Music Business

Gaming Growth Is Good For Music Too

It may not come as a surprise that gaming has seen an impressive level of growth during the pandemic, expanding by virtually every metric. Given the close relationship between gaming and music, Clayton Durant explores why a gaming boom could benefit the music industry as well.

Guest post by Clayton Durant, CEO at CAD Management and Graduate Music Business Student at NYU Steinhardt 

One of the biggest trends we saw come out of quarantine culture was establishing the importance of gaming in today’s youth. How big has gaming actually become? Well, according to data collected by IDC, global video game revenue was expected to surge 20% to $179.7 billion in 2020. This was driven by sales across various areas of the gaming sector. For instance, NPD Group found that hardware sales rose 34% to nearly $4 billion, software sales rose 21% to $38.4 billion, and accessory sales — gaming keyboards, controllers, mice and the like — gained 22% to generate $2.1 billion.

Comparing this to other areas of entertainment, the North American sports industry was estimated to generate $75 billion in 2020 according to PwC while the Motion Picture Association noted that in 2019, revenues topped over $100 billion. The growth of video gaming in 2020 shouldn’t be too surprising as Deloitte found in their 2020 Digital Media Trends survey that during the pandemic, a third of consumers subscribed to a video gaming service for the first time, used a cloud gaming service, or watched esports or a virtual sporting event. More people than ever have entered and bought into the gaming ecosystem, now one of the most powerful mediums to connect with a global audience.

With the power of this ecosystem, it will certainly be interesting to see where music fits into the equation long term. To discuss the future of music and gaming, Musonomics interviewed Jon Vlassopulos, the Global Head of Music at gaming platform Roblox. Here are some of the highlights from our latest episode:

Listen to The Full Episode on Spotify, Apple Podcasts or Soundcloud.  

Music and Gaming Have Always Been Closely Intertwined

Gaming and music have been closely intertwined, even as early as some of the first video games in the 1970s. For instance, Pong, which was released in 1972, was the first arcade video game to use sound effects. At the time, computers produced this sound by using a semiconductor chip to transform the electrical impulses from code into analog sound waves. A few years later in 1978, Space Invaders became the first game to feature continuous music, which means music and sound effects overlapped during gameplay so that music would no longer be restricted to only the intro and game-over screens. Then, in 1985, Koji Kondo’s Super Mario Bros. composed the iconic score for a game that would reimagine the role of music in gaming. After Super Mario Bros, the next major milestone was the development of consoles like Playstation which helped set the stage for games like FIFA, NBA 2K, and Tony Hawk’s Pro Skater, some of the iconic e-sports gaming franchises, to build the foundation for what would become interactive playlists within games.

In today’s marketplace, playlists have become even more interactive with the users of games. For instance, Grand Theft Auto V featured 18 different music genre stations—including real DJs with unique personalities for each station—and over 240 licensed tracks. It is clear that music in games has now gone way beyond “just background music”, ultimately giving artists both a source of revenue and significant public exposure.

Virtual Currency Is Being Exchanged at High Rates with Gen Z

One of the fastest-accelerating trends since COVID emerged is the explosion of real money being spent on virtual gaming currency. For instance, RoosterMoney, an app and debit card for children, collated data from 70,000 kids ages four to fourteen in its annual index. It found that the video games Roblox and Fortnite topped the pocket money spending charts in 2020 as screen time soared under lockdown. This trend is in line with what Vlassopulos noted in his interview in which he said, “my daughter just lost her tooth for example, and she got paid with the tooth fairy in fiat real money and then immediately wanted to cash it in for Robux.”

There is no doubt that the amount of virtual currency that is flowing through companies like Roblox, Fortnite, and others is incredibly high. Estimates show that there was more than $4.7 billion spent on virtual currencies in games during 2020. For Roblox in particular, the company earned close to $1.2 billion from selling virtual currency to its users in the first nine months of the year as gaming surged under COVID-19 lockdowns.

The amount of money flowing through gaming currency even forced the IRS to consider making these virtual currencies taxable. The good news for creators, video gaming companies, and other parties benefiting from this ecosystem is that for the time being, gamers who transact in virtual currencies as part of a video game do not have to report the transactions on a tax return if the currencies do not leave the game environment.

There is no doubt that in 2021 and beyond, virtual currency will play a major role in the growth of gaming and how creators and artists can monetize their music and likeness within these metaverses.

Licensing Bigger Catalogs of Music Become Focus for Major Gaming Companies

As music moves away from being “background noise” in games and curated playlists become more important elements in gaming, the need for global licensing deals will become critical for gaming platforms. As an example, Facebook has entered a series of new music licensing deals with labels and publishers for its Facebook Gaming platform. It will now allow live streamers, who play video games for the platform’s community of 200 million monthly viewers, to legally add songs from a vast catalogue of popular music to their videos. Facebook struck multi-year pacts with Universal Music Group, Warner Music Group, Sony Music Entertainment, Kobalt Music Group, BMG Publishing, and Merlin to cover use in more than 90 countries. 

This is good news for music publishers who continuously look for new ways to drive revenue into their songwriters, especially as the value of the mechanical royalty has declined and ad-supported public performance royalties were negatively affected by the pandemic.

More Virtual In-Gaming Concerts Are on The Horizon

Concerts and gaming are becoming ever more intertwined as it pertains to the future of the industry. As Vlassopulos noted during his interview, Roblox’s virtual concert with Ava Max was a monumental success. The virtual concert drew 1.156 million unique players for the event, with a peak concurrent total of 166,620 people. With over 150 million players on the Roblox platform, there is no doubt that artists, labels, touring agents, and managers need to seriously consider how to create these sorts of activations within these platforms. It is entirely possible that entire tours could be routed virtually in partnership with games like Roblox to just as broad of an audience as a global tour. Only time will tell just how important in-game concerts will remain when the touring industry starts scheduling physical shows and the COVID-19 vaccine gains distribution at scale. 

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