The most interesting bit to come out of Warner Music's (WMG) Q3 earnings call: Some saber rattling about the music-based video games, primarily Activision's Guitar Hero and Viacom's Rock Band.
The games, which allow players to download songs from the likes of Aerosmith and play along with their rock idols, are great, CEO Edgar Bronfman Jr. said. But he said that Warner's seeing very little of the money that the games generated, and said that has to change. Paraphrased transcript from the call:
Games have enormous opportunity, and proves we have future business in non-traditional formats. But we have to be very careful that we do not allow an eco-system to occur where we do not get compensated properly. Like what happened with MTV, and now with Apple. And now [game developers] Activision and Harmonix [owned by Viacom] are in the same place. Amounts being paid to music industry for downloads, etc. "far too small". Industry needs to participate much more fully. If that does not become the case, "we will not license to those games." Very small license fee per song, plus additional revenue if artist involved. But royalties far below what true value is.
The gist of that is quite clear: they've seen two huge businesses (MTV, iPod/iTunes) built off the backs of their work over the last few decades, and they haven't gotten much out of it. They don't want that to happen again. What's not clear: What WMG can do about it.
That's because the game-makers are free to rerecord sound-alike songs for the games without Warner's permission, and pay just a small publishing royalty. Would the actual songs be better? Sure, and they use those too, which do require sign-off from the labels. But while iTunes buyers expect to be able to purchase any track they want from the digital store, Rock Band and Guitar Hero are doing just fine by offering players a very small collection of tunes to play.
So while the game makers might be very excited to include, say, Warner artists Led Zeppelin in a future game, they can also live without them -- they can always get the Who, or maybe even the Beatles. Hard to see where WMG will have the leverage working on their own to get more money out of the games business.