What I Like About You, Activision

Activision's (Nasdaq: ATVI) Guitar Hero franchise is so hot that the company is increasing its profit guidance even as it battles new wave rockers The Romantics in the courtroom.

Let's get to the good stuff first. The video game company boosted its expectations for the current quarter. It is now looking to earn $0.66 a share, well above the $0.51 per share it initially projected. The $0.15-per-share boost is also being applied to its fiscal 2008 guidance, where Activision now stands to earn $0.70 a share.

Activision's Guitar Hero III is a hit. We knew that from the healthy October sales data generated by third-party industry watchers, showing the title to be the top-selling game across all platforms.

The timing of the update is encouraging. It comes a week after GameStop (NYSE: GME) faltered on a relatively weak holiday outlook. It also comes just a week after the release of Rock Band, a rival music simulation developed by Viacom's (NYSE: VIA) Harmonix and distributed by Electronic Arts (Nasdaq: ERTS). 

I was worried. Rock Band builds on the success of the Guitar Hero franchise, enhancing the guitar-driven game by adding a microphone and drum pad controllers to complete the faux-gigging feel.

Both games should sell well into the holiday season, explaining why The Romantics may be getting litigious with Activision.

It's an iffy lawsuit. The band's What I Like About You is featured as one of the many cover songs in the Rocks the 80s add-on available for Guitar Hero II. The cover itself was authorized, but the cover band's version sounds so much like the original quartet's recording that the band is suing on the grounds that the cover is not differentiated enough. In a lawsuit filed in federal District Court in Detroit last week, the band alleges that since the game's version of the song is indistinguishable from its own,  consumers may interpret it as an endorsement of the product by the band.

I'm no legal eagle. However, what I do know is that the Activision pinata is a little heavier now that the company's recent successes, Guitar Hero III and Call of Duty 4, are ringing the registers.

It's probably also a good trend to see both Rock Band and Guitar Hero III lean mostly on original masters these days. It makes the music that more genuine, and the lawsuits that more unlikely.

Either way, Activision is rocking in more ways than one these days.

For a Foolish encore:

• Heroic Times for Activision?
• Will Rock Band Shut Off Guitar Hero's Mic?
• Electronic Arts Pauses Before the Holidays