There's been a lot of discussion about softness in the music video game space of late. While both Guitar Hero and Rock Band continue to be popular franchises, sales aren't quite as explosive as they were last year at this time. EEDAR analyst Jesse Divnich recently commented that Guitar Hero has already reached its peak.

Signal Hill's Todd Greenwald, however, does not agree with this assessment. In an investors note on Activision prior to the publisher's fourth-quarter results, Greenwald remarked that "Guitar Hero sell-through a bit soft, but not a disaster. It is now fairly apparent that Guitar Hero [World Tour] sales are likely to come in a bit below expectations. While the full band kit has sold extremely well, the stand-alone game and guitar kit have been a bit sluggish, especially in comparison to the record-breaking sales of last year's Guitar Hero 3."

Despite the decline in sales, Greenwald does not believe the franchise has peaked. He continued, "Despite this 'weakness', we disagree strongly with those who contend that Guitar Hero is a 'fad,' or that the franchise peaked last year with GH3. 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% for the year, while Europe could be up nearly 300%. 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."

As for Activision on the whole, any softness in the music category should be offset by Call of Duty: World at War and World of Warcraft: Wrath of the Lich King. World at War has already sold 2.2 million units in the U.S., topping the 2.0 million units launch of Call of Duty 4. Wrath of the Lich King meanwhile is on pace to sell over 4 million units in Q4, having sold 2.8 million units in its first 24 hours.

With the slight softness in music, Greenwald is lowering the Q4 estimates on Activision to $2.2 billion in revenue and EPS of $0.29, which is down from $2.3 billion and $0.32. Nevertheless, he states that Activision remains the "key name to own in the videogame space."

Spore Screenshots

    Spore, the highly anticipated game from the creators of The Sims, gives players their own personal universe in a box. Create and evolve life, establish tribes, build civilizations, sculpt entire worlds and explore a universe created by other gamers. Spore gives players a wealth of creative tools to customize nearly every aspect of their universe: creatures, vehicles, buildings, and even UFOs. Players can then seamlessly share their creations with the world or explore infinite new galaxies created by other gamers. (Screenshot 1 of 112)

    Spore, the highly anticipated game from the creators of The Sims, gives players their own personal universe in a box. Create and evolve life, establish tribes, build civilizations, sculpt entire worlds and explore a universe created by other gamers. Spore gives players a wealth of creative tools to customize nearly every aspect of their universe: creatures, vehicles, buildings, and even UFOs. Players can then seamlessly share their creations with the world or explore infinite new galaxies created by other gamers. (Screenshot 2 of 112)

    Spore, the highly anticipated game from the creators of The Sims, gives players their own personal universe in a box. Create and evolve life, establish tribes, build civilizations, sculpt entire worlds and explore a universe created by other gamers. Spore gives players a wealth of creative tools to customize nearly every aspect of their universe: creatures, vehicles, buildings, and even UFOs. Players can then seamlessly share their creations with the world or explore infinite new galaxies created by other gamers. (Screenshot 3 of 112)

    Spore, the highly anticipated game from the creators of The Sims, gives players their own personal universe in a box. Create and evolve life, establish tribes, build civilizations, sculpt entire worlds and explore a universe created by other gamers. Spore gives players a wealth of creative tools to customize nearly every aspect of their universe: creatures, vehicles, buildings, and even UFOs. Players can then seamlessly share their creations with the world or explore infinite new galaxies created by other gamers. (Screenshot 4 of 112)

    Spore, the highly anticipated game from the creators of The Sims, gives players their own personal universe in a box. Create and evolve life, establish tribes, build civilizations, sculpt entire worlds and explore a universe created by other gamers. Spore gives players a wealth of creative tools to customize nearly every aspect of their universe: creatures, vehicles, buildings, and even UFOs. Players can then seamlessly share their creations with the world or explore infinite new galaxies created by other gamers. (Screenshot 5 of 112)

    Spore, the highly anticipated game from the creators of The Sims, gives players their own personal universe in a box. Create and evolve life, establish tribes, build civilizations, sculpt entire worlds and explore a universe created by other gamers. Spore gives players a wealth of creative tools to customize nearly every aspect of their universe: creatures, vehicles, buildings, and even UFOs. Players can then seamlessly share their creations with the world or explore infinite new galaxies created by other gamers. (Screenshot 6 of 112)

    Spore, the highly anticipated game from the creators of The Sims, gives players their own personal universe in a box. Create and evolve life, establish tribes, build civilizations, sculpt entire worlds and explore a universe created by other gamers. Spore gives players a wealth of creative tools to customize nearly every aspect of their universe: creatures, vehicles, buildings, and even UFOs. Players can then seamlessly share their creations with the world or explore infinite new galaxies created by other gamers. (Screenshot 7 of 112)

    Spore, the highly anticipated game from the creators of The Sims, gives players their own personal universe in a box. Create and evolve life, establish tribes, build civilizations, sculpt entire worlds and explore a universe created by other gamers. Spore gives players a wealth of creative tools to customize nearly every aspect of their universe: creatures, vehicles, buildings, and even UFOs. Players can then seamlessly share their creations with the world or explore infinite new galaxies created by other gamers. (Screenshot 8 of 112)

    Spore, the highly anticipated game from the creators of The Sims, gives players their own personal universe in a box. Create and evolve life, establish tribes, build civilizations, sculpt entire worlds and explore a universe created by other gamers. Spore gives players a wealth of creative tools to customize nearly every aspect of their universe: creatures, vehicles, buildings, and even UFOs. Players can then seamlessly share their creations with the world or explore infinite new galaxies created by other gamers. (Screenshot 9 of 112)

    Spore, the highly anticipated game from the creators of The Sims, gives players their own personal universe in a box. Create and evolve life, establish tribes, build civilizations, sculpt entire worlds and explore a universe created by other gamers. Spore gives players a wealth of creative tools to customize nearly every aspect of their universe: creatures, vehicles, buildings, and even UFOs. Players can then seamlessly share their creations with the world or explore infinite new galaxies created by other gamers. (Screenshot 10 of 112)