It looks like music-based video games — led by titles “Guitar Hero” and “Rock Band” — have started to run their course.
Viacom’s (VIA) Sumner Redstone warned as much during yesterday’s earnings call, saying sagging sales of Viacom-affiliated property Rock Band were dragging down earnings. And video game stats released last night by the NPD Group confirm it: Sales of music games are down significantly from the same time last year.
UBS’ Ben Schachter notes in his wrap-up of January game sales that, if you exclude “Rock Band,” Electronic Arts (ERTS) was January’s gaming champion with sales up 21% y/y. But include Rock Band, and EA slumped 6.2% with dollar sales of Rock Band down 52%.
Same story with the other big music game, Activision (ATVI) property Guitar Hero: Sales down 22% y/y. But Activision is particularly poorly placed because it’s doubling down on music: In a CNBC interview yesterday, CEO Bobby Kotick was talking up hip-hop themed “DJ Hero” as his company’s next big release. (We think Starcraft 2 and the new Diablo may prove to be bigger Activision hits this year.)
We’re a bit surpised at how quickly music game sales are falling, but not by the general downturn. Two factors at work here: First, music games sold so amazingly well the past few years the market is approaching its saturation point — Most of the potential customers of a music game already own one.
Second, South Park did its “Guitar Hero” satire a year ago, and we saw Tumblr founder David Karp playing Rock Band at a TriBeCa meetup way back in June. Music games were, basically, a very 2008 sort of fad. And all fads come to an end.