Warner Music Group boss Edgar Bronfman Jr. wants a bigger cut of the booming business around video games like "Guitar Hero" and "Rock Band," setting up a showdown over money with their makers Activision and MTV.
Bronfman yesterday threatened to stop issuing song licenses for games that allow users to pretend to be rock stars if the revenue-sharing model for the games doesn't improve for the music business.
"The amount being paid to the music industry, even though their games are entirely dependent on the content we own and control, is far too small," he said. "We need to be very careful that [we] do not allow an ecosystem to occur where we are not properly compensated."
Bronfman - wary of creating another Apple or MTV - told analysts yesterday he wants higher royalties both for the use of Warner songs in the games as well as for what Warner collects in the sale of songs downloaded to video game consoles, calling the fees the label currently receives "paltry."
Bronfman's comments come as Activision's "Guitar Hero" has blossomed into a $1 billion franchise, and "Rock Band" is anchoring the game ambitions of MTV Networks, which owns Harmonix, the game's developer.
"The industry as a whole needs to take a very different look at this business and participate more fully and in a much more partnership way," he added. "If that does not become the case, as far as Warner Music Group is concerned, we will not license to those games."
Activision did not return calls for comment. MTV declined to comment.
Sales of the latest edition of Guitar Hero, "Guitar Hero III," total more than 8 million units, while "Rock Band" sales are north of 2.5 million.
"Rock Band" has also sold more than 18 million additional song downloads for the game at $1.99 each.
Sources said while the issue is unlikely to impact the licensing of songs to "Guitar Hero World Tour" and "Rock Band 2," both due later this year, Warner is likely to withhold music it controls for uses in any artist-branded versions of the games in development.
In a new trend, Aerosmith recently released its own special branded version of "Guitar Hero."
A number of other classic bands, including Warner acts like Metallica, are reportedly in talks to do similar deals.
Music-industry sources complain that while video-game makers have been discussing revenue-sharing deals with artists for their names and likenesses - including up-front advances in some cases - labels have not been offered similar participation opportunities for song licenses.
Meanwhile, Warner yesterday said third-quarter revenue increased 5 percent to $804 million, while it narrowed its loss to $9 million from $17 million.
Digital revenue grew 39 percent to $166 million, representing 20 percent of the company's total revenue.
Shares in Warner fell 17 cents, or 2 percent, to $8.27.
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