Australia's Mushroom Group today launched an interactive division, to produce PS3 and Xbox 360 games for the global market.

Mushroom Interactive is 50/50 owned by Mushroom chairman Michael Gudinski and Vincent Donato, who also runs and co-owns the group's international licensing division Liberator.

The first project, tentatively titled "The Establishment", goes into production in eight weeks, Donato tells Billboard.biz.

The game revolves around a music club, in which the player's challenge is to acquire more money to better the venue, book bigger bands and fend off gangsters doing deals in toilets.

"The Establishment" will use up to 130 tracks. Works will be sourced from Mushroom Group labels, such as Liberation and Ivy League, from Mushroom Music Publishing and from other labels.

Australian-based games and film consultant Tom Parkinson is negotiating with international distributors.

"This is a game for the international market, not for Australia," Donato emphasises.

Mushroom Interactive will work closely with Mushroom Pictures, headed by film and television producer Martin Fabinyi, to turn scripts into games and vice versa, Donato says.

The games (four others are also in the pipeline) will be built by Melbourne-based production house Acheron.

Australia is home to about 40 game development companies, with four major players: Tantalise, Chrome, Blue Tongue and IR Gurus. Between them, they produced 200 games earning A$100 million ($77.50 million) in export sales, according to local research firm GfK.

"It is an exciting time for music placement in games; the future holds a lot of promise with the level of involvement that music will play in games globally," commented Gudinski in a statement issued today. "The Mushroom Group has always been proudly at the forefront of promoting Australian music and now Australian music will be further exposed to a young digital global audience. Clearly our future lies with digital audiences, it is imperative we embrace all new music applications to market and promote our artists."

Last year, the Australian gaming industry grew to A$925 million ($716.8 million), up 7% from 2005. Gaming retail sales in the United States rose 19% to US$12.5 billion in 2006, according to researcher NPD Group. The U.K. market rose by 7% to £1.36 billion ($2.62 billion), says the Entertainment and Leisure Software Publishers Association (ELSPA).