said ringtone sales in the U.S. mobile music market dropped from $714 in 2007 to $541 in 2008 to register a massive 24 percent crippling stat, which in turn had a cascading effect on the overall mobile music revenues across the nation because ringtones’ share of the total U.S. mobile music market fell from 80 percent in 2005 to 63 percent in 2008. Officials also emphasized that this was the first time in the history of any U.S. Mobile Content category that revenues experience a sustained declined over an entire calendar span and also when compared with the previous years’ performances. To stem the rot, the research org expects labels will begin pricing ringtones lower to rekindle demand lost to sideloading.

SNL Kagan says that all is not lost in the overall U.S. mobile music market as ringback tones, full track song download and advertisement supported mobile streaming radio services are expected to strongly make up for the gaping hole left by the diminishing ringtone service’s negative growth. As a matter of fact, point out officials, the overall U.S. mobile music market grew at a 20 percent Compounded Annual Growth Rate from 2005 to 2008.

“When we ask mobile music insiders what will replace ringtone revenues, RBTs (ringback tones) are most often mentioned,” said John Fletcher, Wireless Analyst at SNL Kagan. “We estimate this category grew at a 37 percent CAGR from 2005 to 2008, from $77 million to $199 million.”

Another market study titled, “Mobile Music, The End Of The Beginning: Market Assessment And Forecasts” that estimated the revenue from mobile phone music related business streams all across the globe will be almost $4.4 billion by end 2012, which is a hundred percent more than what it was by end 2007.

The report claimed that the Full Track Audio and Video Services, otherwise known as FTAVS, market will increase to 46 percent in 2012 as compared with 29 percent in 2007 and revenues may touch $1.2 billion with USA and Japan continuing to be the most significant markets. It cautions, however, that profitability may be diluted by the high wholesale price of music, and the highest consumer segment - young people between the age of 16 and 30 - relying heavily on music piracy.

In direct contrast with SNL Kagan’s study, the report optimistically claims that musical ringtones and personalization services will still remain the highest revenue stream in 2012 at $2.2 billion, and this popularity is mostly reinforced by an earlier report of another study that says more than thirty three percent of mobile transactions during 2008 accounted for purchasing ringtones and music.