Activision Blizzard pulls plug on Guitar Hero
Striking the death knell for a once-hot music game business, Activision Blizzard Inc. said Wednesday that it would disband Guitar Hero and scrap development of a Guitar Hero title slated for this year.
At the same time, the Santa Monica company told analysts during a conference call to announce fourth-quarter results that it would invest heavily in creating an online service dubbed BeachHead for an existing video game, Call of Duty.
Activision, which provided little detail on the upcoming service, also dropped hints about a new product it plans to announce next week at Toy Fair in New York, as well as a new multi-player online title from its Blizzard Entertainment studio in Irvine. Executives declined to elaborate on the new projects.
At the same time, Activision said it planned to lay off about 500 workers, roughly 7% of its workforce, associated with Guitar Hero and other games for casual players. The publisher also announced that it had axed True Crime: Hong Kong, a shooter game modeled after Take-Two Interactive Software’s blockbuster Grand Theft Auto franchise.
The double-barreled announcements of new projects and canceled titles highlight the hit-driven nature of the video game industry, in which consumers flit from one fad to another. Two years ago, Guitar Hero generated more than a billion dollars in revenue for Activision.
But the company’s popular World of Warcraft online game has garnered 12 million subscribers who pay up to $15 a month to play. Its latest release, an add-on game for World of Warcraft called Cataclysm, sold 4.7 million copies within a month of going on sale in December.
Activision’s Blizzard unit has not yet set a date for releasing a new, as-yet untitled online game, along with another expected title based on its Diablo franchise. The uncertainty over release dates caused Activision not to estimate those game sales in its 2010 revenue projections, which surprised many analysts and triggered an 8% slide in the company’s stock price in after-hours trading Wednesday. Its shares closed at $11.69, down 19 cents, or 1.6%.
Activision’s shares were also depressed by investor concern over the concentration of the company’s revenue in two franchises, Call of Duty and World of Warcraft, said John Taylor, an analyst with Arcadia Investment Corp. in Portland, Ore.
“It’s a double-edged sword,” Taylor said. “It’s great when the numbers are growing. It’s not great when they run out of gas, like it did with Guitar Hero.”
For its fourth quarter ended Dec. 31, Activision posted a $233-million loss, or 20 cents a share, on $1.43 billion in revenue. A year earlier, it lost $286 million, or 23 cents, on sales of $1.56 billion.
