Last week, on the eve of Jamba’s party, News Corp. confirmed rumors of its intentions to sell off the mobile division, and Fox Mobile, like other ringtone providers, are left scrambling to find new business models as the clock runs down out their traditional revenue streams.

SEE ALSO: Next Mobile Battleground Is Music Subscription Services

At the height of the ringtone business, carriers, music labels, artists and third party companies, like Jamba, Thumbplay and others, were making piles of easy money—selling a snippet of a song for three times what a whole track sells for today. John Fletcher, an analyst at SNL Kagan, said ringtone sales in the U.S. peaked in 2007 at $714 million, and today are closer to 2005 levels. “It’s been a depressing story for a couple of years.” As consumers have transitioned to smartphones, users can often load a full-track MP3 to their phone and designate a portion for a ringtone.

Fox Mobile and Thumbplay are two of the largest companies that specialized in ringtones and are now trying to reinvent themselves. But both companies have a long way to go to be successful. News Corp. said last week it was writing off $217 million from the value of its outdoor and mobile businesses, though it was not clear how that money was split between those two areas. News Corp. acquired Jamba in two chunks, for about $400 million. If it decided to put Jamba on the block, Fox wouldn’t likely make back that purchase price. Meanwhile, Thumbplay has raised roughly $61 million since being founded in 2004. Investors include Brookside Capital Advisors, Cross Creek Capital, Bain Capital Ventures, Redwood Partners, New Enterprise Associates and Meritech Capital Partners.

In an effort to replace declining revenues, many providers have switched to selling other mobile products, like ring-back tones, full-track music, or streaming radio. Fox Mobile’s EVP of Global Products Joe Bilman said the company has been able to stabilize ringtone revenues by being smarter about how to market them (through online and mobile ads—not TV and print ads). As an international company, it has also focused more on emerging markets, like Brazil. Bilman: “It’s not as fast or as steep of a cliff as people might think,” he said, though he declined to offer specific numbers.

Its competitor, Thumbplay, tells a similar story. From his offices in New York’s SoHo neighborhood, Thumbplay’s Co-Founder and CEO Evan Schwartz, says they’ve been able to maximize their “classic” revenues by expanding the company’s product mix to sell full-track music and video over mobile—not just ringtones. So, while ringtone revenues are declining, he says the new products have more than compensated—enough to make the company profitable on a sustainable basis. “There are still enough people with feature phones who are still looking for personalization content,” he said. (Thumbplay also declined to provide evidence to show that revenue from new products is more than making up for the general decline in the ringtone business.) 

While both companies have been able to minimize the damage, they recognize there is no future in selling ringtones. Instead, they are trying to find something better, and that means tapping into the app frenzy that’s part of the smartphone era.

Fox Mobile has created a TV subscription service dubbed BitBop. For $10 a month, subscribers will have access to TV shows from 25 networks, including News Corp. and NBC Universal (NYSE: GE), The Food Network, A&E, CBS (NYSE: CBS), TLC, USA and MTV. Plans are for the application to be available on all major platforms, including BlackBerry, Android and iPhone. For now it’s launched on BlackBerry, and users get a week-long trial before having to shell out any money.

Likewise, Thumbplay is also banking on a subscription service, but is staying closer to its musical roots. For $10 a month, subscribers have access to millions of songs. Users can sync their iTunes playlists to the service, and immediately start streaming music through a client on their Mac or PC. Thumbplay has built applications for Android, BlackBerry and iPhone that allow you to access the same catalog music from the phone. The songs can be downloaded to the phone, so you listen when your phone is offline.

The two companies’ plans sound eerily similar—perhaps it is because the executive teams have commonalities in their resumes. Last year, Fox Mobile hired two Thumbplay executives, Markus Thorstvedt and Bilman, to drive the strategy after numerous delays and executive departures. Bilman said the move raised legal concerns, which were settled out of court late last year.

It’s too early to say how successful the companies will be at their new strategies, or if their deep history in mobile offers them any advantages. Thumbplay is entering a particularly competitive market with other major players like Microsoft (NSDQ: MSFT), Rhapsody and others (including Google (NSDQ: GOOG), soon), selling music subscriptions. Meanwhile, BitBop will have to face much bigger brands, like News Corp.‘s own-Hulu and MobiTV, on the video-subscription front. Schwartz said they are getting 10,000 new downloads a day for the music-subscription service, but wouldn’t say how many people convert after the 10-day trial. Bilman also wouldn’t provide a conversion rate, but said subscribers are watching more TV than they had anticipated, or roughly five to seven shows a week during the first month the service has been live.