Activision pulls plug on Guitar Hero music game

NEW YORK Thu Feb 10, 2011 10:56am EST

Visitors play Guitar Hero 5 game during the video game show in Paris September 17, 2009. REUTERS/Charles Platiau

Visitors play Guitar Hero 5 game during the video game show in Paris September 17, 2009.

Credit: Reuters/Charles Platiau

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NEW YORK (Reuters) - Activision Blizzard said on Wednesday it would disband the unit that makes its Guitar Hero games, citing declining popularity for music-themed video games.

The company, whose first-quarter outlook was below Wall Street expectations, said it would disband its Guitar Hero business unit and stop development of the Guitar Hero game for 2011.

"We simply cannot make these games profitably based on current economics," Activision Publishing's chief executive, Eric Hirshberg, told analysts on a conference call.

The company also said it would not release a skateboarding game next year and that it would discontinue the game "True Crime: Hong Kong."

In December, Viacom sold Harmonix Music Systems, the developer behind the Rock Band franchise, to the investment firm Columbus Nova and gained up to $200 million in the deal, analysts have estimated.

Activision Blizzard announced a new digital platform, "Beachhead," which will focus on the highly successful "Call of Duty" franchise.

Since the launch of "Call of Duty: Black Ops" in November, it has pulled in more $1 billion in sales.

The company's shares fell to $10.81 in after-hours trading compared with a regular-session close of $11.69.

The company forecast revenue of $640 million in the first quarter of 2011 and EPS of 7 cents per share, compared with the $734.70 million analysts were expecting on 10 cents per share for the quarter.

Adjusted for various costs, the company's revenue was $2.55 billion, up from $2.50 billion a year earlier. This was above analysts' expectations of $2.36 billion.

The company was formed in 2008 through the merger of Activision with Blizzard, the former games unit of France's Vivendi, which still owns more than half the combined company.

(Reporting by Liana B. Baker; editing by Bernard Orr, Andre Grenon and Matthew Lewis)

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