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Special to CNBC.com
A year ago, there was no hotter genre in video games than music. “Guitar Hero” and “Rock Band” had been embraced by gamers and non-gamers alike, and the future seemed unlimited.
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Fiskfisk Playing Guitar Hero |
By mid-August, revenue from music and dance games was short of 2008's pace by $390 million—and no publisher is more likely to feel the impact than Activision [ATVI
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]. The publisher will release eight titles in its “Hero” franchise this year (including six different “Guitar Hero” games). That follows four “Guitar Hero” releases in 2008.
Toss in competition from “Rock Band,” produced by Electronic Arts [ERTS
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] and Harmonix, plus similar games from Disney [DIS
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] and other publishers, and what was ground-breaking less than three years ago has become commonplace.
“What it amounts to is saturation,” says Billy Pidgeon, an analyst with Game Changer Research.
Mix the weak economy in with that saturation, and the numbers really start to get scary.
Music-based video games have generated over $3.8 billion in revenue since November 2006 (the year “Guitar Hero” initially launched as an independent game), according to NPD Group. For the first seven months of 2008, those games brought in $840 million in revenue. This year, during that same period, revenue was down to $452 million.
“This is not like ‘Madden’ where you have an annual change of rosters or uniforms or things that make sense to issue an annual franchise,” says Colin Sebastian, analyst with Lazard Capital Markets. “‘Guitar Hero’ isn’t naturally an annual franchise, unless you have something unique to offer.”
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Rock Band |
]-owned Harmonix are hoping the lure of The Beatles will attract fans back to the genre next month, with the launch of “The Beatles: Rock Band”. The group’s unprecedented level of fame will certainly help, but the $250 price tag for the special edition, which will come with Beatles-styled instruments, has caused a fair bit of hand-wringing. Here’s the hidden truth, though: A stand-alone version of the game will sell for $60 for people who want to use their current plastic guitars and drums. EA’s relying on that stand-alone unit for the majority of sales, even though the profit margins on it are a bit lower.
The potential hidden strength of the music genre is its ability to generate post-retail income with downloadable content. Both “Guitar Hero” and “Rock Band” offer owners the ability to purchase additional songs for the games for nominal amounts.
While both companies offer the songs, EA’s game is typically seen as the leader in pushing new music to players.
“The most lucrative portion of this genre—potentially—is the electronic download,” says Pigeon. “I’m not seeing that being exploited as well as the retail product … Activision seems way behind the times in terms of moving toward digital distribution ... I’m not seeing the intelligence that Blizzard has collected over the years being used there.” Blizzard Entertaiment, which is owned by Activision, makes 'World of Warcraft,' the most successful online game in the history of the industry.
While games focusing on traditional rock might be losing steam, Activision is betting on some of the other fields of music to keep its “Hero” franchise alive and well in the years to come. In late October, the company will release “DJ Hero,” a new game bringing the club scene home.
It’s not entirely new ground for the industry. Japanese developer Konami had a similar rhythm game on shelves 12 years ago—even offering a turntable controller, as “DJ Hero” will. But it will break away from Activision’s history of instrument-centric music games.
It will not, however, have the market to itself. Take Two Interactive Software [TTWO
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] is releasing “Beaterator,” a music-mixing game co-produced by rapper Timbaland, before “DJ Hero” lands. And a small, independent publisher is working on “Scratch: The Ultimate DJ”—which will be out next year.
Despite the competition, there’s a lot riding on the sales of “DJ Hero”. If the game flops, it could indicate the music genre is not as flexible as many think, meaning it will continue to dwindle. But a success could open it up in new directions.
“‘DJ Hero’ has to prove itself in the market,” Sebastian says. “If it works, that probably tells Activision ‘We can take some risks with the ‘Hero’ brand and expand the experience and there’s a market for that.’ As long as innovation drives their game development, you can imagine a scenario where this will be a genre for years to come.”
If nothing else, the wish-fulfillment part of the game will continue to appeal to some.
“One of the joys of the whole music genre is it’s a ‘lite-sim’ simulation of a role that is admired and fun and people want to do,” Pigeon says. “If you had ‘Accountant Hero,’ who would play it? That, to me, is the roots of this genre’s success: Everybody wants to be a rock star.”
Data is a real-time snapshot *Data is delayed at least 15 minutes