Analyst: Activision Doesn't Need Warner Music

Music games may expose artists to a whole new audience as the genre sees a popularity boom -- but as the genre competition heats up, the advantage for titles like Guitar Hero and Rock Band does hinge in part on the strength of their track lists. So who needs who more? Activision, publisher of Guitar Hero, and Warner Music, who maintains relationships with many of the bands involved in the franchise, recently went head-to-head on the issue of song royalties. Warner says it's entitled to more money for music games, and Activision CEO Bobby Kotick disagrees. Speaking to Gamasutra, Wedbush Morgan analyst Michael Pachter says Activision's winning this fight. "Activision doesn't 'need' Warner Music at all," he says. "There are over one million songs out there -- probably two million -- and Activision is going to turn fewer than a thousand of them into Guitar Hero songs every year." This equates, says Pachter, to a 2000-year supply of music for game companies to choose from -- "and they don't need to deal with a label that represents less than 20 percent of artists." And Pachter says a worst-case scenario, where all record labels collude to force music game publishers to pay more, could provoke an antitrust claim. On the other hand, Warner music gets a clear benefit from having one of its artists featured in a game like Guitar Hero, as the game drums up interest in the band and its music. Pachter notes that Aerosmith's record sales "multiplied" after being featured in Guitar Hero: Aerosmith. "Warner is wrong when it says you buy Guitar Hero for the song," says Pachter. "You buy Guitar Hero for the game, and the song creates the challenge. It's quite different from an iTunes download, where the only purpose is to listen to the music." Nonetheless, the presence or absence of monster hits by bands like Metallica -- who Warner Music represents, and is widely rumored to be getting a standalone Guitar Hero title -- may yet play a role in which music games are more attractive to consumers. Should conflicts over royalties escalate, it could complicate promising emerging trends like album releases via video games.