Will Video Games Save The Music Industry? Dream On

“Can Guitar Hero Help Save the Music Industry?” asked a post to the New York Times‘ “Freakonomics” blog recently. And while our natural inclination is to yell “we hope so,” it’s worth examining the claims made before we go down that path—especially since the author of the piece is “the worldwide games portfolio manager for Xbox Live Arcade” and thus not really that unbiased an observer. While it makes logical sense that a massively popular video game would help increase the sales of the music featured within, the article throws in another claim to bolster its argument for the gaming industry’s eventual overtaking of the music biz: that the Aerosmith edition of Guitar Hero “resulted in more revenue for the band than any individual Aerosmith album.” Well! But how much revenue is that, exactly? And does it really make up for lost sales?

First, let’s try and figure out how much money we’re talking about here. Though 1974’s Toys in the Attic is the biggest-selling Aerosmith album, the album that’s probably resulted in the most actual dollars for the band is probably Get a Grip, which went 7x platinum in 1993, when absolute royalty rates and wholesale prices were considerably higher than in 1974. If we assume they made a 10% royalty on a $7 wholesale price on 6,000,000 of those albums and made the statutory rate capped at 10 tracks on the full seven million, that’s around $8,000,000 for the band.

So that means that Aerosmith made over eight million dollars from its own edition of Guitar Hero. Since that game sold a million copies (!!!), that means that when fees for the band’s appearance in the game are included with royalties (who knows what the per-track fee was, or how much of that was split with the label), they averaged more than $8 per game sold, or 16% of the game’s retail cost. That’s pretty good, right?

The thing is, saying that Aerosmith made more money from Guitar Hero than from any individual album sounds really impressive. But it’s comparing apples to oranges. It’s a video game, not an album; people aren’t buying it to hear the tracks, which they could hear elsewhere in a more convenient way, and the revenue realized from their Guitar Hero wouldn’t have been possible without the band already having released so many giant-selling albums. The statement implies that video game sales could replace album sales, but they’re not the same thing. They’re essentially merch, gravy in the revenue stream that’s not going to sell without the basic product being popular in the first place.

Moreover, the statement seems to be suggesting that a band can make more money from selling video games than from selling music. And that’s just not true. Aerosmith may have made eight million off the game, but they grossed over $37 million on their 2007 tour. That makes it look like video games won’t save the music industry, touring will—except, well, we know that’s not true either.

Can Guitar Hero Help Save the Music Industry? [Freakonomics]