Bad business practice, repetitive content, and high production costs are among the factors responsible for the downfall of the music game genre.
I see the bad business practices but I have not experienced the repetative content from Rock Band. Yes, Guitar Hero is as cookie-cutter as they come but Rock Band is not on the same crazy release schedule. Rock Band still needs work on how to build a last game but now that they own the genre it should be up them to self-destruct or thrive. I am not sure how it cost so much to produce the music. It's raw music tracks, click some notes when they match the music for different instruments, and royalties. If they can't find a way to slim that down they need to higher some developers to brainstorm.
The lack of innovation also killed the franchise.
i really wouldnt lump Rock Band in with Guitar Hero. Every feature in a Rock Band game (except drop in/drop out i believe) has been original to that series. Harmonix should be seen as innovators, RB1 had first full band gameplay, RB2 had 84 songs and updated intruments, and RB3 had introduced pro mode, harmonies, and keyboard. Also people seem to forget that Rock Band is the ONLY game to constantly put out new DLC every single week since November 2007. That is an impressive stat.
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