Perhaps they should’ve asked for a sliver of a percentage rather than a large amount upfront, but based on their counter-offer they weren’t interested in percentual royalties.
Until the game is launched, Rockstar is operating on investment money and every component of the game is expressed in cost. Spending 1/85th of 11 years of revenue (or about a third on top of development cost) on songs upfront is hard to sell to executives. Especially when the rate is set by a small band like this.
Asking Beatles money for a Heaven 17 song was worth a try, but I don’t think they get to feel incredulous after their counter-offer was refused. Don’t high-ball offers you can’t afford to lose!
Thanks to COPPA, American kids under 13 actually have very good protections online. To the point companies like Google and Valve will forego profits so they don’t have to comply.