Music labels continue to search for new ways to make money in the face of declining cd sales. Digital track sales, such as those from Apple's iTunes Music Store, were up 27 percent from 2007, breaking the $1 billion mark for the first time in 2008. But, according to Nielsen Soundscan, only 428 million albums (including LPs, CDs, and online albums) were sold - down 14 percent from 2007. As recently as 2005, 619 million albums were sold. Meanwhile, there are more choices than ever to hear free music online, including MySpace Music, Imeem, Last.fm, and Pandora. It seems clear that music on demand is heading towards the day of free streaming whenever and where-ever people want to listen, and labels and artists will need to find ways to create music experiences for their fans that they are willing to spend money on.
What people have always been willing to pay for is a unique experience where they can engage with an artist's music in ways that cannot be copied for free. For example, fans love to see live music because they cannot replicate that experience at home. Ringtones have been popular for over a decade. People are still willing to pay to join fan clubs because of perks like a closer relationship to the artist.
One of the most promising areas for music revenue growth is combining music with games. There have been over 30 million downloads of songs in Rock Band because fans to want to rock out to their favorite songs in game play. Guitar Hero has had over 40 million downloads and is now a $2B franchise. What is remarkable is that players have shown a willingness to pay for individual songs for use in music games despite them often costing double the price of a normal digital download. In fact, Aerosmith claims to have made more money from licensing its music to Guitar Hero than from any of the group's previous recorded albums. Even digital holdouts, The Beatles, will be releasing a Rock Band version of their own. More music games will be coming soon, including Band Hero (for family gaming) and DJ Hero which offers turntable and record scratching games in a battle for victory in a virtual nightclub.
Other popular music games include Dance Dance Revolution, Jam Legend, and Tap Tap Revolution which is one of the best selling iPhone applications. SingStar is a competitive karaoke video game series which requires players to sing along with music in order to score points. Loudcrowd offers a constant stream of music set to a connected series of music-themed games. Through game play and interaction with others, users can earn or purchase a variety of virtual goods including apparel for their character and music tracks that can be collected for play and competition within the site. Best selling artists Fall Out Boy created an artist themed game on FriendsorEnemies.com. Even lo-fi games like lottery tickets are jumping on the music bandwagon. For Aerosmith's summer tour, fans can win backstage passes, front-row seats, and maybe an extra few million dollars playing Aerosmith branded lottery games.
With the rise of popular casual games on sites like Facebook, Addicting Games, and Miniclip, along with the universal appeal of music, it's a natural fit for the two to come together. Music games give labels a new way to earn revenue that users have shown a willingness to pay for. It seems clear that more will follow.