The Next Level: Music in gaming, labels see cents

08 July 2010

by Eamonn Forde

In 2008, Edgar Bronfman Jr. fired a broadside against the gaming industry, suggesting that his company, Warner Music, would not play ball until licensing terms were more equitable. He was not prepared to accept, in his own words, “paltry” fees from the likes of Activision, Sony and Harmonix, the leaders in music-based console gaming.

Yet in quick succession last month, a version of Rock Band built around Green Day (signed to Warner Music) was launched while Warner announced a new strategic partnership with Tapulous to build iPhone app games around its acts, spinning off from the Tap Tap Revenge franchise. So what happened?

Well, labels are allowed to change their mind as the landscape around them evolves. Bronfman, for example, said in 2007 that the move to MP3 was “completely without logic or merit” and now Warner licenses DRM-free to many download services.

Naturally money also plays a part here. It can only be presumed that gaming companies are now offering Warner fees that are no longer “paltry”, but games in general are an increasingly important source of revenue for labels seeing both CD sales and CD pricing drop in the market.

Rod Kotler is VP of Music Resources at EMI Music Publishing in New York and he spells out very clearly how important these games are in income terms.

“A few years ago, we started to see a decline in advertising revenue and advertising fees, and the rise of music games has helped to make up for some of that lost revenue,” he says. “It has also opened up new revenue streams, such as downloadable content. This means that more music can be used beyond the 50-80 songs that are preloaded on a game.”

Gaming is a huge market and, while musicbased games are down the pecking order compared to battle and sports game, they are benefitting enormously from the boom in the overall sector.

Indeed, PricewaterhouseCooper recently forecast that the gaming market will be worth three times that of the recorded music market by 2014. Consumer spending on games will grow by more than 10% over the next four years – pushing the sector to a value of $84billion [A$96bn]. On top of this, Ipsos recently reported that 67% of households in the US now play video games.

What music company wouldn’t want a cut of that? That’s why all eyes were on the recent E3 convention in LA where the gaming industry set out its stall for the year. And music featured much more heavily this year than in previous years (see box out section).

“It’s a very busy year for gaming,” says Greg Turner, Senior Creative Licensing Manager at Universal Music UK, where he looks after music-based gaming. “An increase in the types of music games is a good thing as we want the games to be as popular as possible and reach as wide an audience as they can. The more products that are out there competing will make each company strive to make theirs better in terms of innovation and gameplay.”

Universal has already worked with Tapulous to build versions of Tap Tap Revenge around a number of its acts and has recently signed a deal with PC-only social gaming company Conduit Labs for Music Pets (think virtual Tamagotchi where you ‘feed’ your pets music to keep them alive and in turn they recommend similar songs/acts).

While there is a rise in PC and mobile gaming, the console is where the greatest margins are to be made still. And against this new competition, console gaming is evolving to stay relevant.

“Games are moving slightly more online,” says Martin Hewett, the Senior Music Supervisor at Sony Computer Entertainment Europe as he explains how his company has to keep abreast of developments. “My SingStar is our online community for the SingStar game and is a place where people can upload themselves singing their favourite songs with their friends. It’s part of an open-ended play ethos. The games are just the start, in that they are long experiences and people deal with them in a social setting much more than they do with traditional games.”

Music gaming is not just moving beyond the console; it is also opening into new genres beyond rock and pop – most notably hip-hop and dance/ electronica.

“It opens doors for more of our writers, not just the rock guys,” says EMI Music Publishing’s Kotler. “Now our DJs and producers can get more involved. DJ Hero opened that door for them as will the Def Jam Rapstar game which we have been working with them closely on. The dance games, like Just Dance and Dance Central, were getting great reviews at E3.”

Hewett adds, “Gaming is important for the music industry because a lot of the time it’s where people get exposed to new music.” When asked to give an example of this at work, he said, “I got [UK dubstep producer] Skream to write a track for [racing game] Wipeout Pulse a few years ago. At the time, that was the first time a lot of people would have heard of him, but now he’s fairly overground. That’s a really good thing for us and the music industry.”

While major acts, for obvious reasons, will dominate in in-game use, the rise of connected consoles and DLC (downloadable content) means that new acts can be bundled in with more established names.

“New acts do fit in here,” says Turner. “Obviously it would be hard to sell a specific game off the name of a new artist. But with the DLC there are ways to get new acts out there on things like Track Packs [bundles of song downloads].”

While social and mobile games will attract ‘non-games’ who are not willing to invest in expensive hardware, everyone agrees that console gaming will remain the central point of the entre gaming ecosystem.

“Consoles are an important part of the future of gaming,” argues Hewett. “SingStar is a good example as we’ve created it as a social experience and an interactive game whereby people have events and parties around it. I can’t really see PC-based games or mobile applications offering the same experience.”

For Kotler, it is an exciting time but also an uncertain one, suggesting that rightsholders have to treat carefully. “The social gaming market is huge as most people these days have a PC or a Mac,” he says. “I think we are still working our way through this phase in terms of finding opportunities for music, opening revenue streams and determining how pricing should work so that we and our writers are compensated fairly for these uses.”

Turner is optimistic for a future where all types of music games coexist. “I think they will all sit sideby- side,” he says. “The music console games are not going to go away. Sales may have dropped off slightly in the last year, but there are enough people out there with consoles to keep that market going. On the mobile side, the sheer volume of people with smartphones, will make this a huge area as well.”