Social Games, Meet Streaming Music: Conduit Labs Scores Universal Music Deal

Conduit Labs, a social gaming company with two games on Facebook, is announcing an unexpected coup today: it has inked a deal with Universal Music Group, the largest music company in the United States, to use its entire music catalog in Conduit’s games.

The two seem an unlikely pair. Universal dominates a good portion of the entire US music industry, whereas Conduit is a tiny startup working in a new field. What Conduit does have, though, are a pair of music-centric Facebook games that, it seems, Universal is willing to test out its music catalog on.

The bigger of the two is Music Pets, which we reviewed when it came out in February. In Music Pets, which now has over one million monthly active users, players have to raise a pet by playing it music; the pet can also go fetch new music for its owner, who can then teach the pet by telling it they love or hate the song.

Before Music Pets, Conduit released Loudcrowd in 2009; that game focused on humans, but was otherwise similar. Conduit’s stats from that game and its 10 indie label partners convinced Universal to get involved, according to Nabeel Hyatt, Conduit’s CEO.

Stats or not, it still seems odd that one of the “Big Four” record companies that fought so hard against putting free-to-listen music on the internet just a few short years ago would proactively sign up with a young startup. But the times may have changed. “I’d give Universal lot of credit for having a very positive business model. They no longer seem to be in the business of trying to stop innovation,” Hyatt told us.

There are a couple of enticing considerations for Universal, as well. Perhaps most important is that Music Pets is fundamentally different from the hated concept of internet radio. Players can’t just repeatedly listen to a song that they like; as in other Facebook games, the user gets allotments of energy and virtual currency that must be carefully used on finding new music and buying goods.

Discovery is central to the game as well; since Universal will be the only major label on Music Pets, players will always be hearing a Universal band, perhaps one they never knew about before. And the game doesn’t just offer a new path for discovery. Conduit also lets players buy in-game virtual goods with real money, out of which Universal will take a cut.

Even with these obvious advantages, Hyatt is keen to point out that Music Pets now has a larger catalog than a much bigger music gaming franchise, Rock Band. And he’s eager to move on to bigger and better projects. “The edges of the gaming genre don’t stop at plastic guitars and action,” said Hyatt.

In social gaming, that might mean figuring out ways to keep players coming back each time new music is released. According to Hyatt, Music Pets has an excellent long-term retention rate, a quality that he says boils down to the central feature. “We don’t see the games as what keeps people, it’s the music,” he said.

Music Pets will still have to prove that it can grow into a major hit, of course, but the Universal catalog should help significantly. As for what’s next, Hyatt isn’t saying anything specific, except that his plans extend much further. “We have some conceptions about how not just music can be used this way, but all traditional media,” he told us. So if the newspaper industry doesn’t find a savior in the iPad, perhaps it should knock on Conduit’s door.