A bit of both. If the song is not in the public domain, you can't release a cover of it at all.
If it IS in the public domain, it can't be patterned after someone else's performance--for example, Ploy of Oracle can't release their cover of House of the Rising Sun since it's patterned after the Animals version.
So most video game covers won't be able to secure rights to the original song. This is why I'd be very happy if The Black Mages ended up on RBN--because they're theoretically one of the few video game bands that COULD be published on RBN.


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