Artists from Nirvana to the Red Hot Chili Peppers have seen sales of their music more than double after being released on the games. Some bands are featured on special editions — like Aerosmith on Guitar Hero this year and, soon, The Beatles with MTV Games — and last month, The Killers released two new songs on Guitar Hero the same time their latest album came out.
"It's a way to save the music industry," said Grant Lau, a 40-year-old bar worker who started the play-along night at the Hyperion three years ago for a friend who owns the bar.
Lau points out the games protect artists and recording companies from piracy because buyers have to own the console equipment to enjoy new music, which they must purchase through sanctioned game sites or on special game-formatted discs.
"You actually have to buy the music," he said. "You can't just rip it and put it on (file-sharing site) Limewire."
The addictive play-along games are a cross between karaoke and open-mike night. Players hear an approximation of a song and try to match colorful visual cues by pressing buttons on a guitar-like plastic game controller, pounding touch-sensitive rubber drums and singing into a specialized mike. Successful performances sound quite like the originals.
"As soon as you play it, you like it a lot more, and then you buy it," said Tan Doan, a 26-year-old Web developer from Long Beach. While playing Rock Band at the Hyperion every Wednesday, he discovered The All-American Rejects, got hooked on the band and then bought its CD.
A new feature on this October's Guitar Hero: World Tour allows users to create new songs and upload them for others to play, making the platform a place to discover music, as well as compose it.
Seeing more than 65,000 original songs uploaded so far, RedOctane's Huang predicted that music video games will "become the biggest platform for music distribution in the world."
"We still have great relationships with most of the (music) industry. We continue to really benefit each other," he said. "At the end of the day it's about creating a great game for the users. We'll figure this stuff out."
This holiday season is expected to bring even stronger game sales and, by extension, a still greater boost for the featured musicians.
Through November, some 22 million units of Guitar Hero had sold in the U.S. since its launch in October 2005, along with 5 million units of Rock Band since its debut in late 2007, according to NPD Group. The release of Guitar Hero: World Tour in October could boost revenue for the franchise some 40% over last year, according to analysts. At $189, the latest Guitar Hero costs nearly twice as much as last year's version because it comes with a drum set and a microphone. The newest Rock Band—Rock Band 2— costs the same with all the peripherals.
"They're selling out," said Cowen & Co. analyst Doug Creutz, who noticed resellers on Amazon.com charging a premium of up to $85 over the regular price for the full kit. "In the U.S., supply is a lot tighter than they were anticipating."
The predecessor, Guitar Hero III: Legends of Rock, raked in $750 million between fall 2007 and this fall.
The revenues don't stop there.
Users have downloaded game-playable songs more than 55 million times, some free but most around $1.99 each, since the games launched, and new titles come out each week.
Promoters have even brought the game into the real world with a Rock Band Live concert tour.