Activision Blizzard mulls iTunes-like store

SUN VALLEY, Idaho Fri Jul 11, 2008 12:28am BST

Show attendee Brian Weinberg plays Guitar Hero III on a Dell laptop during the Consumer Electronics Show (CES) in Las Vegas, Nevada January 8, 2008. REUTERS/Steve Marcus

Show attendee Brian Weinberg plays Guitar Hero III on a Dell laptop during the Consumer Electronics Show (CES) in Las Vegas, Nevada January 8, 2008.

Credit: Reuters/Steve Marcus

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SUN VALLEY, Idaho (Reuters) - Activision Blizzard is considering developing an iTunes-like digital entertainment store on its popular "Guitar Hero" video game platform, Chief Executive Robert Kotick told Reuters on Thursday.

Kotick also said the company, whose $10 billion merger with Vivendi's video game business closed on Wednesday, expects stiffer competition from traditional media companies like Time Warner Inc and Walt Disney Co.

While there were no concrete plans to launch a rival to Apple Inc's iTunes just yet, he said all the pieces were in place.

Blizzard makes the most popular subscription online game, "World of Warcraft," Vivendi owns the world's largest music company, Universal Music Group, and "Guitar Hero" lets gamers play plastic guitars along with music on television screens.

"When you think about the potential for what we will be able to do together, there have not been many viable alternatives to iTunes," Kotick said.

"If you're downloading a song to play on your 'Guitar Hero,' there's no reason why you can't download the performance also. So there's all kinds of things you can think about."

The creation of an iTunes rival would make Activision Blizzard the latest company to try to challenge Apple in the digital music market. Amazon.com Inc has also launched its own online music store.

Such services are just the beginning of what the combined Activision Blizzard, now worth an estimated $19 billion, can do, executives said.

"When you look at Universal Music Group as having such a big slate of artists and a large catalog and such a well balanced presence over all the major territories in the world, there are plenty of opportunities," Vivendi CEO Jean Bernard Levy said.

MORE CONSOLIDATION, COMPETITION

With Vivendi's financial heft, Activision Blizzard would be better placed to pursue future acquisitions, Kotick said. "We'll have a bigger market capitalization, the resources of Vivendi available to us and the balance sheet of Vivendi available to us if there are appropriate transactions."

Kotick and Levy declined to comment on any potential targets, but said Activision had historically aimed for reliably profitable game developers with good management.

Despite rival Electronic Arts Inc's ongoing pursuit of "Grand Theft Auto" maker Take-Two Interactive Software, Kotick said the games industry remained a fragmented sector with more deals likely in the pipeline.

He expects deals to buy development talent and intellectual property rights, as well as to combat stiffer competition from traditional media companies wading back into the games market.

"The pace of consolidation has accelerated," Kotick said. "It's still a fragmented business with lots of new competitors coming in the market all the time."

Kotick said the merger would help his company fend off competition from Time Warner and Disney. Activision already competes with MTV Networks-owner Viacom Inc, which develops a direct rival to "Guitar Hero" called "Rock Band."

Disney and its Pixar animation franchises, and Time Warner's deeper investments in video games in the United States, the United Kingdom and the Middle East, are all viewed as growing competitors to Activision Blizzard, Kotick said.

Time Warner's Warner Bros Home Entertainment unit recently hired veteran video game executive Martin Tremblay this year to lead its efforts, including a deeper investment in the UK's SCi Entertainment Group, maker of the "Tomb Raider" game franchise that features character Lara Croft.

(Visit here for more Sun Valley coverage at the Reuters MediaFile blog)

(Editing by Leslie Gevirtz and Braden Reddall)

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