Rock Band vs. Guitar Hero

I am an ATVI (Activision) investor. Last night Electronic Arts reported earnings. Today the stock is up over 6%. I am getting a little nervous because the bounce all seems to be based on their upcoming releases, namely Harry Potter and Rock Band.

I did a little searching on digg.com and the dorks on there are really excited about Rock Band. It is a game that has four players each with a musical instrument (drums, guitar, singing, and bass??) I didn't get to see the YouTube video because it is blocked at work, but all the dorks were drooling over it. The game is being made in conjunction with MTV - the masterpromoters, they love to run commercials. If Rock Band takes off it could be a serious drag on ATVI, but I don't think that will happen.

Because of its price, the select systems it will be available on, and the fan base that Guitar Hero has already built I don't think Rock Band will have a major negative effect on Guitar Hero. Rumors are that Rock Band's price point will be $200. Consider the recent products that have been priced on the high side - Playstation 3 and the iPhone. Playstation 3 was a disaster. iPhone - though it isn't certain yet - is way too expensive even for the 30-something adult like me. In my opinion, marketers are going to have to take this into consideration. Would your kids be satisfied if all that was under the Christmas Tree was Rock Band the game?

Rock Band is only available on the Playstation 3 and Xbox 360. Owners of these systems are exactly opposite the audience for who this type of game is intended for. Owners of Playstation 3 and Xbox 360 can figure out how to use a joystick with a thousand buttons on it. They don't need dumbed down, social games that require friends. They would much rather go around killing people in a first person shooter (this is where ATVI's Transformers The Game comes in). Electronic Arts just went through a reorganization in order to be competitive on the Wii-type platforms. Great going EA Management!

Finally, Rock Band will not effect Guitar Hero due to the fact the Guitar Hero has already sold over 3 million copies. That doesn't even include the first Guitar Hero. Consider that these customers spent 70 dollars for the game and the guitar. Their friends have played it. There is an 80s version out now. Guitar Hero 3 will be released prior to Christmas. You can buy songs online for 3 dollars. And it is available for the most popular gaming system - Playstation 2.

Based on this information. I would recommend an investment in ATVI over ERTS. I will be watching the competition very closely. I find monitoring the Top Sellers on amazon.com of video games to be an instantaneous indicator of the current market.