Video games are an important facet of life, especially teenage life, today. And for a great many teenagers, there's something else that's equally as important -- the power chord. Think back to the first time you heard Cheap Trick's "Surrender" or Nirvana's "Smells Like Teen Spirit," and you'll know what I mean.
That's the essential formula behind the success of the Guitar Hero franchise. Make no mistake about it -- this is an extremely important asset for Activision (Nasdaq: ATVI). The franchise has been a top seller for a while now; in April, according to research data from marketing firm NPD, Guitar Hero II moved 197,000 units on Microsoft's (Nasdaq: MSFT) Xbox 360 platform and 147,000 units on Sony's (NYSE: SNE) PlayStation 2 console. The acquisition of the game's publisher, Red Octane, was a prescient move on Activision's part.
So it's no wonder that Guitar Hero III will be rocking its way to next-generation systems in the fall. As can be expected, there will be improvements; the biggest news on this front is the addition of wireless guitars to the package. Don't underestimate the value added by wireless controllers -- pretending you're Ace Frehley or Angus Young just got a whole lot easier. It is possible now to buy a wireless controller separately for the PlayStation 2 version of the game, but bundling it with the software makes things a lot simpler for the buyer, and I foresee that increasing sales even more.
One potential risk here is that the original developer of Guitar Hero, Harmonix, which is owned by Viacom (NYSE: VIA), won't be involved in the development of the third installment. In fact, in an interesting development, Activision competitor Electronic Arts (Nasdaq: ERTS) is actually teaming up with Harmonix and MTV on a new piece of software called Rock Band, which is meant to take the Guitar Hero concept even further by adding more instruments. Will Guitar Hero III, which is being developed by Neversoft, suffer since it won't have access to the expertise of Harmonix?
I'm not worried. The brand, as well as the format, has so much equity tied to it that I'm sure Neversoft will respect the franchise. An extremely exciting element for Activision shareholders is the fact that the game will be available on the Nintendo (OTC BB: NTDOY.PK) Wii -- that system's base of installed users is expanding, and it should help to move a lot of copies of Guitar Hero.
For those about to rock, Activision salutes you! And it hopes you pick up a copy of Guitar Hero III, which should hopefully be available in time for the holidays. Shareholders of the publisher have seen a nice rise in the stock -- I think the show still has a long way to go before the encore.
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Fool contributor Steven Mallas owns shares of Activision. As of this writing, he was ranked 5,228 out of 29,272 rated players in the Motley Fool CAPS system. Don't know what CAPS is? Check it out. Microsoft is a selection of Motley Fool Inside Value. The Fool's disclosure policy can play that Buckethead song from Guitar Hero II on expert.
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