Guitar Hero “Has Not Peaked”

Guitar Hero "Has Not Peaked"

Lagging sales of Guitar Hero: World Tour are not an indication that the $1 billion-plus franchise has "peaked," analyst Todd Greenwald with Signal Hill contended on Wednesday.

"Guitar Hero sell-through a bit soft, but not a disaster," said Greenwald of Activision’s latest franchise entry, which incorporates microphone, drum and guitar controllers. He said the full band bundle has sold well, but admitted sales of the standalone game and guitar/software kit have been "sluggish" when compared to the record-breaking Guitar Hero III.

However, he refused to believe that the franchise’s popularity has peaked. "Despite this ‘weakness,’ we disagree strongly with those who contend that Guitar Hero is a ‘fad,’ or that the franchise peaked last year with [Guitar Hero III]."

Greenwald added, "For the year, the overall Guitar Hero franchise is up substantially (including extensions like Guitar Hero Aerosmith and Guitar Hero On Tour). North America sales are likely to be up over 20 percent for the year, while Europe could be up nearly 300 percent. Furthermore, the title count will expand materially in 2009, driving further growth with potential titles like GH: Metallica, GH: Jimi Hendrix, DJ Hero and more."

UBS analyst Ben Schachter recently reported that the Guitar Hero franchise sold 1.7 million units in the U.S. during November, down 25 percent year-on-year. Rival music franchise Rock Band sold a relatively few 629K, although sales were up 65 percent for the busy shopping month.

Greenwald’s comments counter those made by Electronic Entertainment Design and Research analyst Jesse Divnich, who said that franchises like Guitar Hero and Rock Band will have a large, loyal fanbase for the next 10 years, but argued that sales show popularity is reaching its peak.

Lowered estimates

Due to recent softness of Guitar Hero, Greenwald lowered Q4 estimates to $2.2 billion in revenue and earnings per share of 29 cents, down from $2.3 billion and 32 cents.

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