Music and Games Partnership Strategy Beyond the Comfort Zone

The 20,000 Foot View:  Music companies are flocking to explore partnerships with games companies. Seeking a foothold in a fast-growing market, music companies are often looking for easy wins that fit traditional licensing models that monetise consumption. These however, typically do not align with the games industry’s spend-centric worldview. The traditional licensing approach can deliver, but it is only a fraction of the total games opportunity. Music rights holders need to design proposals that help games companies grow their success, rather than simply seeking a share of it. Music companies need to become ‘business-critical’ partners to the gaming industry, innovating deal structures that help the games industry unlock its most important growth opportunity: in-game spending. In turn, games companies need to look for music partners possessing a suitable combination of: catalogue size, popularity and relevance, along with willingness to align KPIs, and the ability to move fast.

Key Insights

• The commercial            of music companies and games            are misaligned, with music KPIs            and games KPIs spend-centric
• Labels’ traditional            and set-up is geared to            consumption-centric licensing partnerships, which offer            incremental value to the games           
• As a            games companies view consumption-centric licensing            as a nice-to-have, rather than            need-to-have
• At            games            are three times more likely            spend            hours per week streaming            fuelling further labels’ push for            approaches
• Music rights            want to expand the reach            music in games more than            companies need it
• Global in-game            accounted for            of global games            in 2020            billion), expected to                       billion by 2027
• Cosmetic in-game            will reach            billion in 2021,            to            billion of total global            music revenue (retail values), presenting            transformational revenue opportunity for music           
• In-game spending            labels a unique opportunity to            fandom, on top of consumption,            thus break out of the            of the attention economy-driven velocity           

Companies and brands mentioned in this report: Apple, Appstore, Epic Games, Fortnite GTA, League of Legends, Riot Games, Roblox, Rockstar Games, Sony, Spotify, Warner Music Group, YouTube