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Games are like fashion: One day you're in, and the next day you're out.
After another quarter of disappointing sales, video game giant Activision Blizzard (Nasdaq: ATVI ) has officially disbanded its Guitar Hero business unit and deep-sixed the Guitar Hero title under development for a 2011 release. Making great games just isn't good enough when fresh ideas become aged fads. As publishing chief Eric Hirschberg puts it: "Despite a remarkable 92 rating (out of 100) on DJ Hero 2, a widely well-regarded Guitar Hero: Warriors of Rock, as well as the 90-plus rated release from our most direct competitor, demand for peripheral-based music games declined at a dramatic pace."
It looks like add-on downloads will continue, at least as long as they're making money. Other than that, Guitar Hero is dead.
To add a bit of anecdotal evidence, the Guitar Hero 5 boxes at my local Target (NYSE: TGT ) store still have stickers on them proclaiming an included Guitar Hero: Van Halen coupon. That was a launch-day promotion -- the game still hasn't sold out the original shipment from the summer 2009. And so it goes.
Harmonix tried to breathe new life into the genre with Rock Band 3 and honest-to-goodness stringed guitars, but Viacom (NYSE: VIA ) sold the studio into private equity for its trouble. It's the end of a multibillion-dollar era, people. I'm a diehard rocker myself, but even I'm not sad to see the music games go.
But don't cry for Activision: The Call of Duty and World of Warcraft franchises are making money hand over fist, since military action and strategy games have much longer legs than the faddish music genre. Though the bottom line looks sad with a $233 million GAAP net loss, Activision recorded $993 million of operating cash flows in the holiday-flavored fourth quarter. That cash-juicing power puts fellow industry giant Electronic Arts (Nasdaq: ERTS ) to shame, though Nintendo (Pink Sheets: NTDOY.PK) still is the plumpest cash cow in the business.
To find out more about the video game industry and who will dominate this $91 billion business in five years, grab a free report titled "Top 2 Plays for the Coming Tech Boom." You won't be sorry.