Two years ago, many proclaimed the Guitar Hero and Rock Band video game franchises as some sort of long-lasting alternative to declining traditional media following the games’ significant impact on artist profiles and spiking digital sales. While music simulation games are far from a pet rock-ish fad, sales are finally starting to taper off and we’re seeing sobering statistics regarding their effect on music sales.

Billboard‘s December 19 issue has a great article by Antony Bruno detailing the music gaming industry’s drop off from $1.4 billion in revenue in 2008 to somewhere around half that this year, despite 5 major releases including hyped new entries The Beatles: Rock Band and DJ Hero.

And while $700 million is nothing to sneeze at, placement in a game doesn’t guarantee digital single spikes as it once did. From the Billboard article:

Hand in hand with the decline of music-based game sales is a softening of the impact those games have on digital downloads. A sampling of the songs included on soundtracks to “Guitar Hero 5”, “Band Hero” and “DJ Hero” shows no significant increases in track sales as a result of their inclusion in each respective game, according to Neilsen SoundScan data.

The game with the most impact on sales was “Brutal Legend” – which isn’t a music simulation game but an action/adventure title with a strong heavy metal theme and soundtrack. But while songs from acts like Motorhead and Judas Priest saw sales spike as high as 700%, the volumes were too low to make much of a real impact – in many cases from single-digit or double-digit weekly sales to triple-digit sales.

In related news, GamesIndustry.biz has a story that suggests people are still playing these games, they just aren’t falling over themselves to buy more plastic guitar clutter. While sales of new titles are declining, downloadable song sales over Xbox Live and the PlayStation Network are still very strong:

Microsoft’s David Dennis told GamesIndustry.biz that…”We still see a lot of activity on Live for those games, people are still buying a lot of song packs for them. And that’s an ongoing revenue stream that third parties can do, and leverage games like that to keep the experience fresh. It’s a steady stream, and a sort of steady adoption.”

Dennis added that once players are hooked on a game, they become dedicated to downloading new music and building a collection of tracks to keep the software fresh.

“It’s an investment in a music library, just as you would for your CD library. People are passionate about building out their music game library, it’s something that they cherish and play with their friends over again.”

What do you think? Are you still playing music simulation games? Would you rather stop buying new discs and instruments every year and just keep building a universal/standardized collection of tracks on your hard drive and use the same old platform to play them?