All Things Digital

It wasn’t very long ago that Warner Music Group boss Edgar Bronfman Jr. was demanding a share of Apple’s iPod revenue and calling for mandatory peer-to-peer filtering and taxes on recordable media and MP3 players. So to hear him calling for higher royalties from video games like Guitar Hero and Rock Star isn’t all that surprising. Because, according to Bronfman, the success of those games is predicated entirely on Warner’s music.

“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,” Bronfman said during an earnings call today. “There is what I would call a very paltry licensing fee per song. … I think 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. And if that does not become the case, as far as Warner Music is concerned, we will not license to those games.”

Leaving aside, for a moment, the question of why Warner (WMG) agreed to a royalty scheme it apparently finds unappealing, you’ve got to wonder why the company persists in lambasting these new media that so obviously invigorate the industry and promote its music. And beyond that, you’ve got to wonder why Warner is doing it at a time when games like Guitar Hero and Rock Star are clearly becoming viable distribution outlets.

Of course, we already know the answer. Bronfman himself gave it to us in a speech last year. “We used to fool ourselves,” he said. “We used to think our content was perfect just exactly as it was. We expected our business would remain blissfully unaffected even as the world of interactivity, constant connection and file sharing was exploding. And of course we were wrong. How were we wrong? By standing still or moving at a glacial pace, we inadvertently went to war with consumers by denying them what they wanted and could otherwise find, and as a result, of course, consumers won.”

If the old media advertising economy is in the toilet, then its new media counterpart is sitting atop it.

According to figures compiled by the Interactive Advertising Bureau, spending on Internet advertising in 2007 rose to $21.2 billion, up 26% from the prior year. That’s a record high and one that exceeds the $20.9 billion spent on print, radio, outdoor and cable TV.

Unsurprisingly, keyword search, Google’s (GOOG) cash-cow ranch, generated the most revenue and claimed the largest market share–41%. Display advertising followed with 34%, classifieds at 16%.

(Image Credit: Tyler Jordan, eVisibility Insider)