Activision snaps up RedOctane and Guitar Hero franchise

Activision has acquired Californian publisher RedOctane, the company best known for bringing music game Guitar Hero to PlayStation 2, in a deal that's set to close by the end of the current financial quarter.

RedOctane will continue to operate out of its Sunnyvale offices, with the management team and key employees signing long term employment contracts with Activision.

The financial terms of the agreement were not disclosed, but in a statement Activision said that it does not believe the deal will have a material impact on its financial forecast for 2007.

The decision to acquire RedOctane was doubtless taken following the huge success of Guitar Hero, a game that comes complete with a guitar-shaped controller and lets would-be rock stars play along to more than 30 different tracks. The sequel, which is due go on show at E3 this week, is set to feature around twice as many songs.

"The success we are seeing today is a strong indicator that Guitar Hero and the many potential extensions, new platform exploitations and international versions appear to be somewhat transition proof, as consumers are responding to this product on current-generation platforms in a manner that defies traditional late-cycle behavior," said Activision's Ron Doornink.

"We think the online capabilities of the next-generation platforms offer new and well differentiated opportunities to create additional revenues from downloadable music, which today represents one of the most popular downloadable content categories."

Activision isn't the only one to spot a market opportunity here - at the company's pre-E3 press conference last night, Sony's Phil Harrison unveiled SingStore, a new download service that will allow players of karaoke title SingStar PS3 to purchase a wide range of music videos online. Although a PS3 version of Guitar Hero has not been announced, it seems like a natural progression for the series in light of the comments from Harrison and Doornink.