The Changing Gaming Landscape and the New Opportunity for Music Licensing

Gaming continues to capture consumer attention around the globe, achieving revenues of close to $200 billion across software, hardware and accessories in 2019, and accelerating the prospects for music in gaming. As a result, Futuresource Consulting was invited to present to CISAC’s Media Technical Committee last month and talk about the opportunities. With 232 member societies in 121 countries, CISAC is the world’s leading network of authors’ societies, representing more than four million creators. Morris Garrard, Research Analyst at Futuresource Consulting, takes us through some of the detail.

Of the $200 billion generated by gaming software, hardware and accessories, software commands the lion’s share, accounting for more than $140 billion in spend. And when we explore the wider entertainment content industry, comprising music, games and video, gaming software, video still takes the lions share. However, gaming continues to increase its share of the consumer wallet, commanding close to a third of every entertainment dollar spent.

Gaming Software on the Up, Fan Bases Increasing

Gaming software accounted for 32% of total content spend in 2019, with Futuresource forecasts showing this will increase to 35% by 2024. It’s the 12 to 35-year-olds who are most active in gaming, and as people get older many of them continue to pursue gaming as a hobby. In addition, younger generations are discovering gaming, the gaming userbase are accumulating and the market continues to expand. This presents not just an opportunity for gaming, but an opportunity for licensing music within gaming as well. Increasing consumer spend on content means an increasing investment in game production, particularly for high budget AAA titles. As publishers explore ways to differentiate their offerings and create immersive experiences, they are investing heavily in the audio experience, of which music is a core element. This presents a beneficial environment for the music industry. In particular, the key growth areas are mobile gaming content and subscription streaming services; which promise to expand the reach of top tier content to an even wider demographic of consumers, including those in emerging regions.

We expect mobile gaming’s share of software spend to grow from 50% in 2020 to 52% in 2024. Console and handheld’s share of the market will remain relatively stable, with PC software experiencing some downward pressure. This shift towards mobile is being driven primarily by budget constrained consumers in emerging regions, however cloud processing is also pushing the industry into a state of flux, with services such as Google Stadia, Microsoft’s project xCloud, Amazon Luna and Nvidia GeForce Now blurring the lines between the gaming devices in terms of access to AAA content.

A New World of Licensing Agreements

As the market steers a course away from traditional PC gaming and console, in favour of mobile, the number of business models, operators and publishers is increasing. Although this fragmentation could create challenges for the music industry when trying to identify and capitalise on emerging opportunities, it also means that lucrative licensing agreements exist beyond the top tier AAA gaming titles. Traditionally, these titles and publishers have been dominated by buyouts, work-for-hire contracts and in-house music production, making it very difficult for musicians and those representing them to gain a foothold in the gaming industry. Now that the industry is shifting direction, a much larger share of the $200 billion gaming purse is expected to make its way towards the music industry.

Subscription Services Provide Opportunities for Music

Subscription gaming services are also becoming a viable opportunity, striking out on the trail blazed by music and home video subscriptions. The market is still comparatively small, with some gamer inertia caused by a desire to own the personal experience that gaming offers, as well as a fear of losing progress in a game if a subscription lapses. Another major issue has been the lack of compelling content, partially driven by publisher and platform reluctance to release big titles on subscription services from launch, due to fear of cannibalising full game sales. However, services such as Xbox Game Pass and Amazon Luna are overcoming content availability issues by buying out publishers or forming strategic partnerships to guarantee AAA content will be available on the platform on the day of release. This is an area where we’ll see market entry from companies like Google, Amazon and Apple, with the backend infrastructure to support cloud processing. No longer will there be the need for dedicated hardware, and in some cases, such as Amazon Luna, access to a Netflix-style, ‘all-you-can-eat’ library of content.

The rise of steaming services presents a major landmark for music licensing agreements. That’s because streaming enables a reclassification of games content. Physical disc purchases and digital downloads do not count as public performances. Therefore, they’re not eligible for performance rights payments. However, cloud gaming may be able to acquire a public performance classification, opening up the opportunities for collection of performance royalties.

Moving forward, while dedicated hardware will still maintain a foothold in the gaming ecosystem, Microsoft, Google, Apple, Amazon and China’s Tencent all have the ability to disrupt the current status quo. In many cases they are already making moves to capitalise on the growing gaming market. We expect further fragmentation in the future, with streaming services playing a key role in driving this revolution and further opening up the market to the music industry.

If you would like to learn more about the music and gaming reports from the digital media and entertainment team at Futuresource Consulting please visit get in touch with Kailash Morjaria via kailash.morjaria@futuresource-hq.com.

About the author

Morris Garrard

Morris Garrard is a Market Analyst at Futuresource Consulting, working within the Media & Entertainment team. Morris leads a number of projects within the Video Insights report series, covering the waterfront of video entertainment in multiple international markets. Morris also works on Futuresource’s biannual ‘Living With Digital’ Consumer survey.