by : Business, February 2016

Synch Money and Video Games

Synch Money and Video Games

In 2011 the $26 billion videogame industry doubled the film industry and almost tripled the recorded music industry sales of $6.9 billion1. Videogames are going places, which is great news for music. As games have become increasingly complex and cinematic in their storytelling, so too have their soundtracks. Borrowing from the playbooks of directors like Quentin Tarantino and the Coen Brothers, more and more games are adding a new atmospheric element to their visuals by using popular songs, all of which require the purchase of a synchronization license. By examining game franchises such as Guitar Hero and Grand Theft Auto, one can understand the varied and innovative ways in which modern gaming is implementing popular music and how it may create more attention and revenue for the music industry.

The world was very different in 2007. The very first iPhone had just been released, Barack Obama had just announced his intention to run for President, and P2P file sharing programs such as Limewire, Frostwire, and Kazaa were at their peak. In the videogame world, a new pop culture phenomenon was ready to explode. Videogame designers Red Octane and Harmonix partnered to release the third iteration of their smash hit franchise, Guitar Hero III: Legends of Rock. The game sold $115 million in its first week2, and according to NDP in 2011, grossed $831 million since its release, going on to be the highest-grossing videogames in the U.S. up to that point in time3. Guitar Hero III was the franchise’s peak in terms of sales and pop culture influence. With a total of 132 songs, it was the perfect outlet for music revenue exploitation.

The Guitar Hero series successfully created a new market for the song catalogues of rock/metal artists in the 1960’s to the 1990’s. For famed stadium rock band Aerosmith, Guitar Hero was a particularly profitable venture. The franchise, which went so far as to create a tie-in game almost entirely dedicated to the band, “generated far more in revenues than any Aerosmith album ever has,” according to Bobby Kotick, Activision’s and Guitar Hero CEO. “[Aerosmith’s] merchandising, concert sales, and new recording contracts [were much] influenced by their participation in Guitar Hero.”4

Dragonforce, whose song “Through the Fire and Flames” is considered the hardest of any game, also saw increased sales. Countless YouTube videos show gamers proving their mettle by demonstrating flawless virtual performances of the tune. This rite of passage for top gamers ensured that the song got much more attention than expected. In a 2008 interview with USA Today, Herman Li, one of the group’s guitarists stated “our CD sales have gone up, and we are high up the charts on digital downloads; as we don’t play commercial music, it took everyone by surprise.” According to the same article, digital sales of the song rose from fewer than 2K sales weekly to 38K by the end of December 20075.

Initially, and as revenues expanded, music videogames like Guitar Hero and Rock Band appeared to milk well the synchronization licenses they used. But synch licenses became an ever growing and important factor in total production costs (though not the only one: the expenses incurred to produce the plastic guitar controller packaged with the games also weighed heavily)6. When the market became saturated and sales slowed down, profits fell and costs were reappraised. For instance, Vivendi, the owner of Universal Music Group, made a bid for a controlling stake at Activision, it was accepted partly because it promised to cut synch costs on all UMG catalog7.

The record labels have since found additional new avenues for synch income—and no less from the best selling game franchise Grand Theft Auto. Although the majority of the attention surrounding the controversial series focuses on its violence, it is often forgotten that Grand Theft Auto is a pop culture satire at heart. To achieve its aim, the game features a virtual radio as its most effective tool to lampoon media and consumerism in the current age. Synch licenses are needed for this, of course.

In-game radio uses actual popular music to connect with players. With multiple stations in each game, comes the ability to appeal to different genres of music and different listener demographics. For example, Grand Theft Auto: San Andreas takes place in Los Angeles in a satirical version of the early 90’s. It rather fittingly includes a west coast hip hop station named Radio Los Santos. This station plays out a greatest hits mix of popular 90’s West Coast gangster rap tracks, including early hits from N.W.A, Dr. Dre, Snoop Dogg, and others which helped make the soundtrack popular with fans. The radio stations further appeal to listeners by featuring celebrity DJ’s. For example, GTA V’s radio includes a 70’s g-funk station, with Bootsy Collins starring as himself. GTA V also took a new step forward and went so far as to give respected artist Flying Lotus his very own tie-in station that features many of his songs, as well as others that have influenced him.

Due to the private character of the synch negotiations with video gamers, it is difficult to know exactly how much revenue the music industry has made from the GTA series. Nevertheless, buyout fees usually correlate with the production budget, which for GTA V’s stood at $266 million8. It was the most expensive video game ever made, with 241 songs licensed. Music publishers, for sure, made much money too. In the Jan. 2012 edition of Music Week, for example, EMI’s VP of music resources says “over the years, the Grand Theft Auto series has provided EMI Music Publishing with a unique opportunity to get sync placements for some hidden gems in our catalogue that otherwise may not have landed in the world of video games.”9

Indeed, as of August 2015, two years after its release, GTA V sold 54 million copies.10 That means at least 54 million pairs of ears listened to its selection of tracks. The game also sold $800 million dollars in its first 24 hours on the market alone, and grossed $1 billion within its first three days. This makes it the fastest entertainment property in all of history to cross the $1 billion threshold.11 Album sales for the entire music industry totaled to $15 billion in 2013, averaging about to $1 billion a month.12 Thus, within four days of its release, Grand Theft Auto V outsold the monthly global recorded music sales.

The success of the Grand Theft Auto and Guitar Hero franchises remind us that the level of interactivity they offer provides users with a deeper connection to the accompanying music. This invariably creates interest and encourages gamers to go research new artists and genres on their own. The music repertoire expands and in turn draws in more attention from gamers.

Recently, the International Federation of the Phonographic Industry, in its Digital Music Report, put the annual increase in worldwide synchronization revenues for 2013-14 at 8%. In a couple of years there could be as much as half a billion dollars from synch money worldwide, just for the record labels. No other sector except streaming seems to be showing such potential–not live music, not music products, and not general music publishing. The thoughtful exploitation of music in video games is therefore adding significant resources to the bottom line of the industry’s key players, especially record labels and music publishers. It is also driving large number of new listeners firmly into the camp of paid-for recorded music, which promotes both live music and sales of instrument gear.

 

References:

1. http://www.stratoserve.com/2011/06/entertainment-video-game-industry-three-times-music-and-double-movie-industry.html

2. Kuchera, Ben. October’s NPD numbers show the utter domination of Guitar Hero. Arstechnica. November 15, 2007. 112/7/15. http://arstechnica.com/gaming/2007/11/octobers-npd-numbers-show-the-utter-domination-of-guitar-hero-3/

3.Reisinger, Don. Guitar Hero tops list of best-selling games. CNET. March 25, 2011. 12/7/15 http://www.cnet.com/news/guitar-hero-tops-list-of-best-selling-games/

4. Klepek Patrick. Activision: ‘Guitar Hero’ A Bigger Money-Maker For Aersomith Than Any Album. MTV. September 15, 2008. 12/7/15. http://www.mtv.com/news/2457724/gh-money-for-aerosmith/

5. Snider, Mike. USA Today. Bands’ sales are feeling the ‘Guitar Hero’ effect. February 14, 2008. 12/7/15/. http://usatoday30.usatoday.com/tech/gaming/2008-02-14-guitar-hero-effect_N.htm

6. Kohler, Chris. Wired. Activision Bails Out of Guitar Hero, Cancels Games. February 9, 2011. 12/7/15. http://www.wired.com/2011/02/guitar-hero-canceled/

7. Karasu, Sirma. Academia.edu. Music Industry and Video Games. p.10. 12/7/15. http://www.academia.edu/4161279/Music_Industry_and_Video_Games

8. Acuna, Kristin. Business Insider. September 9, 2013. 12/7/15. http://www.businessinsider.com/gta-v-cost-more-than-nearly-every-hollywood-blockbuster-2013-9

9. Parfitt, Ben. Market for Computer and Videogames. January 23, 2012. 12/7/15. http://www.mcvuk.com/news/read/music-publishers-eye-up-gta-v-opportunities/090128

10. Macy G., Seth. IGN. August 10, 2015. 12/7/15. http://www.ign.com/articles/2015/08/10/grand-theft-auto-5-has-now-sold-54-million-copies

11. Kain, Eric. Forbes. September 30, 2013. 12/7/15. http://www.forbes.com/sites/erikkain/2013/09/20/grand-theft-auto-v-crosses-1b-in-sales-biggest-entertainment-launch-in-history/

12. Satistica. 2015. 12/7/15. http://www.statista.com/statistics/273308/music-album-sales-in-the-us/

13. Pakinkis, Tom. Music Week. P.25. February 8, 2013. 12/7/15. http://web.a.ebscohost.com/ehost/pdfviewer/pdfviewer?sid=dc884906-1fa9-459c-a6df-72f5ee8ea345%40sessionmgr4004&vid=1&hid=4104

14. IFPI. April 14, 2015. 12/7/15. http://www.ifpi.org/news/Global-digital-music-revenues-match-physical-format-sales-for-first-time

 

By Michael Kostaras


1. http://www.stratoserve.com/2011/06/entertainment-video-game-industry-three-times-music-and-double-movie-industry.html

2. Kuchera, Ben. October’s NPD numbers show the utter domination of Guitar Hero. Arstechnica. November 15, 2007. 112/7/15. http://arstechnica.com/gaming/2007/11/octobers-npd-numbers-show-the-utter-domination-of-guitar-hero-3/

3. Reisinger, Don. Guitar Hero tops list of best-selling games. CNET. March 25, 2011. 12/7/15 http://www.cnet.com/news/guitar-hero-tops-list-of-best-selling-games/

4. Klepek Patrick. Activision: ‘Guitar Hero’ A Bigger Money-Maker For Aersomith Than Any Album. MTV. September 15, 2008. 12/7/15. http://www.mtv.com/news/2457724/gh-money-for-aerosmith/

5. Snider, Mike. USA Today. Bands’ sales are feeling the ‘Guitar Hero’ effect. February 14, 2008. 12/7/15/. http://usatoday30.usatoday.com/tech/gaming/2008-02-14-guitar-hero-effect_N.htm

6. Kohler, Chris. Wired. Activision Bails Out of Guitar Hero, Cancels Games. February 9, 2011. 12/7/15. http://www.wired.com/2011/02/guitar-hero-canceled/

7. Karasu, Sirma. Academia.edu. Music Industry and Video Games. p.10. 12/7/15. http://www.academia.edu/4161279/Music_Industry_and_Video_Games

8. Acuna, Kristin. Business Insider. September 9, 2013. 12/7/15. http://www.businessinsider.com/gta-v-cost-more-than-nearly-every-hollywood-blockbuster-2013-9

9. Parfitt, Ben. Market for Computer and Videogames. January 23, 2012. 12/7/15. http://www.mcvuk.com/news/read/music-publishers-eye-up-gta-v-opportunities/090128

10. Macy G., Seth. IGN. August 10, 2015. 12/7/15. http://www.ign.com/articles/2015/08/10/grand-theft-auto-5-has-now-sold-54-million-copies

11. Kain, Eric. Forbes. September 30, 2013. 12/7/15. http://www.forbes.com/sites/erikkain/2013/09/20/grand-theft-auto-v-crosses-1b-in-sales-biggest-entertainment-launch-in-history/

12. Statistica. 2015. 12/7/15. http://www.statista.com/statistics/273308/music-album-sales-in-the-us/

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