A month ago, Motley Crue released their latest single, the title track from their soon to be released cd, "Saints of Los Angeles". The band decided to release the single on two formats, iTunes and the video game "Rock Band". The numbers are in and the song sold five times more on "Rock Band" than it did on iTunes.
In the past, labels would donate the music to the video games to promote their bands and artists. However, as you might expect, now that the labels see green, they want to get paid.
The game companies are typically paying the publishers and musicians an advance on future royalties. The more the game sells, the more the musicians & publishers get paid.
"These games can't exist without the music," said Alex Hackford, Sony Computer Entertainment America's artist and repertoire manager. "Musicians deserve these royalties. We pay what I view to be a very reasonable advance royalty. Then, the product goes out and sells and perpetuates the music and mystique of these artists and their catalogs."