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Activision Blizzard (ATVID, news, msgs), the video game company formed by the merger of Activision with the game unit of Vivendi, plans to capitalize on the popularity of its "Guitar Hero" franchise by developing an online music platform that could rival Apple's (AAPL, news, msgs) iTunes.
Creating a "Guitar Hero" online music platform is "the natural evolution" of a franchise that has sold close to 20 million units and generated $1 billion in revenues, said Bobby Kotick, chief executive of the new company.
"I don't think there have been a lot of credible alternatives to iTunes, but 'Guitar Hero' certainly has that potential," Kotick said in a interview. Players can already download "note tracks" to use while playing "Guitar Hero," he said.
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The merger of Activision of Santa Monica, Calif., with Vivendi Games of Paris was completed last week.
The new company should benefit from Vivendi's ownership of Universal Music and its payment and processing capabilities in "virtually every country," said Jean-Bernard Levy, Vivendi chief executive.
"These are all the things that enable you to be a successful competitor (to iTunes)," Kotick added.
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Activision Blizzard is understood to be competing with MTV Games for a deal with The Beatles management to bring out a guitar-based game featuring Beatles songs. Apple's iTunes has been denied access to the Fab Four's catalog to date.
Activision has to decide what to do with $3.5 billion of cash that was originally going to fund a tender offer. However, the offer price was set before a sharp rise in Activision Blizzard's shares, which makes it unlikely to be taken up. Levy and Kotick said the cash either would be returned to shareholders or used to finance acquisitions.
They declined to comment on whether the company would enter the bidding for Take-Two Interactive Software (TTWO, news, msgs), the games publisher behind the successful "Grand Theft Auto" franchise. Electronic Arts (ERTS, news, msgs) has launched a hostile bid for the company.
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More than a gameThe video game business is thriving, but industry leaders such as Bobby Kotick of Activision Blizzard hope to hold their gains as the economy slows and competition intensifies.
Vivendi Games owns "World of Warcraft," the world's biggest online role-playing game, with more than 10 million subscribers, while Activision has ties with Hollywood studios and produces the "Spider-Man" and "James Bond" console titles.
The new company will also concentrate on global expansion. "We have a strong presence in Asia, and when you combine the two companies there are going to be opportunities to grow, particularly in Europe," Levy said.
The two men forecast a growth period for video game publishers, which would be fueled by international expansion and new lines of business, such as merchandising and licensing.
This article was reported and written by Matthew Garrahan and Chris Nuttall for the Financial Times.
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