Activision announces Guitar Hero 5, strong first-quarter earnings

 

The controller for Actvision's upcoming DJ Hero game, due out this fall. Credit: Activision

Activision Blizzard is cranking up the volume on its music games business. The Santa Monica company said today that it would release three new games for its popular Guitar Hero franchise this fall, including Guitar Hero 5, DJ Hero and Band Hero.

The lineup shows how Activision expects to maintain momentum on its multibillion-dollar music-related games business: by segmenting the market to reach different types of music fans and players. Guitar Hero 5, with its indie and classic rock tunes, should appeal to the core audience of that franchise. Band Hero is targeted at the more casual player, with family-friendly Top 40 hits. And DJ Hero will have a turntable and feature dance, hip-hop and other genres of club music.

"Our Guitar Hero business up until now has been just classic rock," Activision Chief Executive Robert Kotick said in an interview. "We’re now broadening out the Guitar Hero fan base to every category of every listener and player."

The company is sitting in the catbird seat of the $50-billion global video game business. Its merger with Vivendi Games last year catapulted the company to the No. 1 spot, surpassing Electronic Arts, in terms of international revenue.

Actvision today also posted its first-quarter financial results. The company reported a profit of $189 million, or 14 cents a share, on sales of $981 million in the quarter ended March 31. Last year, before its merger with Vivendi on July 9, Actvision posted net income of $43 million, or 7 cents a share, on sales of $325 million.

Its shares, which rose 3 cents to $11 in regular trading, gained 25 cents, or 2.3%, after the earnings release.

But the company also issued a cautious outlook, tempered by a stormy economy. It forecast sales of $4.3 billion and earnings of 24 cents a share for the year. That's up just slightly over last year's revenue of $4.2 billion and earnings of 22 cents a share.

"It's a classic Activision report," said Colin Sebastian, analyst with Lazard Capital Markets. "They beat estimates for the quarter and they give a conservative outlook."

-- Alex Pham

Scratch DJ developer says it scored court victory against Activision

Genius Product's game, Scratch: The Ultimate DJ, is at the center of a lawsuit against Activision Blizzard. Credit: Genius Products.

The publishers of Scratch: the Ultimate DJ, an upcoming video game, said today that it had won a temporary restraining order that forces Activision Blizzard Inc. to return software code and custom-made DJ controllers.  

Genius Products, the Santa Monica distributor of movies and television shows on DVD, filed a lawsuit last week alleging that Activision, which is developing its own title called DJ Hero, conspired to "sabotage" Genius by, among other things, withholding code and other assets Genius needed to complete its game. 

Activision, based in Santa Monica, ended up with the assets when it acquired California 7 Studios, the developer that Genius contracted to make its game.

According to Genius spokesman Dean Bender, Activision had until 5 p.m. today to return the software and controllers in dispute. Activision declined to comment, but the company last week in a statement denied any wrongdoing.

In his ruling last Wednesday, Superior Court Judge James Chalfant said the software code belonged to Genius. "They paid $6 million for it," he concluded.

But because Chalfant ruled off the bench, the court did not issue a written ruling, leaving the door open for both Genius and Activision last week to declare victory. Genius said it was satisfied with the judge's order to have its code returned. And Activision said, "L.A. Superior Court found that there was no evidence of any wrongdoing by Activision and refused to grant any restraining order against Activision."

Who won? We'll keep you updated when we hear more.

 -- Alex Pham

Activision denies Genius allegations in DJ game dispute [UPDATED]

Scratch: The Ultimate DJ, developed by Genius Products, is at the center of the company's lawsuit against Activision. Credit: Genius Products

Another day, another twist in the battle of the disc jockey video games.

First, a quick primer: Genius Products has been working on a game called Scratch: the Ultimate DJ, and it hired a small design firm, California 7 Studios, to do a lot of the heavy lifting. A lawsuit filed this week alleges that Genius and Activision Blizzard, a game publishing giant, started talking about collaborating on a game. When they couldn't reach a deal, Activision, which is creating its own game, DJ Hero, went ahead and bought 7 Studios.

Big problem: 7 Studios was still under contract with Genius. Tempers flared, lawyers got involved.

It's looking now as if the judge in the case issued a bench ruling Wednesday. The Los Angeles County Superior Court hasn't issued any paperwork on the decision, so we're still piecing together what the judge actually said based on the small shreds of information the two sides have provided. But here's our best read:

Genius seems to have won one early victory: Activision and 7 Studios were told to return some of the assets they allegedly wouldn't hand over, including game code and custom turntables used to control the game. Genius said it was "very pleased" and now "able to complete our game in a timely manner."

But after declining to comment Wednesday, Activision unloaded its PR guns today, issuing a statement that trashes Genius and denies wrongdoing:

Activision Publishing strongly denies the allegations made by Genius Products and Numark Industries and believes that the claims are disingenuous and lack any merit. Yesterday, the L.A. Superior Court found that there was no evidence of any wrongdoing by Activision and refused to grant any restraining order against Activision.

These allegations are nothing more than an attempt by Genius to place blame for the game's delay, as well as to divert attention from the cash flow, liquidity and revenue challenges Genius detailed in its March 30, 2009, SEC filing. By their own admission in October 2008, the game had fallen behind in production, which was well before Activision had any involvement with Genius, Numark or California 7 Studios regarding the game.

The lawsuit will have no impact on Activision's upcoming DJ Hero(R) game, a turntable-based music game that the company has been independently developing.

Activision purchased 7 Studios on April 6, 2009 to bolster its development capabilities. 7 Studios had continued to develop Scratch: The Ultimate DJ, and Activision did not interfere with or delay their efforts to complete the game. In fact, Activision provided the fledgling developer with much needed financing during these difficult economic times.

We'll update you as we find out more.

CORRECTED 2:45 p.m.: A previous version of this post said Activision acquired 7 Studios to help make DJ Hero. In fact, Activision won't say why it bought 7 Studios.

-- Chris Gaither

Publisher of Scratch DJ sues Activision, alleging 'sinister strategy'

Scratch: The Ultimate DJ, an upcoming game set to rival Activision's DJ Hero, is at the center of a brewing legal fight. Credit: Genius Products.

The publishers of Scratch: The Ultimate DJ are suing Activision Blizzard, accusing the Santa Monica game company of embarking on a "sinister strategy of intentional interference and unfair competition."

In the suit, filed in Los Angeles County Superior Court on Tuesday, Genius Products and Numark Industries lay out a tale of alleged corporate intrigue and backstabbing. They claim that Activision tried to thwart their "disc jockey-style" game from hitting the market before Activision's own hotly anticipated title, DJ Hero, which is scheduled for release this fall.

Just months ago, Activision and Genius were considering a deal. So what happened? Activision hasn't  returned messages seeking comment, and Genius President Trevor Drinkwater declined to be interviewed. But his lawsuit highlights the hazards facing developers and publishers alike as they stake their claims in a video game business that's rife with me-too products.

Our story begins in Santa Monica with Genius, a distributor of home movies and television shows such as "Animal Planet" and "Sesame Street" DVDs. In February 2008, Genius enlisted California 7 Studios to develop a music rhythm game that lets players pretend to be DJs. By October, the suit alleges, 7 Studios started to fall behind on its work and was having trouble making payroll. That same month, 7 Studios filed a lawsuit against Brash Entertainment, claiming it was owed $581,000 for developing several games for Brash, which subsequently shut down. Genius said it pumped more than half a million dollars into 7 Studios to keep it afloat.

Meanwhile, Activision approached Genius and 7 Studios in late January to ...

Call of Duty's $10-million weekend

Call of Duty: World at War Map Pack 1. Credit: Activision Blizzard

Downloadable content used to be regarded as pennies in the couch compared with sales of packaged disc games sold at retail stores -- nice to have, but not a game changer. That's no longer the case. 

Activision Blizzard, which has sold millions of songs for its Guitar Hero games as downloads on Sony's PlayStation Network and Microsoft's Xbox Live, this morning said it sold 1 million downloads of an add-on to its Call of Duty: World at War game in one weekend. The add-on is essentially a set of four additional levels to the main game, which players can buy the old-fashioned way for $50 to $60 at a Best Buy or Gamestop.

At about $10 a pop, the add-on pulled in nearly $10 million in revenue from March 19 through March 22, the weekend it was released. Activision won't reveal how much of a cut Sony and Microsoft claimed, but the usual take is about 30%, with the remainder going back to publishers. So it's likely that Santa Monica-based Activision netted $7 million.

The Call of Duty add-on is called Map Pack 1, which suggests that there are more maps, and more money, to come.

-- Alex Pham

Activision snags former Yahoo COO to head up Guitar Hero business

Activision Blizzard said today that it hired Dan Rosensweig, former chief operating officer of Yahoo, to head up its multibillion-dollar Guitar Hero business.

Rosensweig left Yahoo in December 2006 after a five-year stint leading the Sunnyvale, Calif., company's product development and marketing strategy. His departure occurred during a tumultuous time for Yahoo that eventually resulted in a shakeup of the company's senior management, including the departure of Chief Executive Terry Semel.

Activision CEO Bobby Kotick served on Yahoo's board of directors until last year.

After Yahoo, Rosensweig joined Quadrangle Group, where he worked as the New York-based private equity firm's Silicon Valley representative. Prior to Yahoo, Rosensweig served as president of CNet Networks, having merged it with ZDNet.

As president and CEO of Activision's Guitar Hero franchise, Rosensweig will be responsible for shepherding the Santa Monica company's popular game, which was co-developed by Activision's Red Octane and Neversoft studios. Though Guitar Hero games have generated blockbusters over the past three years, growth in the music games genre may be slowing. It will surely be part of Rosensweig's job to figure out ways to drum up new sales.

"I am extremely excited for this opportunity to work with the talented Guitar Hero team, which has transformed the interactive entertainment landscape," Rosensweig said in a statement announcing the hire, which was first reported by AllThingsD. "With a platform and content that universally engages a wide range of audiences, Guitar Hero has incredible growth potential. I look forward to continuing to develop Guitar Hero into an even more successful enterprise."

-- Alex Pham

Activision ends 2008 on high note, but expects slower games sales this year

A scene from Guitar Hero, which helped boost Activision Blizzard's quarterly revenue. Credit: Activision Blizzard.

Activision Blizzard today posted a fourth-quarter loss. But, amped by its Guitar Hero, Call of Duty and World of Warcraft game franchises,  its operating profits and revenue of $1.6 billion beat Wall Street's forecasts.

For the year, the Santa Monica company posted $3 billion in revenue.

Its revenue would have been higher had Activision not deferred revenue from sales of titles that have online gaming features. Activision and rival Electronic Arts in recent years have begun to spread out the revenue they get from these games in order to reflect the cost of maintaining a related online service. Adding that revenue would have boosted Activision's sales to $3.7 billion for the year. The figure also doesn't include sales from Activision's standalone business prior to its July merger with Vivendi Games, which would have added another $1.3 billion in sales for a combined $5 billion.

"We had a fantastic year," Bobby Kotick, chief executive of Activision, said during an interview. "And we're expecting to grow our margins even further this year."

The Santa Monica game company posted a net loss of $72 million, or 5 cents a share, for the quarter ended Dec. 31, primarily due to the write-offs of last year's merger with Vivendi Games. Excluding those one-time charges, Activision ...

Game company earnings: Activision is up, THQ down

Santa Claus may not visit all the video game companies this year.

Activision Blizzard, based in Santa Monica, this afternoon posted a doubling of revenue and projected strong holiday sales. But the other big independent publisher in Southern California, THQ, said its fiscal-year 2009 revenue would be 23% lower than it had anticipated. The Calabasas company also announced it would shutter five studios, including two in California, and slash 250 jobs. As we say in this story:

The divergent reports from Southern California’s two largest independent game publishers provide a snapshot of the industry as it attempts to navigate through tempestuous economic waters and into the crucial holiday season, when 40% of its sales typically occur.

"The theme this year is caution," said Arvind Bhatia, senior vice president with Sterne, Agee & Leach, a brokerage firm in Dallas, Tx.

Though the industry is still expected to clock 20% growth in game sales, fortune will be spread unevenly within the sector. With skittish retailers ordering only big titles that are guaranteed to sell, some publishers may find themselves out in the cold this winter. To adjust to the changing dynamics, THQ will be "focusing on fewer, bigger and better," Chief Executive Brian Farrell said.

-- Alex Pham

Photo: A scene in Activision's Web of Spider-Man game. Credit: Activision

Video: The puppet master behind the hands of Call of Duty

The developers at Infinity Ward in Encino have won accolades for their games, and their latest title, Call of Duty 4: Modern Warfare, has sold more than 11 million copies and was voted the best game of 2007 by its peers in the American Academy of Interactive Arts and Sciences.

Behind the franchise is a team of more than 80 developers who digitally code, polish and sculpt the game to a high sheen. They include Chance Glasco, a 27-year-old animator. His full-time job is to animate the hands on the screen of the first-person shooting game. There are dozens of weapons, each requiring up to 20 individual animations such as picking up, loading, aiming, firing, reloading and dropping a weapon. Glasco handcrafts each animation to get the look just right. He recently consulted an arms expert, something he frequently does, to see whether a tiny bolt on a particular gun moves after it is fired.

"You don't want the hands to feel robotic," Glasco said. "You want to feel like there's life behind them."

Glasco's job is one of thousands in California created by the video game industry, which is expected to post a record year of sales despite the rough economy.

We are launching a series, The Work of Play, exploring some of the industry's fascinating jobs. You can find Work of Play stories here as they're published.

-- Alex Pham

Video: Alex Pham / Los Angeles Times

Game designer John Carmack talks about Wolfenstein and iPhone

Id Software, the developer of the Doom and Quake games, has worked up a version of its beloved Wolfenstein franchise for mobile phones. John Carmack, an Id founder and the company's lead programmer, has cranked out an all new rendering engine to give the game a three-dimensional feel.

Old-school gamers will remember that the first version -- Wolfenstein 3D, which came out in 1992 for the PC -- is considered by some to be the original first-person shooter game.

When Wolfenstein RPG, which will be published by Electronic Arts, arrives on cellphones this holiday, players old and new can once again take on the role of BJ Blazkowitz, an American soldier trying to blast his way out of a Nazi prison. Whereas most cellphone games confine players to a two-dimensional horizontal plane, Carmack came up with a way to let players angle shots up and down. Hello, 3D! The game packs nine levels, 17 weapons and about eight hours of game play in about 2.5 megabytes, thanks in part to Carmack's hyper-efficient code.

"We could have just made a couple of games on the old technology," Carmack said, referring to the engine he wrote for the Doom RPG and Orcs & Elves mobile games, which collectively sold 2 million copies. "But we wanted to make a game we were really proud of."

What Carmack really wanted to do, but couldn't, was make a game for the iPhone. "I'm sad we didn't have anything at launch for the App Store," Carmack said, referring to last week's launch of the Apple App Store for iPhone applications. "I'm super excited about the iPhone."

By the time Apple released its software tools for iPhone developers, Carmack and Id were already overcommitted. Although Id has a big reputation, it has a relatively small team of 60 people, six of whom work on games for cellphones and the Nintendo DS hand-held console.

Wolfenstein 3D will be ported to the iPhone eventually, but Carmack said he wanted to make a game that's specifically designed for the Apple device. We already know consumers are gaga over the large screen and, to some extent, the touch screen. Why does it appeal to a hard-core programmer such as Carmack?

One answer: Its processing speed. "The iPhone is far more powerful than the DS," he said.

Also, instead of being limited to a few megabytes, iPhone games can be far larger because they can be downloaded via computer or streamed via Wi-Fi.

Carmack promised an original iPhone game in the not-too-distant future. He said he has a game in mind but wouldn't divulge details.

-- Alex Pham