Dueling guitars in gameland: MTV, Activision face off

One of the most watched rivalries in the video game business is between two games that put players in the role of rock musicians.

The holiday season is when all the action takes place in the video game business, and this year has already pitted Microsoft's Xbox 360 against Sony's PlayStation 3, and sleek new software against sequels like Halo 3.

But one of the most watched rivalries is between two games that are not first-person shooters or movie tie-ins. Instead, Activision's and MTV's Rock Band put players in the role of rock musicians and allow them to play along with songs by bands like Metallica and The Who.

Both titles could be important to an industry that is trying to reach out to adults, women and anyone lacking interest in a fighting game. Like Nintendo's Wii, the Guitar Hero games have found a receptive mainstream audience, and the earlier versions sold a total of 6 million copies. In its first week of release, Guitar Hero III had sales of $115 million. Rock Band was released last Tuesday.

This virtual battle of the bands will also pit a mainstay of the industry, Activision, against MTV, a unit of Viacom, a relative newcomer to the game business but one with deep roots in the music world. In the long term, both Activision and MTV believe that the genre of "rhythm games" has the potential to attract a mainstream audience unmoved by the robots and race cars that have become industry staples.

"We've never had anything like Guitar Hero in terms of appealing to a mass of people," said Robert Kotick, the chairman and chief executive of Activision. "The game has been on South Park, Gossip Girl, and The Ellen DeGeneres Show. I don't know the audience demographic for Ellen, but it's not your typical gamer."

Both games use controllers : Guitar Hero III is played with a miniature plastic version of a Gibson Les Paul with buttons where the strings would be, while Rock Band uses a toy Fender Stratocaster, a faux drum set and a microphone. The object of the games is to hit the guitar buttons or drums in time, or sing with the right phrasing and pitch, in an experience akin to karaoke.

MTV is looking for an additional benefit from Rock Band. At a time when its core demographic is spending more time with video games, the company wants to use this game as a starting point for new music and programming ventures. Rock Band and Guitar Hero both allow players using certain game systems to pay to download extra songs to play along with. Such sales would mean revenue for the beleaguered record labels.

"We thought the opportunity was wide open, and it fit into our brand and our heritage," said Van Toffler, president of the MTV Networks Group. "It will yield a whole bunch of ancillary businesses and revenue streams."

The Harmonix connection
The rivalry between MTV and Activision is made more stark in that both Rock Band and the previous versions of Guitar Hero were developed by Harmonix Music Systems (the newest Guitar Hero was developed by another studio).

MTV purchased Harmonix in September 2006 for $175 million cash, in a deal that did not include rights to the Guitar Hero franchise. To distribute Rock Band, it signed a deal with Activision's main competitor, Electronic Arts.

Like any battle of the bands, this one features its share of trash talk.

"MTV trying to take on Guitar Hero is like us trying to go into the music cable business," Kotick said. One of the largest video game makers, Activision is enjoying its best year ever, because of Guitar Hero II, several successful movie tie-ins and the latest entry in the action game Call of Duty.

Both games have received positive reviews. Rock Band features more original songs instead of rerecorded versions by studio bands, but Guitar Hero III features the virtual likenesses of Slash, Tom Morello, and Bret Michaels. Guitar Hero III, which is available for all the current consoles, is also less expensive, priced at about $100 with the controller. Rock Band will cost $160 for the Xbox 360 and the PlayStation 3, with a PlayStation 2 version due next month.

In the next few months, analysts believe that of the two, Guitar Hero III will sell better because there will be more copies on store shelves. "Rock Band is going to do fine, but there are supply constraints," said Michael Pachter, a game industry analyst at Wedbush Morgan Securities.

When the publisher RedOctane put out the first version of Guitar Hero two years ago, it seemed remarkably fresh in an industry that has come to depend on franchises and increasingly sleek iterations of old ideas.

Unlike most games, which take in a substantial percentage of their revenue during the first week of release, sales grew over the course of a few months. By February 2006, Harmonix's chief executive, Alex Rigopulos, knew that his company had a hit on its hands when he entered the title on YouTube and, "I saw hundreds of people playing the game," he said.

Other companies saw the game's potential as well. In May 2006, Activision paid $99.9 million in cash and stock to buy RedOctane, which owned the Guitar Hero franchise under the terms of its publishing deal with Harmonix. MTV bought Harmonix four months later.

Rock Band is not MTV's first foray into games. The company has run game-related programming on several of its channels and established the MTV Games division to participate in publishing deals. It also served as a marketing partner for the previous Guitar Hero games.

But Rock Band is the first title that it will so fully integrate with the rest of its business. MTV has already featured Rock Band on TRL, Real World, and MTV News, and VH-1 has done a Behind the Music-style "mockumentary" recounting the imaginary history of the Rock Band band. "We have a plan for three to five years," Toffler said.

Its first new business will involve selling music. Players who have the Xbox 360 or PlayStation 3 will be able to buy extra tracks for $1.99 each, as well as full albums, including Who's Next and Nirvana's Nevermind. Activision will also sell Guitar Hero III downloads, though only in packs of three. Both companies plan to make new content available on a regular basis.

This download market could be good news for record labels, which will be paid for the use of original songs. (Songwriters and publishers, but not labels, are paid for rerecorded versions.) Downloaded tracks are not technically considered sales, since the music serves as part of the game, but record companies and performers will still collect money according to how well they sell.

"These games allow people to discover and fall in love with music in a more impactful way," said Paul DeGooyer, MTV's senior vice president for home entertainment, music, and games. "Part of what can happen out of this is an antidote to the disposable music era."

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