Five years ago, the plugs were pulled on two of the biggest-selling franchises in video game history. After generating $2 billion and $1.7 billion in revenue, respectively, Guitar Hero and Rock Band were discontinued by their publishers as sales nosedived due to overhype and oversaturation.
Today, like a pair of reunited stadium-rock acts, the games are poised for a comeback: Harmonix announced in March it will release Rock Band 4 this fall. Activision followed with news of a new Guitar Hero Live coming in October. Both companies unveiled early versions of the games to tens of thousands of players — and rave reviews — in June at the annual E3 video game convention in Los Angeles.
But the resurrection of these two once-towering franchises prompts the question: Is this the last hurrah, or do they have a viable future? And will they ever again reap significant licensing income for record labels and rights holders?
To answer, it helps to understand the backstory. In 2005, also at E3, Harmonix and its partner Red Octane introduced the first Guitar Hero in “a back corner, under a poster-board sign that kept falling down,” recalls Daniel Sussman, the game’s producer. The title became a sleeper hit when it debuted that November, selling 1.5 million units; a year later, Guitar Hero II doubled those sales.
In 2006, the games’ creators were sold to separate companies, spawning one of the industry’s most intense rivalries: Activision bought Red Octane and the rights to Guitar Hero for $100 million; Harmonix was sold to Viacom’s MTV Networks for $175 million, plus $150 million in performance bonuses. Thus began a frenzied battle for market share.
Harmonix created Rock Band, which extended the guitar experience to drums and vocals and followed with five more titles. Not to be outdone, Activision blasted out 22 games based on Guitar Hero between 2007 and 2010; they generated an estimated $2 billion in retail sales.
For the music industry, it was a windfall: At its peak in 2008, the Rock Band music store sold an average of 1 million songs every nine days. “The genre changed the synch licensing business completely,” says Sony/ATV Music Publishing’s Randy Shefer. “It became such an important revenue stream that the major labels and publishers hired people specifically devoted to this area.”
But in 2010, the party ended. Activision dropped Guitar Hero. Viacom ultimately wrote off $200 million in losses from the games and sold Harmonix to a consortium of investors for just $50, plus debt.
Clearly, it’s a long climb back. But both companies cite gameplay innovations as major reasons to revive the franchises. Rock Band 4 is introducing a new feature that offers a choice of preset patterns within the same key as the song, essentially allowing players to assemble their own solos. Players of Guitar Hero Live will see video footage from concerts, music videos and staged actors.
Also in the franchises’ favor, Sussman, now a project director for Rock Band 4 at Harmonix, cites a strong core audience for the games. “There are people who never stopped playing,” he says. “We’ve had more than 1 million plays of Rock Band 3 since 2013.”
Yet many in the music business are circumspect about their opportunities. “The fees and royalties have come down, relative to the way things are in our industry,” says Michael Pizzuto, senior vp at Bicycle Music, which represents the music of acts ranging from Nine Inch Nails to Foghat. “The glory days likely won’t come back, but we hope their success will surpass our expectations.”
Similarly, Wall Street analysts have set fairly modest expectations. “I think $200 million [in sales] each is reasonable, putting them at 20 percent of the peak level from last cycle,” says Michael Pachter, entertainment analyst with Wedbush Securities. “The real question is whether they can generate recurring revenue.” [Billboard]
