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Industry Analysts Talk Activision's  Guitar Hero  Shutdown
Industry Analysts Talk Activision's Guitar Hero Shutdown
February 11, 2011 | By Chris Morris

February 11, 2011 | By Chris Morris
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[Gamasutra editor-at-large Chris Morris analyzes the sudden dissolution of the Guitar Hero music franchise at Activision, with input from multiple financial sector analysts, who discuss how the company has "pretty much driven the franchise into the ground".]

Players might still be reeling from the news that Activision is pulling the plug on Guitar Hero, but Wall Street is giving the fat lady a standing ovation.

It's no secret that the franchise has been in considerable decline for the past couple of years. And while it seems like it was only yesterday that the games were pulling in $1 billion, analysts say the publisher made a hard choice that will likely serve it well over the long term.

"It had a great run, but it also had a steep fall and the customer demand just isn't there," says Eric Handler of MKM Partners. "That money can be spent on something that has better returns. I don't disagree with the decision."

Handler's hardly alone. Wedbush Securities Michael Pachter called the move "prudent". And M2 Research senior analyst Billy Pidgeon told Gamasutra that Activision has "pretty much driven the franchise into the ground with title after title after title."

While gamers were caught off guard by the decision, Wall Street has quietly wondered when the company would make the move for some time. The tepid results of last year's Guitar Hero: Warriors of Rock may well have been the final nail in the series' coffin, though.

"Declining sales as well as a less appealing profitability profile owing to the inclusion of a lower-margin peripheral hastened the decision to cancel the project," Edward Williams of BMO Capital Markets told us.

Of course, it's not just the retail side of Guitar Hero that's being shuttered. Activision, in a statement on the official DJ Hero website also indicated that DLC for that game (as well as Guitar Hero) will end as well.

"We will release the previously announced DLC track and mix packs for February, but - unfortunately, we will not be able to release new DLC packs beyond what we already have," says an answer on the FAQs.

The reason for that is pretty simple: There's not a lot of incentive for Activision to support a franchise it's walking away from. (And, admittedly, yes, it's possible the company will attempt to revive it a few years but that gets into a realm of speculative thinking that's fruitless for fans and painful for those who have lost their jobs because of this action.)

And even if Activision had decided to keep selling DLC, it probably wouldn't have lasted very long.

"I can see them thinking it doesn't make sense to sell digital content for a title they're no longer producing, because the law of diminishing returns comes into play," says Pidgeon.

Handler agrees. "Even if you made it just a digital business, the return on investment with that is so small that it makes more sense to spend the capital elsewhere," he says.

While there's plenty of talk about how wildly popular the Guitar Hero franchise is, the hard truth is that its so-called passionate fan base simply wasn't buying the games anymore. Last year's Guitar Hero: Warriors of Rock sold fewer than 261,000 copies in the U.S., according to sources with access to NPD data - with nine different SKUs on the market.

"It's just not a category that's getting consumers enthusiastic right now," Activision CEO Bobby Kotick told CNBC Thursday. "I think you need to focus your resources on the things that get consumers really excited."

At the moment, that's Call of Duty and Blizzard's titles. And to capitalize on that, the publisher has launched a new Call of Duty-focused development studio known as "Beachhead," through which it plans to build a digital platform for the franchise's community, offer exclusive content and other services.

Skeptics wonder if it's history repeating itself. Will Activision over saturate the market with CoD games as it did with Guitar Hero? Analysts acknowledge it's possible, but think the company learned a lesson from 2009's onslaught, when eight music games hit the market.

"I tend to believe they're looking at it cautiously," says Pidgeon.

While the loss of Guitar Hero is a sad one for gamers who don't care about the bottom line, ultimately, say analysts, it was simply something that made good business sense.

"Mid-level titles are just getting killed in the marketplace," says Eric Handler of MKM Partners. "Would you rather spend an extra $10 or $20 million on something that's not going to be a hit or on a Call of Duty or World of Warcraft?"


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Comments


Robert Gill
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I've got no words for this. If they want to keep churning out CoD, fine by me. It'll come back to haunt them.



Eventually.

Adam Piotuch
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I already skipped the last 2 CoDs because honestly, there wasn't enough new content to warrant purchases. I played them, and well it's the same game over and over. Why pay $70 dollars each year for essentially something I already own. That is the same reason why I stopped with Guitar Hero after the second major installment, and NHL 'XX (EA) after 3 installments. If Activision wants to learn how to be profitable with pumping out sequel after sequel, they should look to Bioware for inspiration. Or they could look into reskinning the products to appeal to different audiences....Oh wait, that's all they did with Guitar Hero. Went from good classic tunes appealing to older crowds to mediocre tunes appealing to current teens. That's just my opinion and is purely subjective.

Michael Kolb
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While I see how you would stop getting future versions of the franchise due to an overabundance of these titles, be it Guitar Hero, Call of Duty or NHL, I don't think you should just decide the future versions aren't good. NHL 11 is great, COD I can agree with you as one of the main reasons I even bought MW2 was for the Spec Ops mode (imo Black Ops is just for the zombie mode), and GH5 is great with the much needed party mode.

Justin Kwok
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This is what happens when people with no creativity dictate what the creative people do. I imagine that the brilliant creative minds at say... Harmonix... we're pulling their hair out having to do iterations of the same game over and over again to appease the suits.



In fact, I would think that the success of Guitar Hero was both the best and worst thing to happen to Harmonix. Now that they've broken off and become independent again, I'm excited to see what new and innovative gameplay they come up with - now that they have the freedom (both financially and creatively) to do what they want. Maybe a return to something like frequency or amplitude?

Jason Brau
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I don't get this comment. Out of one side of your mouth you're lauding their ability to innovate and create something new. And out of the other, you're hoping for a return to sequels of their previous franchise?



The gaming community, myself included, is always quick to blast developers for not listening to their fanbase, but does the fanbase even know what they really want?

Justin Kwok
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I'm not asking for sequels to Frequency or Amplitude but the spirit of creativity that those game were created with.



Guitar Hero/Rock Band were good through a few iterations but then it stagnated and subsequent sequels were just rehashes of the exact same thing.



I can understand how it can be confusing when I name specific games without context so here's a little. Previous to the success of Guitar Hero, Harmonix made some seriously interesting (and good) games that didn't sell particularly well. They then seemed to be relegated to pumping out Karaoke Revolution games to get by. When they were young, they were consistently coming up with innovative additions to the music genre but the "business side" just didn't let them continue. Then came Guitar Hero. Massively successful and gave Harmonix a great deal of clout. However, they were stuck doing the same kind of game for years.



Now that they've broken off on their own again, they still have the clout and in addition have the financial backing to go back to their previous drive that created games like frequency and amplitude. I wasn't specifically saying that I wanted sequels to those games - I was saying that it would be good to see that kind of innovation again from an amazingly creative company that had been forced to pump out sequels for ages.

Rey Samonte
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Guitar Hero wasn't the first time Activision has killed a genre to the ground. Look at their previous O2 series of games that focused on extreme sports games from skateboarding, wakeboarding, surfing, BMX, and an unrelease attempt at making a snowboarding game.



However, with that said...I think the FPS genre has longer legs than the music game franchises. Even though Activision might pump out CoD titles one right after the other, I think people will still buy them as long as Activision provides something new for the player with each iteration.

Russell Carroll
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I think it has more to do with the type of player.



The Music Genre appealed to casual gamers who showed a low desire to purchase new games every year that are similar to games they've already purchased. GH3 is the all-time top-selling music game, sales decreased as the music genre continued to innovate with drums, singing, keytars, and music sharing online. The reason wasn't a lack of innovation, it was a lack of interest by players to purchase something that expanded on the base experience they'd already experienced. In general Casual gamers were satiated with just one music game.



FPS appeals to core gamers who appear to have a much higher resistance to being satiated by a single game within a similar group or genre.





Unexpectedly, writing the above made me think about gaming addiction and general happiness. The need for FPS gamers to continually get more each year may be a sign of an unhealthy life-style (or addiction if you would term it that way). Being able to have one game and be happy without needing each new iteration is a higher zen/peaceful state that is likely to make people happier.



Not that corporations think about such things, but it's an interesting train of thought anyway.

Daniel Martinez
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It definitely isn't over-saturation of the marketplace. Rockband 3 took no prisoners this time around. I've been playing the GH franchise since the beginning. For some reason, hearing about something I love (or loved) talked about in strictly numbers and figures, makes me sick to my stomach. Alas, it was good while it lasted.

Dave Sodee
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Fun but like Madden in my mind...after so many of the games...they are all the same with minor tweaks. At the cost for consumers we do not buy each edition as it is money thrown away on junk. As a dev....if you have nothing new to bring..don't bother.



As for WoW and CoD even these are wearing thin. I picked up the last CoD and after this I am prob done. I enjoyed MW4 ..skipped MW2 and picked up Black Ops with all the hype. It is ok but not spectacular just good. WoW I have been invested in since the beginning. I expected more from Cata to be honest and it is just a rehash pretty much of what we already have. Same grind just faster...same formula and frankly I am bored already without even getting epic gear yet or raiding. Guess just been in WoW long enough.



Blizz will have a hit with D3 as long as they get it out someday. Activision seems to want to be the next EA. Bigger means more money but sometimes means too many bean counters curbing creativity and killing games. You need capital but you need to let the creators create and those who are willing to take a risk will someday get payday. Play safe all the time and guess what...you end up broke someday.

Andrew Griffin
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finaly they realised that peole are tired of paying 60 dollars for the same gameplay repackaged every year with one or two new features and (IMO) a ever worsening line-up of songs.

Lo Pan
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Isn't Tony Hawk also dead? I look at the games decisions ATVI has done over the last three years and you really need to question the leadership. Prudent and resourceful leadership could have saved some of those 500 jobs. ATVI veterans with 10-15 years of loyalty to the company deserved better...

David Fisk
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The problem was coming up with new games with new hardware. Ever since GH3, everyone was saying "Just make these games DLC so we don't have to spend a ton of money on a new one off the shelf that has a crappy playlist". I was a HUGE fan of the GH franchise, but warriors of rock was a gigantic dissapointment. The only good songs was 2112 from Rush. And then you had the Megadeth stuff that was impossible.

Lo Pan
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I keep waiting for the WHAM! DLC. Even I could play those guitar chords!

Alex Beckers
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Everyone needs to read this quote again: "Mid-level titles are just getting killed in the marketplace," says Eric Handler of MKM Partners. "Would you rather spend an extra $10 or $20 million on something that's not going to be a hit or on a Call of Duty or World of Warcraft?"



This is truth. What's happening in video games is the same thing that happened in books and films. Blockbuster titles and super-cheap titles, and nothing in between.

Dave Smith
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i would love to jump on the activision hate wagon, but isn't it possible that Guitar Hero was simply a passing fad and would have died out regardless of how many titles were released in a year?



that said, it is pretty crazy that Activision is seemingly putting all thier eggs in the Blizzard/CoD basket. one day they are gonna have to realize they have to grow new franchises.

Eric Geer
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Activision just seems to have a tendancy to destroy franchises by releasing too many iterations. It's not that these games are bad..but the new ones don't offer enough to consider/reconsider buying ANOTHER game. I'm sure they enjoyed the payder while it came in...but they have taken franchises and truly destroyed them by taking any sort of innovation and creativity out of them--or just taking ideas and including them in games---even though they really have no relevance to what made the game good in the first place.



It just seems a shame---I never played any guitar hero or rhythm games--but I know plenty that do--and they will miss it.



I agree with some comments that say that Activision should follow suit of their Blizzard counterparts--releasing a sequel or new iteration every 6months to a year doesnt work(unless it offers enough changes) but releasing a powerful reboot and letting the fanbase build the momentum over a few years...does work--StarCraft 2 is/was a huge success---on PC non-the-less. If Activision took this into consideration for some of their franchises that are now basically 6 feet under---they might still be live and kicking.


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