Digital Music Roundup: Project Playlist/Sony BMG; Music Games Boost Artists' Sales, Not Labels'

This story was written by Tameka Kee.
Project Playlist seals deal with Sony (NYSE: SNE) BMG :  So what can you do with a double-digit round of funding? You can use some of it to pay record labels' licensing fees for legal access to their tracksat least that's what Project Playlist seems to have done. The music streaming service has brokered a deal with Sony BMG for access to its audio and video catalog. Playlist is being sued by other labels like Warner Music, EMI, UMG (and the RIAA) because its users share tons of unauthorized tracks, and MySpace recently banned its widgets; so this first deal with a major label could usher in a new wave of "legitimacy" for the service. (It may also be a glimmer of hope for other music sharing startups disheartened after the shutdowns of sites like Mixwit and Muxtape).

Founder Jeremy Riney hinted that the company was working on other deals in a release, saying: "We hope that we soon will be able to provide our users with ready access to even more of the music they want." Playlist poached new CEO Owen Van Natta from Facebook and picked up an undisclosed amount of funding in early November (though sources hinted that it was in the $18 to $20 million range).

Music games help artists (not labels) rake in the dough : Music game franchises like Activision (NSDQ: ATVI) Blizzard's Guitar Hero and MTV Games' Rock Band are making some bands more money than their latest albums. Kai Huang, co-founder of RedOctane (the Activision studio that first developed Guitar Hero), told the AP that Aerosmith made more money from sales of Guitar Hero: Aerosmith (which launched in June) than from either of its last two albums. The music games offer multiple revenue streams for artists that appear in them: initial sales (which topped $1.9 billion in the past 12 months, per NPD), downloadable song sales (new tracks typically cost about $1.99, though some are offered for free) and image and likeness licensing fees; the latter of which typically bypass the labels.

And the labels want a bigger cut, particularly as CD sales continue to dwindle. The problem is, they don't have much leverage, as these games use fewer than 1,000 tracks combined. If a given label decides not to allow its content to be used, the gaming companies will find other songsand their artists might even leave. Wedbush Morgan entertainment analyst Michael Pachter told the AP: "If Warner wants to say we'll take our 20 percent of the market and go away, a lot of bands are going to leave the label if they think they can get better exposure by being on these games."

By Tameka Kee