Despite the fact that the demand for great music never wanes, record
labels have it rough these days. The cause: one part misfortune, one part

To survive and thrive in the digital age, record labels need to think beyond their traditional business models.

For struggling record labels looking for new revenue streams, there was some sweet music last week: the Rock Band Network.

Soon, record labels will have the ability to submit their music for inclusion in Rock Band, the uber-popular music video game that allows players to assume the role of a virtual band.

With the upcoming Rock Band Network, record labels (and music rights holders in general) will be given the opportunity to sell their music through an in-game store. Pricing will be variable; individual tracks can range in price from 50 cents to $3. Rights holders will receive 30% of each sale.

While that may seem like small potatoes, consider this: right now, there are only approximately 700 songs available for use on Rock Band. The relatively few songs that have been made available for download and purchase through the game have, however, driven 50m song sales. With labels able to get more of their catalogs into Rock Band, including some of their biggest recent hits, in-game sales through Rock Band should explode.

Rock Band certainly has the userbase to do it as it represents one of the most popular video game franchises. More than 4m units of the game have been sold, reaping over half a billion dollars in sales. The game was created by a company called Harmonix, which MTV Networks purchased in a nine-figure deal in 2009. The game has been such a success for MTV that in November 2008, it paid the two co-founders of Harmonix a whopping $300m bonus. That was on top of a $150m bonus paid earlier in the year.

It’s clear that Rock Band is a rock star financially but for record labels, it’s just not about sales. It’s about building a revenue stream for the digital age. Thanks to the internet, the marketing of music has probably changed forever. Increasingly, record labels need to go beyond the CD or iTunes download. They need to find new markets for their music.

With Rock Band, record labels have an experiential application for their music. They’re not just selling music; they’re selling the experience of being able to play it. For consumers, many of whom don’t see anything wrong with downloading ‘free music‘, that may be the type of value proposition record labels need to embrace and seek out.

Photo credit: MSDPE via Flickr.