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EA Spins New Revenue Tune

Priya Ganapati

Video game publisher Electronic Arts (ERTS Quote) is working to develop a new revenue stream in the music industry.

EA has created a music label, Artwerk, in partnership with publisher Nettwerk One Music, to sign and develop new and established artists. The publishing and master recording contracts will also include digital and physical distribution deals.

The initiative brings together Nettwerk's management, publishing and digital delivery expertise with the marketing power and audience that EA has from its blockbuster video games.

The label also takes EA's efforts to monetize the music from its video games a step further. Early this month, the Redwood City, Calif.,-based company put tracks from its best-selling games for purchase in Apple's(AAPL Quote) iTunes store.

With Artwerk, EA could turn the music in its games into a money spinner, especially if a new band it signs ends up taking off. The Los Angeles-based label will pursue talent worldwide.

So far, the label has inked a deal with producer artist Junkie XL, whose tracks appeared in hit games such as Madden NFL 07 and Need for Speed Carbon.

About 1% to 2% of a game's production budget is allocated to the soundtrack, which is generally split almost evenly between licensed music and original tracks. Through its games, EA says, it has helped discover new artists, and the company certainly has the collective ear of a demographic that is deeply invested in its releases.

That is why the company looked to iTunes as the first step in its strategy. On iTunes, EA plans to add songs, scores, themes, beats and ring tones from its game franchises, including hits such as NBA Live, FIFA Soccer, Command & Conquer and Medal of Honor.

"This furthers us as an entertainment company where we have other means to create revenue resources around the world," says Steve Schnur, worldwide executive of music and marketing at EA.

iTunes expects EA to be a top-10 iTunes affiliate in the next year, says Schnur. iTunes pays a commission to affiliates or partners for revenue they generate by driving traffic to the music Web site. "If we continue to create the links between games and music, all of a sudden we should be able to see pennies add up," Schnur says.

Shares of EA closed Monday's session up 21 cents, or 0.4%, at $50.34.