During Viacom’s Q4 earnings call, on Thursday, Philippe Dauman, Viacmon’s president and CEO, pointed to lower rates paid to record labels as a part of a broader attempt to boost its struggling video games division.
As we go forward, we are continuing to focus more on software than hardware, looking to reduce the cost structure associated with Rock Band, being selective in the music titles that we choose for Rock Band based on their cost. The music industry will assist with this category to make sure that it can continue on a profitable basis in the future and then finally we think we have the best games in the category, we'll continue to rollout exciting products.
Lower licensing fees and more selective video game companies could be bad news for some music companies. Video games have provided a boost to licensing revenues and overall awareness for many artists. But sales are down sharply. An analyst with Wedbush Securities estimated, that two-thirds of December’s 12% year-over-year decline in video game sales came from the music category.
In spite of the promotional value of video games, some labels have maintained they are due more for the use of their content. In Warner Music Group’s FQ3 2008 earnings call, Edgar Bronfman Jr. expressed disappointment over “paltry” licensing fees from videogame makers. WMG and Harmonix reached an impasse last year. In the five or so months after Bronfman first spoke out about licensing rates paid by video game companies, Billboard reported in March 2009, WMG had not inked any new licensing deals for the Rock Band franchise.