Viacom's (NYSE: VIA) MTV Networks knows that video games are an important long-term trend, and that games based on music and dancing are hot right now. In that light, its latest purchase should be no surprise.
According to TheWall Street Journal, MTV Networks has struck a deal to acquire Harmonix Music Systems of Cambridge, Mass., which developed the Guitar Hero video game for Sony's PlayStation 2 system. If you haven't heard of Guitar Hero, your kids probably have. It taps into the rock n' roll fantasies of air guitarists everywhere, challenging would-be rockers to hit the right notes while strumming to the beat of classic tunes on its special guitar-shaped controller.
I've never actually played around with this device, but I have heard a lot of anecdotal buzz surrounding it. Guitar Hero 2 is on its way, of course, which should please a lot of budding musicians out there. That demographic pretty much fits MTV's own target audience, since many of its viewers are no doubt into video games; MTV has previously promoted the game in some of its content. Meanwhile, Konami's (NYSE: KNM) Dance Dance Revolution and Karaoke Revolution franchises (the latter developed by Harmonix) are still selling briskly, having captured the imagination of a lot of gamers out there, many of them female. The Guitar Hero series is a nice way to attract males to this genre as well.
MTV should be able to develop interesting future games from this acquisition. It's a smart way for the company to play the new console cycle we've all heard about. The risk here is that the trend will find itself played out (no pun intended). Personally, I think music-based games stand a good chance of surviving well into the release of the new video game systems. Consider also that one of the best-of-breed publishers, Activision (Nasdaq: ATVI), previously acquired Guitar Hero's publisher, Red Octane. I think that's a pretty nice endorsement, not only for the potential of this gaming theme, but for Viacom's decision to play around with it.
The price tag for Harmonix is reported to be $175 million, and since Viacom has more than $300 million in cash, this acquisition won't break the bank. Viacom has expressed interest in small purchases rather than profligate buyouts at this time; it wants to build a portfolio of media properties that will relate to its youthful, tech-savvy consumer base. Its recent buys include Atom Entertainment, iFilm, and Xfire (read Rick Munarriz's thoughts on this strategy). By all of these acquisitions, Viacom is just making its plans for growth a reality -- after all, the rationale behind the split of old Viacom into new Viacom and CBS (NYSE: CBS) was to let Viacom be an acquisitive growth animal, while CBS goes for simple dividend appreciation.
MTV has a handle on its audience and its role in the pop culture landscape. The company's investment in video games seems like a logical complement to its overall strategy. I think the Harmonix acquisition is further evidence of Viacom's efforts toward building up its base to capitalize on a hot demographic.
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Fool contributor Steven Mallas owns shares of Activision. The Fool has a disclosure policy.
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