Can the Beatles Rock Viacom and the Game World?

The video game business needs "Help!"

It's been "A Hard Day's Night" as game sales dropped 14 percent this year; sales of music video games, the biggest game category last year with nearly $2 billion in revenue, have fallen by nearly half.

Now Viacom is hoping to "Get Back" with a little help from its friends, The Beatles.

Source: Harmonix

The band's scope and popularity convincing MTV Games it's worth investing in; MTV Games spending up to $50 million for the rights to license the music for a 45-song, $60 game that hits stores today.

Viacom is hopeful this game will turn around its Rock Band brand, which it's blamed for dragging down earnings at its media networks division over the past couple of quarters. Though it's invested millions in promoting and creating the high-tech game, beyond the cost of the rights to the music, Viacom is actually looking for higher margins from this game than previous. In addition to the $60 game, Viacom is also offering a $250 package of controllers modeled after the Beatles' actual instruments. This is far pricier than previous instrument packages or the $100 Guitar Hero 5 bundles, but Viacom hopes to attract die hard fans of all generations with the pricey option. The question is whether that steep price tag can work in this market.

Here's the problem with the whole music video game business: it's too easy for consumers to work with the games they already have. Over the past few years music video games have been the biggest piece of the business, with consumers buying some $2 billion in games, or about 17 percent of overall video game sales. The problem now is that 25 million households already own some kind of music game controller, so there's little untapped market. And, it's easy for consumers to buy add-ons, additional songs to play as part of their games through consoles like the XBox 360, for a dollar or two. So gamers get a different experience without spending the kind of cash that previously drove MTV Games and Activision Blizzard's growth.

So what does this mean for Activision Blizzard? It's Guitar Hero is the leader in the space, and it lost a bidding war for the rights to The Beatles music. You can bet that if 'The Beatles: Rock Band' is a disappointment that Activision will breathe a huge sigh of relief in dodging that bullet. And the truth is, the game will have to be a huge hit to justify Viacom's investment. While projected to sell two million copies in its first month alone, a couple of analysts question whether it'll hold up enough over time to be worth it. Guitar Hero fans will be able to play the new Beatles game without buying a Rock Band controller; Guitar Hero controllers will work. But that's unlikely to drive any new Guitar Hero sales. Meantime, Guitar Hero has its most packed lineup yet, including 'DJ' Hero' launching in October and 'Band Hero' in November.

On now:

The battle of the bands is certainly on and we'll see if consumers have the cash to make it a high-stakes fight (Electronic Arts is distributing the game but it's strictly taking a fee, so its upside is more limited than Viacom's).

Questions? Comments?