Gaming will not save the music industry

We recently wrote about how gaming has positively affected the engagement, retention, and monetization of applications in the Finance, Healthcare, Wellness, and Education industries. Today, we are examining gaming’s crossover with the music industry and why we believe that gaming will not be able to solve the music industry’s ownership, monetization, and accessibility problems.

Epic Games <> Bandcamp: Epic Games recently acquired Bandcamp (and previously Harmonix, the developer behind Guitar Hero and Dance Central), an online music marketplace and community where fans can discover, connect with, and support independent musicians. Bandcamp is known to be very creator-friendly by allowing artists and labels to upload music and sell via the medium of their choice (CD, vinyl, digital download, even merchandise).

Uploading music to Bandcamp is free but the company takes a 15% commission on sales, which drops to 10% after $5,000 in sales. What makes Bandcamp so unique is their vision of an open, independent, artist-friendly ecosystem. Their pricing Help page touts “Part of what makes Bandcamp Bandcamp is that you, not some corporate behemoth, set your own pricing” (Source). Thanks Bandcamp, message received loud and clear… Below is a screenshot example of what it looks like on Bandcamp:

Bandcamp’s business model is less about providing sufficient consumer access to supply and more about putting ownership and financial upside in the hands of artists. Their solution is centered more around an artist’s profile and community versus immediate access to streaming music only (like Spotify or Apple Music). This improves factors like artist-to-fan engagement and discovery but sets limits on the number of artists an average consumer can engage with simultaneously.

Unlike Bandcamp, we believe Epic’s previous acquisition of Harmonix is more aligned with where we see gaming and music intersecting: using gaming as a medium to discover and engage with music.

How gaming could potentially help the music industry:

1) Discovery: Harmonix-developed Guitar Hero II showed that games have the power to drive a whole new wave of fans to the songs that are featured. Rich Williams, guitarist for the classic rock band Kansas, says that after the release of Guitar Hero II, digital sales of the song Carry On Wayward Son went from 119k in 2006 to 297k in 2007 and noted "the front row of almost every show we did was filled with young teenagers. It's all due to that. It's brought us a whole new fan base." Most critically, “It brought a younger crowd to us that otherwise might not have come in” (ABC). Other songs in the game saw similar effects. Cheap Trick’s Surrender went from 58k digital sales in 2006 to 161k in 2007, and The Pretenders’ Tattooed Love Boys went from 5k to 16k.

2) Monetization: The music industry is a ~$22b market (IFPI). However, artists only take home about 12% of this amount (Rolling Stone). The other 88% goes to those involved in producing and distributing music (e.g. record labels, streaming companies, satellite radio, and other midpoints that have to exist between artists and listeners). The rise of music streaming (which made up ~40% of total music revenue in 2021, RIAA) has made music essentially a commodity and has forced artists to make up a bulk of their revenues from live music performances. Games provide a new revenue stream for artists through new music discovery, licensing, and scalable live performances (Fortnite virtual rap concert drew a record 12.3M attendees).

3) Engagement: As we mentioned last week, introducing game mechanics to other industries has the power to improve consumer engagement and music is no different. Games can provide a new digital medium for fans to engage with their favorite artists which can continuously evolve and update.

Why Gaming ultimately will not be able to help:

1) Licensing issues: Every song has two separate copyrights: composition (lyrics, melody) and sound recording (the audio recording of the song). The people who write the lyrics and melody of the song own the composition copyright. Sound recording copyrights are owned by recording artists and their record labels (with some further distinctions for performance and reproduction rights). When it comes to accessing and monetizing a track, there are many different entities that must approve, access, and collect revenue. This structure is complex and unscalable across a comprehensive library of music which is why entities such as SoundCloud and Bandcamp have a target market of independent artists. In short, gaming already has a plethora of licensing and IP rights to deal with, much less the added complexity of a music industry that already struggles to monetize.

2) Music is passive, gaming is active: Outside of live performances, listening to music is traditionally a passive experience. With the exception of “play-along” games (Guitar Hero, Rockband, Beat Saber, Just Dance) and one-off concert-like experiences (Fortnite, Roblox), it is unproven whether or not gamers need an active medium to engage with musical content and their favorite artists. By nature, gaming is an interactive experience while music is passive.

3) Music experiences in gaming are expensive: Access to “play-along” games and digital concerts has been limited to artists that already have large-scale followings and thus have the resources for dedicated marketing, development, and branding teams that are focused on creating an artist’s brand within gaming worlds. This is not affordable or scalable for artists outside of the top <0.1% (for example, the 40th artist by revenue in 2020 was Aerosmith at $5.35m, Source). Only the top artists that can afford to build these types of experiences will have access to the upside, limiting the diversity of artists that can be discovered.

Our Perspective: Music is important to the experience of gaming (through soundtracks, etc), but gaming will not solve music's massive problem around access, distribution, and monetization. With the rise of streaming over the past 10-15 years, music has become almost entirely commoditized and structural barriers have risen that inhibit scalable access to artist ownership and monetization, cementing an industry standard. Successful crossover between the gaming industry and the music industry will be in one-off experiences (such as in-game concerts) which will continue to only be available to highly successful artists and are unlikely to scale otherwise. In short, gaming will not be music’s saving grace.