Music and Games Partnership Strategy Beyond the Comfort Zone

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

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