MTV and Activision face off in battle of the brands

Fri Oct 31, 2008 8:18pm EDT

Attendees play the game Rockband by Harmonix at the E3 Media & Business Summit in Los Angeles on July 15, 2008. REUTERS/Phil McCarten

Attendees play the game Rockband by Harmonix at the E3 Media & Business Summit in Los Angeles on July 15, 2008.

Credit: Reuters/Phil McCarten

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DENVER (Billboard) - Now that "Rock Band" publisher MTV Networks just scored the Beatles catalog for a new videogame, announced days after the October 26 release of Activision's "Guitar Hero World Tour," the stage is set for another battle of the bands between the two music-based game franchises.

MTV already has a "Rock Band" release featuring AC/DC, and Activision has a "Guitar Hero" game with Aerosmith and another in the works for Metallica. But the Beatles catalog is the biggest "get" in the game world, and both MTV and Activision spent the better part of a year courting Apple Corps, Sony/ATV Music Publishing and EMI Music Group, the trifecta holding the various rights to the Beatles catalog. MTV ultimately won, thanks to a combination of past innovation and music business credibility.

"MTV was clearly the innovator in offering a full-band experience," Apple Corps CEO Jeff Jones said on the conference call unveiling the partnership.

None involved would discuss the specific terms of the deal, but sources hinted that MTV showed more flexibility than Activision, whose CEO, Bobby Kotick, has said that the music industry should be paying for the opportunity to have music included in "Guitar Hero."

"It was presented as if they were doing the music business a favor," Sony/ATV CEO Martin Bandier said. "It's true you can choose other types of music, and somewhere along the line someone's going to do it for free for the exposure ... When it comes to the Beatles, the leverage changes. We're very happy with the terms of our arrangement with MTV."

But while the Beatles will certainly give a boost to MTV's music games business, none of the Fab Four's songs will be available for download on the existing "Rock Band" franchise. And it's the battle between "Rock Band 2" -- introduced September 14 -- and "Guitar Hero World Tour" that will define the competition this holiday season.

MEANS OF DISTRIBUTION

For "World Tour," the more popular "Guitar Hero" franchise added several "Rock Band"-like innovations: drums, vocals and new songs for sale via download every week. Content will be available as three-song "Track Packs" as well as singles.

That's good news for labels and music publishers, which have seen "Rock Band" quickly become a valuable music distribution platform. So far, the "Guitar Hero" franchise has made only 66 songs available for download, compared with the 280 from "Rock Band."

Until now, Activision's "Guitar Hero" strategy was more about selling games, either with rapidly developed sequels or such artist-specific expansion packs as "Guitar Hero: Aerosmith."

That's changing. "We are approaching downloadable content differently," said Kai Huang, founder/president of Activision's "Guitar Hero" subsidiary, Red Octane. "You're going to see us be much more aggressive about releasing more songs that we did with 'Guitar Hero III.'"

At the same time, MTV aims to sell more games, including a title based on an AC/DC live DVD that's available exclusively at Wal-Mart. Right now, the installed base of "Rock Band" lags far behind that of "Guitar Hero," and last year "Rock Band" sold 4 million units compared with 11.8 million of "Guitar Hero," according to numbers provided by both companies -- in part because MTV faced supply problems.

Looking ahead, Wedbush Securities gaming analyst Michael Pachter expects the full bundle of "Rock Band 2" and "Guitar Hero World Tour" -- including the guitar, drums and microphone controllers -- to sell about 3 million units each by spring 2009. He predicts that another 1.5 million existing "Rock Band" owners will pick up the sequel alone -- sans new controllers -- while another 8 million "Guitar Hero" fans would do the same.

As Activision concentrates on downloadable songs, MTV will try to sell more games. And now that MTV has set the stage for round three in this fight next year, the music business will be watching closely.

Reuters/Billboard

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