Business

Can Video Games be the New MTV?

Selling songs via console games, the Web, and phones may help the ailing music industry.

Music’s always been about more than just listening. People dance, sing along, and, lately, play along too, through video games such as Dance Dance Revolution, Guitar Hero, and Rock Band. As CD sales decline and the music industry struggles to find new ways to make money, some companies are betting that games could be a key to getting consumers to open their wallets for music.

Beat it: A screenshot from Tap Tap Revenge, an iPhone game that requires tapping or shaking the device in time to music.

Music-oriented computer games now enjoy huge popularity–the Rock Band franchise made more money in 2008 than any other game, according to NPD Group, a games industry analyst firm. Sales of Rock Band have also turned into music sales. As of this March, users paid for and downloaded more than 40 million songs to use with Rock Band. Bands featured in the game have enjoyed increased sales, for example, Weezer, whose 1994 debut album features songs packaged with the game.

A number of companies are creating games that incorporate music into play, betting that Rock Band and Guitar Hero aren’t isolated phenomena. They believe that all sorts of games–including titles created for use on cell phones and the Web–can offer listeners a new way to discover music, become more involved as fans, and, ultimately, encourage them to pay for tracks. “It’s a much broader market than people are currently giving it credit for,” says Nabeel Hyatt, CEO and founder of Conduit Labs, which maintains a social network built around playing music-related games online, called Loudcrowd.

Hyatt says that games can more easily tap into the social aspect of listening to music, which has always drawn people out to concerts or clubs. Some avid fans already organize Rock Band parties, where they get together to play the video game. Hyatt envisions players getting together online, listening to music and playing along together. Loudcrowd simulates a club scene, allowing users to dance, hang out, and listen to a mix provided by an in-house DJ. Users can win music tracks and other virtual goods and, if they like what they hear, they can buy it with a few clicks.

A simple way of purchasing tracks is at the core of how the companies creating this new wave of music games hope to make money. Tap Tap Revenge, a game for the iPhone in which users tap or shake the device in time to a song’s beat, has prompted thousands of users to visit iTunes via the game to buy tracks, according to Bart Decrem, CEO of Tapulous, the company behind the title. Though it started out using music from independent bands, Tapulous has also created paid games featuring bands such as Weezer and Nine Inch Nails.

A music-focused social network called iLike recently launched the iLike Challenge, a trivia game that asks users to identify tracks and compete with friends to earn points. The game’s interface makes it easy to purchase tracks while playing or add them to a wish list for later. ILike has also struck advertising deals with music labels, inserting certain artists’ songs into the game as paid promotions. During a panel at the Web conference South by Southwest Interactive in Texas last month, iLike CEO Ali Partovi noted that, though it’s hard to determine which promotions affect a song’s popularity, all of the songs promoted on iLike so far have debuted near the top of the charts on iTunes.

The makers of these games still have to strike licensing deals, a problematic reality for many online music businesses. Internet radio companies such as Pandora have struggled to get access to music for a rate they can afford. But games have a stronger bargaining position than Internet radio, according to Decrem, since they don’t need to license large quantities of music to create a worthwhile product. Radio stations usually need to have a deal with every major label and want to access most of those labels’ back catalog. Games, on the other hand, can get by with a few hits and a smaller catalog of quality songs from independent bands. Decrem says that Tapulous aims to include one big hit per month to help attract users, but already offers plenty of independent music and older songs. ILike pays licensing fees for the clips it uses in its trivia game, even though each song plays for no more than 30 seconds (Partovi said that, though it might be considered fair use, the company prefers not to take a risk).

While the games’ creators believe their impact on the music industry is positive, some observers say that the demand is not yet big enough to justify the optimism. Forrester analyst Sonal Gandhi, who follows the music industry, says that the impact of games on music sales is “dwarfed by the impact of radio.” Although radio has declined in recent years, she says that people still discover about 60 percent of the new songs they buy through the radio. Gandhi adds that licensing fees obtained via games will be an important source of revenue, but says games aren’t going to serve as the major way to promote artists in the near future.

That’s not what the many makers believe. They argue that games offer the advantages of radio and music-video channels, but can also be personalized for different users. “Games have the power to be the new MTV,” Partovi said at South by Southwest. “And I think that they already are.”

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