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Analyst:  Guitar Hero  To Lead 2009 Band Game Wars
Analyst: Guitar Hero To Lead 2009 Band Game Wars
April 22, 2009 | By Leigh Alexander

April 22, 2009 | By Leigh Alexander
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    18 comments
More: Console/PC



Although music games may see moderate decreases in sales this year, the genre is "here to stay," according to Cowen Group analyst Doug Creutz -- and he's betting on Activision and Guitar Hero as the category's ultimate leader.

Band games, in attracting new audiences, have created a permanent market position, says Creutz. And as the industry is challenged to post year-over-year growth in the current climate, he expects Activision's music games will be up "modestly," or .7 percent year over year.

"We believe music genre sales for the company will be driven by an expansion of the release slate in 2009, which should broaden sales to core consumers," says Creutz.

Plus, Activision Blizzard's expected to pull ahead in the genre competition, says the analyst: "We also believe that Guitar Hero is likely to face less competition from Rock Band this year, driving a gain in market share for Activision Blizzard."

It's doubtful, according to Creutz, that the upcoming Beatles-themed Rock Band release will make the same kind of impact as another major franchise release. And the high price point -- $250 -- of the special edition "could put a cap on peripheral sales."

If anything, Rock Band can benefit from Activision's upcoming DJ Hero release, which Creutz believes will once again expand consumer willingness to buy new peripherals -- a reversal of the fashion in which Rock Band's successful band kit paved the way for Guitar Hero to move beyond guitars.

"New product innovations, such as the upcoming DJ Hero, should keep the franchise fresh, possibly supporting another strong surge of peripheral sales," he says."

That doesn't mean the road ahead is easy. Creutz forecasts that this holiday's Guitar Hero release will actually see a 21 percent year-over-year sales decline in the U.S., weighing down the rest of the portfolio.

But the company has room to grow in other markets: "We think that Activision Blizzard will benefit from more significant growth for the Guitar Hero franchise in Europe where sales and supply have thus far lagged the U.S," Creutz explains.

The analyst says that concerns about genre decline, or assertions from other analysts that music games are a "fad," are overall unwarranted. "Our expectation is that given the wide consumer acceptance of music and rhythm video games, the category is unlikely to collapse back down to a significantly smaller percentage of total video game sales," says Creutz.

"Although some casual gamers who purchased music games over the past few years may drop out of the market, we believe that the genre is now firmly established as one of the major categories of interactive entertainment and will likely see continued strong and expanding sales to its core base."


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Comments


Geoffrey Mackey
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I do think this is some-what of a fad. The games are much less special because there are 17 released every year it seems. I'm not saying the genre is going away, but I can't imagine interest will grow at this point now that the innovation has reached it's height.

Andrew Dovichi
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You think that the innovation is out of the genre already? Innovation will always be limited by the publishers willingness to take a risk, so in that sense, innovation in the rhythm genre may be dead, but there is always room for more innovation. I think there are still some more innovative surprises left in the genre, just have to hope that someone will take the risk involved in attaining them. Harmonix has historically taken that risk, so I would hedge my bets on them.

Bob McIntyre
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I think Andrew's right, this genre isn't tapped out yet. A lot of games are just doing the very simple, surface-scratching "pretend you're playing an awesome song you've heard on the radio" thing. Games like Parappa and Patapon, although not the newest in the genre, show us that there are places to go with this. We just need people to go there.

Sean Parton
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While I'd like to agree with Andrew that there is still innovation possible in the rhythm genre, I'm not sure if I can agree that it will come from Harmonix. All Harmonix has shown me since the release of RB1 and 2 is that they don't want to improve what they have. At least Activision added in new mechanics in Guitar Hero World Tour (open notes for bass, holding down one note and playing others, solo notes).



While it seems with Harmonix's history that they could indeed come up with some sort of new style of game, it looks like they're far more interested in milking the Rock Band IP then even trying to take risks with in and making something new. I suppose we'll find out when the Beetles game comes out, but I'm not holding my breath.

Ed Alexander
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I'm not so certain this analyst actually gets in the trenches with what the consumers want. I've followed the Rhythm genre pretty extensively and always read various posts and threads to keep my finger on the pulse, and if there is one consistent theme that is circulating among the gamers, it is "Activision is stifling the genre."



And it is true, every disc based game they release could better be served as DLC. Harmonix has done a wonderful job of keeping disc swapping essentially non-existant (you can rip all but 5 Rock Band tracks to play like DLC for any future Rock Band title, and you can get a one-time rip of Rock Band AC/DC to do the same). They are focusing on consumer convenience, giving their customers what they want. They release DLC every single week, and release a very broad spectrum of genres. Harmonix is very customer oriented.



Activision is very business oriented. Their strategy seems to make the consumer buy discs for $60 a pop, whereas maybe the consumer only wanted $26 worth of tracks (at the typical going rate of $2 per song). Their strategy technically is working, they are making a lot more profit than Harmonix, but it is arguable just how long a horse can take a beating before it dies. Right now the gamers want Activision to stop releasing 2-3 Guitar Hero games a year, especially since any time you want to play a particular song, you're likely to need to switch discs, which interrupts the flow of play.



As far as consumer peripherals go, again, keeping the finger on the pulse will show that people are already concerned about the amount of fake plastic instruments clogging their living room. There are already multiple peripherals out there that try and address the issue by having a coffee table that doubles as a chest to store the instruments and collapsible drum kits to save room. It is a concern that will effect consumer consumption.



I agree that the Rhythm genre is not a fad, but I disagree on a fair bit of other things. It seems like his points are being made off of past sales data, which can track trends, but current consumer discontent is not a part of his equation. Besides Activision is a corporate giant compared to MTV Games, if you're looking at it from a profit only based bottom line, Activision is definitely going to profit more. The stakes are higher with a lot more money being spent on marketing. The earnings potential from playing $50 a hand Blackjack is definitely higher than $5 a hand.



Personally I think comparing Guitar Hero to Rock Band has become apples and oranges. Each company is successful in their goals, Rock Band for customer satisfaction and Guitar Hero for profit, but their business models are not identical. They're still fruit, just different kinds of fruit.

Roberto Alfonso
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It may not be a fad, but Activision isn't helping by releasing 5 or 7 games per year.

Jamie Mann
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There's some interesting statements there. I have to admit that my anecdotal evidence points to Rock Band being more popular than Guitar Hero - the musical "notes" are better laid out, the graphics are less cheesy and the music selection is generally more interesting. Admittedly, now my friends and I are outside the 18-30 demographic, it can be argued that the GH cheese isn't particularly targetted at us :)



Someone mentioned innovation above, which is a complex and thorny subject. Both Harmonix and Activision are constrained by the need to maintain backwards compatibility with existing instruments - the various things they'd added since RB1 have all been effectively limited to "gimmick" status. There's also limits to how far they can tweak the gameplay - gameplay changes generally increase the complexity (and alienate non-hardcore gamers) or require the aforementioned "gimmick" hardware, which means they're effectively optional and liable to be ignored. GHWT's "slider gems" are a prime example of this.



I have to admit that I agree with the article about Beatles Rock Band - I'd expect sales of this to be fairly low: it's a great publicity coup, but no-one I know is particularly interested. I'd also expect the "cap" on the peripheral sales to be the fact that most musical-gamers already own the required peripherals and are unlikely to want to buy more (though it's possible RB1 equipment owners will want to trade up).



Still, Guitar Hero is liable to face some challenges - Lego Rock Band is inspired lunacy which is liable to be highly popular (especially on the Wii) and it remains to be seen whether DJ Hero is going to catch on or not.



Regarding the focus on disc-based updates, I think the reason why Activision (and Harmonix, to a lesser degree) are going down this route is simple: they make more money out of it. There's a distinct parallel with the music industry, albums make a lot more than singles, partly because the purchaser is forced to buy songs they don't want.



dlcstats.com is hideously out of date (and relied on highscore table usercounts), but has a snapshot of DLC sales data from September 2008. Of the 203 songs released at that point, only 19 had hit the 100'000 mark. Meanwhile, 80 songs had sales of less than 20'000. This is with an installed userbase (on the X360 alone) of 1.8 million!



It's also notable that the album collections (The Pixies, Judas Priest, the Who, The Cars) had an average of around 25'000 sales per track - The Pixies was actually banging along the ground with an average closer to 7'000!



Compare this to the expansion packs (stats taken from vgchartz.com, with all the inaccuracy that implies!).



RB: AC/DC looks to have sold around 300'000

RB2 (which can be viewed as a sequel or an expansion pack) has sold around 2'700'000

GH: Aerosmith looks to have sold around 2'500'000

GH: Metallica has sold around 500'000 - and it's yet to launch in the EU!



DLC is a great value-add to suck newcomers in, and it makes for a nice trickle of income, plus an ongoing bubble of free publicity. But it's not where the big bucks are.

Sean Parton
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@Ed Alexander: I was originally what was going to ask you if I could get some of what you're smoking, but I think our differences in opinion lie entirely in preference and what we want with our product. For example, I own GH games on the Wii, so not only is DLC not very feasible for me, I actually enjoy getting large packs of tracks for less than buying them all separately. Also, I don't give a damn how many games Activision releases a year; the only "expansion" title of theirs I've bought was Metallica, but I've enjoyed that thoroughly.



@juice uk: Nice writeup of the comparison of DLC to expansions. Thanks for that.

Tom Newman
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Music games currently are a fad for sure - but the fad is so huge that the genre will continue to survive long after the "fad" part goes away.

I don't see The Beatles as being a game changer by any means, and next year I'm looking forward to a comparison between the RBBeatles and GHMetallica sales figures. It will be interesting to see what the entire genre will become in a few years.

Ed Alexander
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@Sean: Is a good thing we live in the country that we do. ;) The Wii platform in specific is an interesting situation, with the lack of a hard drive for storage. I guess that multiple discs would be the better solution early on, since there was no storage solution in place to allow for DLC. The Wii's new SD card workaround seems to fill that gap. It's not as permanent of a solution as an actual hard drive, but it is one of the pitfalls that has prevented me from wanting to buy a Wii.



I would not call myself biased, I actually own most all of the rhythm games myself. Guitar Hero 1, 2 and 3 on the PS2, Rock Band, Rock Band 2, Guitar Hero: World Tour and Guitar Hero: Metallica on the PS3. They all fill their niche in their own way, but my biggest complaint is about the disc swapping. Because of that, I'd say Rock Band has dominated my fix of a ratio of about 80/20, 90/10 if you remove GH:M from the equation. And I greatly prefer the World Tour setlist over the Rock Band 2 setlist...



Maybe I'm a minority, but I know for a fact I've spent more than $200 on Rock Band DLC, which would not have been the case if not for the convenience factor associated with it. The pacing at which I play the songs I want is an important factor to me. (I'm actually scared to tally up exactly how many songs I've purchased and calculate the money spent. Out of sight, out of mind!)

Sean Parton
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@Ed: Perhaps it's less a matter that it's a good thing of where we live (I

Sean Parton
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@Ed: Perhaps it's less a matter than it's a good thing of where we live (yay Canada) but that having the two companies competing stops the rock band-style games from stagnating as they would under a monopoly of the type of game.



Note to Gamasutra: Most of my previous comment seems to have gibbled out due to something I typed. Seems to have died after I attempted to use the "less than" sign (to make a heart emoticon).

Brian Harris
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I think the popularity of rhythm games is very similar to Dance Dance Revolution. How many people are still playing that?

Meredith Katz
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Sean, that's standard on forums that enable HTML, as it's the opening of a HTML tag.

Sean Parton
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@Meredith: I was aware of that, I just didn't know if it was a bug that it cleaned out the rest of my comment due to there not being an end symbol for that tag. I guess I'll just have to stay away from similar symbols in the future.

M. Smith
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"The analyst says that concerns about genre decline, or assertions from other analysts that music games are a "fad," are overall unwarranted. "Our expectation is that given the wide consumer acceptance of music and rhythm video games, the category is unlikely to collapse back down to a significantly smaller percentage of total video game sales," says Creutz."



It isn't a fad. But it was a case where a new market was found that had absolutely nothing offered to it, and so the initial sells are awesome. I think a lot of gamers will continue to buy rhythm games, but you'd have to be insane to think they're going to be buying them enough to support 2-3 releases from each franchise every year.

James Hofmann
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DDR is a good point to bring up, mainly because the equipment makes it arcade-oriented, but because it's a series that has been around for a very long time, and has mostly lacked for strong competition. The two major competitors are Pump It Up(Andamiro) and In the Groove(Roxor). PIU is still alive, but it's mostly a Korean game with some success in South America, and almost no attention in North America. ITG was a known success with one sequel and a second planned, but the use of an upgrade kit installed into existing DDR cabinets violated Konami's patents, so legal action was taken, the company was purchased in settlement and the series was mothballed.



I can say anecdotally, as a player, that when ITG was around, it revived interest because there were more/different songs and a plethora of gameplay options added, and they would have kept coming if there were still new content. In the last few years interest has only stuck around because ITG's creators included (one intentionally, others not) multiple backdoors towards playing custom songs. As a result there's a tiny in-the-know hardcore that will continue playing for as long as the cabinets hold up. The competitive play has reached insane levels with no sign of stopping.

Simon Carless
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Sean, we actually do have it as a bug report that 'less than' eats the rest of the comment and we're going to see if we can find some way round it - sorry about that!


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