Posts Tagged ‘rock band’

Picking winners in tough times – part 2

December 27, 2008

As with books, it would seem that video games are also proving quite income inelastic. This report from the Economist notes that “Games sales in America in October totalled $697m, 35% more than a year earlier”. There is some logic there. Like books, games are experience goods that substitute well for more transitory, ephemeral experiences like the consumption of ‘nights out’, fine dining, or (as the article notes) vacations. As consumers count the pennies and become more frugal, a game that might be still providing entertainment in a month’s time does seem much more cost effective.

Interestingly, the article raises the prospect that any recessionary effect might be lagged. This is a rather strange argument. The example they give (EA) is just one firm in the industry, and one that has copped a lot of criticism in the past year for not delivering enough quality products to market, and for taking on higher and higher cost projects when other, more nimble competitors have been experimenting with cheaper formats (such as games for the Wii and the iPhone) or games with hardware tie-ins (like Rock Band). It would still seem that gaming is a recession-proof growth industry.

Advertisement

Revenge of the Rock Band

December 22, 2008

Much has been written over the years about bargaining power issues within the music business. Record labels have consistently been portrayed as exercising an unhealthy level of control over the livelihood of their signed artists. The rock pantheon is littered with tales of bands and songwriters ripped off by the greedy “man behind the desk with the cuban cigars” (as Tim Rogers would put it).

With the big labels’ declining control of recorded music (due to filesharing etc), emerging artists have deemed them less relevant. Artists have some scope to got it alone using myspace and direct contracting with distributors.

It looks like the emergence of the various successful video games built around playing along to your favourite tunes – i.e. Guitar Hero, Rock Band (and their various sequels) – have pushed the power balance further away from the big record labels and towards the musicians themselves.

As this article discusses, the game producers are most interested in dealing with the artists, and the record labels appear to be holding little sway inslash getting their artists’ tracks on the games. Also, it would appear that most of the bigger royalty streams here (use of image, bandname, and the publishing of what is, in effect, a cover rather than the original recording) reside outside of most artists’ contracts with their record label (i.e. it is the artists and their publishers who are getting much of the cash from this).

So, record labels can only sit around and hope that a band’s presence within the Rock Band playlist might significantly boost record sales. The labels have very little bargaining power with the games companies. As an analyst says in the article:

“There are literally probably 2 million songs out there, and fewer than a 1,000 were used in these two games combined in these last two years…If Warner wants to say we’ll take our 20 percent of the market and go away, a lot of bands are going to leave the label if they think they can get better exposure by being on these games.”

This is another instance where a whole link in the Value Chain has been disrupted by technology and shifting consumer behaviours. The record labels underestimated the impact of digital download technology on their sales. And now they look to have missed the boat on potent promotional tool which they should have had in their arsenal. Watch this space for artists taking back even more control in the future…