Analyst: Despite Band Game Softness, Initial Guitar Hero 5 Sales On Track

The band game sector has come under close scrutiny in recent months, as many investors, retailers and analysts have expressed concerns that a constrained economy, coupled with consumer fatigue, might mean that franchises like Guitar Hero are no longer the cash cow that they once were. But sales of Activision's recently-released music game Guitar Hero 5 seem to be as strong as Activision expected, Stern Agee analyst Arvind Bhatia said in a research note Wednesday. "While timing and SKU differences make data difficult to compare to last year, our checks on Guitar Hero 5, released yesterday, indicate the game is meeting initial sales expectations at retail," he said. "We believe investor expectations for GH5 are low given the music genre of games has been under pressure all year." Music games exploded in popularity in past years, led by Activision's Guitar Hero games and Harmonix's Rock Band. But analysts have questioned whether the popularity of music games is waning. Nevertheless, sales of Guitar Hero games have surpassed $2 billion. The previous Guitar Hero game, Guitar Hero: World Tour, sold 3.4 million units in the U.S. in 2008. Bhatia noted strong ratings thus far for Guitar Hero 5, which is currently earning an 89 percent on Metacritic, "slightly above last year’s Guitar Hero World Tour," at least for the time being. A limited promotion in which Guitar Hero 5 buyers receive a copy of the unreleased Guitar Hero: Van Halen may also sweeten the deal for customers, and help near-term performance, Bhatia said. Bhatia noted, however, that year-on-year comparisons between Guitar Hero: World Tour and Guitar Hero 5 are difficult at this point. There are only two SKUs of Guitar Hero 5 currently at retail (one with a guitar controller, one software-only), whereas the full band kit for Guitar Hero: World Tour launched side-by-side with other SKUs. Bhatia believes that the guitar-bundled version is down by at least 50%, year on year. This year's Band Hero is launching in early November. In addition, last year's Guitar Hero launched closer to Christmas, which could cause a difference in sales performance year-on-year, the analyst said. The publisher is banking this holiday on partially on the continued success of more expensive, peripheral-based game bundles. Also coming this year from Activision is DJ Hero, which will sell with a turntable controller, as well as Tony Hawk Ride, which comes with a skateboard controller.