'Guitar Hero', 'Call of Duty 4' make huge sales

Ending its last independent year with a bang, Activision reported 80% revenue growth during the holiday quarter to $1.48 billion thanks to the world’s two top-selling games: “Guitar Hero III” and “Call of Duty 4.”

Current quarter is likely the final one before Activision merges with “World of Warcraft” publisher Vivendi Games. Once the deal is complete, French conglom Vivendi will be majority owner of the new company, to be called Activision Blizzard.

But Activision is heading into the transaction on a major hot streak. Publisher, which ends its fiscal year in March, reported that revenues from the first nine months have already exceeded the total from the last fiscal year.

Net income surged 90% to $272.2 million.

Perf was even better than Activision’s most recent guidance, which it increased for the second time in December.

Though “Call of Duty 4″ was the world’s bestselling game in units sold, at more than 7 million, “Guitar Hero III” was the biggest in terms of dollars thanks to the higher price tied to the guitar controller.

Activision also benefited from big sales for “Spider-Man 3,” the bestselling movie-based game in the U.S., as well as its adaptations of “Transformers” and “Shrek the Third.”

The only significant underperformer was the latest Tony Hawk skateboarding game. Activision is in the midst of major revamp of the franchise as sales slowed amid competition from EA’s new title “Skate.”

“We thought having competitive products might increase the overall market, but they didn’t,” Activision CEO Bobby Kotick said in an interview, noting that “Tony Hawk’s Proving Ground” and “Skate” together sold about as much as 2006’s “Tony Hawk” title.

Activision is in the midst of a major revamp of its skateboard game strategy to prepare for this fall’s “Tony Hawk” game.

Activision ended up as the No. 1 game publisher in North America for 2007. It still lags Electronic Arts worldwide, but Kotick said he’s aiming to change that this year by focusing on international markets, particularly Europe.

“That’s the low-hanging fruit for us,” he told Daily Variety. “We have No. 1 market share in the U.S. but not Europe, and there’s no reason we see why ‘Guitar Hero’ shouldn’t be the No. 1 product in Europe as well.”

He noted that Activision will increase its marketing and infrastructure in Europe, as well as tailor the music in “Guitar Hero” releases for European countries.

He also said the “Guitar Hero” franchise could benefit around the world from collaboration with Universal Music Group, which will become a sibling company following the Vivendi transaction.

Once the deal happens, UMG topper Doug Morris will join the board of Activision Blizzard.

Kotick will remain as CEO of the new company, while Vivendi’s Rene Penisson will be chairman.

On the conference call, Activision also outlined its release plans for the rest of the year, with a focus primarily on sequels and movie adaptations. Kotick hinted that some original properties may be coming as well, though the publisher isn’t yet ready to release details.

Games already on the sked for 2008 include the following:

  • Multiple “Guitar Hero” follow-ups, including two add-ons in the spring and a proper sequel, “Guitar Hero 4,” in the fall.

  • Adaptations of DreamWorks Animations’ spring release “Kung Fu Panda,” for which Activision has particularly high hopes, and the fall’s “Madagascar 2,” as well as a separate “Kung Fu Panda” game for the holidays.

  • An adaptation of Sony and MGM’s new James Bond movie “Quantum of Solace” in the fall.

  • A new “Spider-Man” game.

  • Sequels to “Marvel Ultimate Alliance” and “Call of Duty” and a new Tony Hawk skateboarding game.

Shares in Activision closed up 1% at $26.29 Thursday before earnings were announced.

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