As The Gaming World Grows, So Do Music Opportunities

With more traditional music and video retailers expanding their games inventory, the three video-game console formats launching this year offer new opportunities to market to current buyers of records, music videos, and movies. All were on view with the first software at the recent Electronic Entertainment Expo (E3), May 16-19 at the L.A. Convention Center.

"The new game systems are pretty exciting, and this year should be huge, with next year even better," says Scott Burtness, VP of gaming and software for the Musicland Group, which is now part of Best Buy. "Never before have four new systems debuted in a 12-month period." The chain is expanding games into several hundred Sam Goody stores to create what he calls "the ultimate entertainment destination."

At E3, it was evident that more music acts are getting directly involved in the games market, with Britney Spears being the latest superstar to show interest. Other musicians are sharing their songs or writing new music for such projects as Infogrames' 'N Sync HotLine Fantasy Phone, Tecmo's Unison, Konami's Dance Dance Revolution, Sony Computer Entertainment America's (SCEA) Frequency, and Uncle Mudfish with a music video for the new Radica Gamester peripherals line. And MTV DJ Funkmaster Flex plays an onscreen role in Codemasters' MTV Music Generator.

The lucrative tween and teen markets that these acts attract make up 43% of console game players (Nintendo Game Boy Color [GBC] and Nintendo64 [N64], Sony PlayStation One [PS1] and PlayStation2 [PS2], Sega Dreamcast) under 18, as well as 30% of computer gamers (Windows/Macintosh), according to Doug Lowenstein, president of the Interactive Digital Software Assn. (IDSA). The group owns and produces E3, and its members account for more than 90% of all console and computer-game sales in the U.S.

After a highly successful March 21 bow in Japan, Nintendo launches the portable handheld Game Boy Advance (GBA) June 11 at a $99.95 suggested retail price, with 17 first- and third-party titles at $29.95-$39.95 each. Following a Sept. 21 Japanese debut, Nintendo GameCube is due in the U.S. on Nov. 5 at $199.95, with six Nintendo-developed titles at $49.95 each. Microsoft will introduce its DVD-ROM-based Xbox system Nov. 8 at $299, with 10-15 titles at $49.95 each.

Sony announced new partnerships with AOL, RealNetworks, Macromedia (Flash Player), and Cisco Systems that will give PS2 gamers Web access, e-mail, chat, and audio/video streaming next year. SCEA is ramping up spending on both PS1 and PS2 to compete with Nintendo and Microsoft, with more than $750 million committed to marketing through the first half of next year.

Pricing and margin concerns for the new software, noted by major retailers such as Babbage's Etc. chief Dan De Matteo and Electronics Boutique executive VP Jeff Griffiths (Billboard, May 26), were addressed by both Microsoft and Sony.

"We talked to the top retailers in the console market on their margin expectations and expected turns and conditions," says Don Coyner, Xbox marketing director. "We've structured a program we believe is better than [Nintendo's and Sony's], as we want to do what we can to be a good partner for retailers."

For SCEA, senior VP Jack Tretton emphasizes, "prior to 1995, when we established [minimum-advertised-pricing policies], it was wild out there. We believe Sony has contributed greater margins on software than hardware, with the same 20-point margin for front-line or greatest hits. You've got to protect retail from itself."

Typical of musicians with growing involvement in interactive multimedia is Spears, who says, "I'm really excited to be the first artist to use Enroute's FirstPerson [360-degree surround-sound] technology. It's a great new way of watching a concert."

Enterprise Britney, the working title for the DVD project for PS2, was previewed at a press event hosted by Paul Chu, Enroute executive VP, and Mark Steverson, Spears' attorney and spokesman.

The 'N Sync HotLine Fantasy Phone, due in September, allows gamers to use a plug-in controller that looks like a cell phone to "call" each band member and play five games: bowling, a charity challenge, Make a Move (dancing), quick change, and trivia. "The band members have been part of the game in all stages," says Stacy Allyn Hendrickson, Infogrames' senior producer for the game, which will retail for $39.95. For point-of-purchase, stores will get life-size stand-ups and window/consumer posters.

Other games are using song samples from both established and underground acts. Tecmo's Unison: Rebels of Rhythm and Dance, a dance, music and anime PS2 title, features snippets of "Stop the Rock" by Apollo 440, "O.P.P." by Naughty by Nature, "(Hot S**t) Country Grammar" by Nelly, "Barbie Girl" by Aqua, and "That's the Way I Like It" by KC & the Sunshine Band. Also featured in the game is L.A.-based R&B/pop group Nuance, which gave three mini-concerts at E3, performing dressed as game characters Cela, Chilly, and Trill.

Tecmo is also looking to license music for Dead or Alive 3, an Xbox launch title; company spokesman George Ngo says Aerosmith is among top prospects for the soundtrack.

Harmonix's Sony PS2 title Frequency lets gamers mix and remix 20 songs from such acts as Crystal Method, BT, June Reactor, DJ QBert, and Dub Pistols.

Also growing in popularity is music-mixing software. On hand from Germany was eJay from Stuttgart, whose line of music creation software, sound archives, and MP3 solutions is distributed in the U.S. by Voyetra Turtle Beach (VTB).

"We had to beef up packages for the American audience," notes VTB regional sales manager Gary Prell. He also previewed the new MusicWrite Songwriter and MusicWrite Maestro for serious musicians to create sheet music. He notes that an in-the-works AudioStation Dynamite would incorporate VTB's PC Jukebox and CD-burning software with MP3 utilities.

On the technology side, Muze launched its promised MuzeGames database (Billboard, May 12), developed with Pacific Games to provide online merchants with the data elements they need to market and sell console-based video games.

"The structure and depth of MuzeGames makes it easy for consumers to find the titles and features they want," says Paul Zullo, Muze co-founder and executive VP. "Weekly updates ensure that both retailers and consumers as end-users will have the latest information."

And with so many titles and systems coming to market, there will be plenty of need for updates. What's more, the opportunity for additional game revenue is significant, retailers say. In fact, if Microsoft, Nintendo, and Sony deliver on their hardware promises for the critical November/December time frame—unlike the Sony PS2, where only 50% of promised units for its introduction were made available to consumers—this could be the first $10 billion year for the interactive entertainment industry, IDSA's Lowenstein observes.

With the online gaming and mobile (cell phone) sectors just taking off, some industry forecasts project a $25 billion game market by 2005, which would be four times the movie market and nearly twice the recorded music industry sales. That's a big pie for music, video, and multimedia retailers.