The Music Business, Gaming-Style

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This is Celia Hirschman with On the Beat for KCRW.

It may be a bitter pill to swallow, but record labels are finally waking up to the fact that lots of consumers are passing up the record-store experience for alternative ways to spend their money.

Numbers just don't lie. Normally a #1 record sells at least 125,000 copies, but in January, two records that hit # 1 each sold just 60,000.

Why isn't music selling in stores? Thirty years ago, there was an overwhelming hunger that drove people to buy records. Whatever got them into the store in the first place, whether it was a friend's recommendation, a local DJ or a good review in Rolling Stone, the record store was the place to fill that burning desire. But today, consumers have so many options they can afford to be choosy about their purchases. With Internet access, they can stream tracks first, read customer reviews, pick and choose the songs they want from an album, decide whether to own or rent music and compare prices -- all from the comfort of their own home. And though the remaining independent retailers have a loyal customer base, many of America's favorite record stores have closed. Music consumers have just gone elsewhere.

So where did they go?

Judging from the numbers, a lot of them went to gaming. Games like Guitar Hero or the similar game, Rock Band, represent huge income streams. Guitar Hero sales for 2007 set a new gaming industry standard, earning over $820 million in sales. In fact, the entire Guitar Hero franchise, which allows players to create all the sensations of being a rock star, without leaving their house, has sold almost 16 million copies worldwide.

Both games, Rock Band and Guitar Hero, feature classic rock anthems. You can buy additional classic tracks and new songs online.

What's particularly interesting is that Rock Band offers new song downloads every Tuesday. This means a rabid fan base waits each week for the next download.

And though Guitar Hero 3 offers less new tracks, the brand is well established. Take Guitar Hero 3's most popular download this week. It's the song Slow Ride. Players can download Slow Ride and compete online. Currently the track has been used in over 10 million plays this week!

Music gaming is rapidly becoming an important revenue streams for labels and artists to generate money and build fan bases.

A hungry record industry, desperate to rebuild the magic, should look positively on news like this. After all, something is working.

This is Celia Hirschman for On the Beat on KCRW.