The console battle between Xbox 360, PS3 and Wii might grab the spotlight most of the time, but there's no doubt that one of the fiercest battles this holiday season will be between Activision's/RedOctane's Guitar Hero III and EA's/MTV's Rock Band. Ahead of Activision's earnings announcement, analyst Mike Hickey of Janco Partners made an interesting observation in his latest research note on the publisher's potential plans for the Guitar Hero franchise.

"Electronic Arts' (ERTS) upcoming title Rock Band from the Harmonix team will likely create a compelling option for the music oriented category beginning in holiday '07, which will pressure Guitar Hero's growth. That said, we expect Guitar Hero to follow a natural product evolution by adding additional music peripherals in CY08," he said. "Importantly, the Guitar Hero franchise that is developed internally and owned, offers a meaningful operating margin expansion potential versus Rock Band, which is purely a distribution deal for ERTS."

It'll be interesting to see how the battle plays out this year. If consumers really do want extra instruments besides the guitar peripherals—and show that by purchasing Rock Band over Guitar Hero—Activision will have no choice but to start offering new instruments as well.