Guitar Hero headbangs out $100 million

Activision SEC filing reveals hefty acquisition cost for RedOctane, developer of the popular headbanger simulator.

Last week, Activision reported its earnings for the quarter that ended on June 30, 2006. After the report, company CEO Bobby Kotick fielded queries from analysts, who tired to glean information from the report. One question brought a revelation that many gamers will find welcome: Activision is planning an "all-new Guitar Hero" game, with the next appearing in its 2008 fiscal year, which runs from April 1, 2007, to March 31, 2008. Guitar Hero II is due to hit PlayStation 2 consoles later this year.

Now, it appears that Activision will have to release many more Guitar Heroes to recoup the acquisition cost of the game's developer, which it bought earlier this year. Buried deep in the 10-Q form the company filed with the Securities and Exchange Commission is the price it paid for RedOctane, the developer of the award-winning PlayStation 2 series. Suffice it to say, the Sunnyvale, California-based studio did not come cheap.

Activision's report summed up the deal with an elaborate sentence. "On June 6, 2006, we completed our acquisition of 100% of RedOctane, Inc. (RedOctane) for an aggregate accounting purchase price of $99.9 million including transaction costs, consisting of $30.9 million in cash and 2,382,077 shares of Activision common stock valued at approximately $30.0 million based upon prevailing market prices, and $39.0 million payable in Activision common stock within two years of the closing date, which is recorded in other liabilities." (Emphasis added.)

Besides the aforementioned sum, Activision may also have to shell out another chunk of change if future Guitar Hero games rock retail. "In the event the net income of the business over a certain period of time exceeds certain target levels by certain amounts, certain former shareholders of RedOctane will be entitled to an additional amount of up to $51.0 million payable in shares of Activision common stock."

51 Comments

  • alejandrosimms

    Posted Feb 4, 2008 6:28 am PT

    And I guess those shareholders will now be getting those shares.

  • Deagler_

    Posted Aug 21, 2006 8:26 pm PT

    It would be so sweet if they brought GH2 to the xbox360, ill buy it right away

  • zeldawrocks

    Posted Aug 12, 2006 2:46 pm PT

    Guitar Hero is one of the most fun, innovative games I have played for a long time. Every person I have convinced to have a go has loved it, no matter whether they rocked, or just stunk. I can't wait for the sequel!

  • banshe02

    Posted Aug 11, 2006 11:35 pm PT

    Hopfully they will now make GH2 for the 360... I could happen now...

  • wraith808

    Posted Aug 11, 2006 4:46 pm PT

    @goat_god_3

    It wasn't RO's decision to not have vocals in Spanish Castle Magic. As part of the licensing deal, they couldn't license the lyrics, just the music, i.e. no vocals. Apparently the Hendrix Estate doesn't want anything out there that sounds too close to the real songs, which is understandable since they've made about 44mil since 1997 on them...

  • Ace_Gunner

    Posted Aug 11, 2006 4:36 pm PT

    Ok, I'm really confused. One minute people are saying Harmonix developed the game and Red Octane published it, next minute they're saying Red Octane developed and published it. I never saw anything about Red Octane in Frequency and Amplitude so what's the deal?

  • cesarotromundo

    Posted Aug 11, 2006 2:15 pm PT

    that game is lame.. i mean what r u talking about "guitar hero" u barely press a few buttons etc... get a life ppl! lol

  • comthitnuong

    Posted Aug 11, 2006 11:40 am PT

    thats alot of money

  • polsci1503

    Posted Aug 11, 2006 11:16 am PT

    Holy Toledo that's a lot of money...

  • mr_squibble

    Posted Aug 11, 2006 8:24 am PT

    I should've bought some shares of RedOctane last year, darnit.

  • GameNutts

    Posted Aug 11, 2006 6:48 am PT

    In a previous story it was mentioned that Activision plans on bringing the new guitar hero to the Xbox360 and PS3. I believe they want to work out a service much like iTunes where you pay something like a dollar to download any song you want for the game. While that sounds cool I'm not sure that would be a great idea. If they did that, then how would they charge for a new version of the game which basically just has more songs (like Guitar Hero II)?

  • ebonyflame

    Posted Aug 11, 2006 6:25 am PT

    That price seems a bit steep to pay for a developer that has only developed a couple of games and only one of them was a hit...

  • digitalpro

    Posted Aug 11, 2006 5:25 am PT

    WHOA 100 million. Crack tose bottles open. Was that RedOctane first game? Activison might be taking a big risk if they don't put the game on other systems. This type of game screams XBOX LIVE. But PS2 are in more homes but if they want to make back their money, spread the live. As much as we would love to have all the system, many can't afford them.

  • Ponsardin

    Posted Aug 11, 2006 3:00 am PT

    What is going on? Every news article I've read today includes something about SEC.
    Anyway, 99.9 million dollars is a whole bunch of money.

  • goat_god_3

    Posted Aug 10, 2006 11:26 pm PT

    [This message was deleted at the request of a moderator or administrator]

  • phSychO_AtDawn

    Posted Aug 10, 2006 11:06 pm PT

    Make it 4 360!!! it means mo money RO! come on! millions more will buy it.

  • ragingoptimistu

    Posted Aug 10, 2006 8:29 pm PT

    This is the first franchise that I've actually WANTED to have milked for all that it is worth. The sequel is my #1 most anticipated game of the year, and I'd love Activision to release a slew of sequels. It is a lot of money, but this game's fans are some of the most loyal in the video game world.

  • gameloverx

    Posted Aug 10, 2006 8:04 pm PT

    whoa $100 million, go guitar hero

  • VegetaMaelstrom

    Posted Aug 10, 2006 7:48 pm PT

    I have no doubt at all that Activision will recoup the 100 million it spent on acquiring Red Octane. We can expect to see textbook milking like this industry hasn't seen since Tony Hawk (what, 8 games in 8 years?). Who publishes Tony Hawk? Activision. This is great news for Guitar Hero fans though because you will be getting all of the rawking that you can handle and then some.

  • MrUn1t

    Posted Aug 10, 2006 7:09 pm PT

    kids need to pick up a real guitar and play it....

    so much for "guitar hero"

  • Army635

    Posted Aug 10, 2006 6:31 pm PT

    wow

  • jman183

    Posted Aug 10, 2006 6:22 pm PT

    That is awesome news!!! RO most definitely deserve it!!

    O and to the people saying that they wish the songs were the REAL recordings....RO wanted the real songs really bad but the artists them selves either wanted a LOT of money and/or and they didnt know if this game was going to flop so they didnt want to invest that much into it. Now though bands are actually going to the Harmonix guys and asking if they can have their REAL songs in the game!! So exciting!!

  • TintedChimes

    Posted Aug 10, 2006 6:02 pm PT

    I just want 10% of the aquisition cost so I can start a real headbanging band, regardless if I'm devoid of any talent and can't tell between a C note and a A note.

  • Fallout_red

    Posted Aug 10, 2006 5:56 pm PT

    Red Octane deserves it, and even more...

  • T1Panda

    Posted Aug 10, 2006 5:45 pm PT

    Woo. Guitar Hero is a great game. I just kind of wish the songs were the original recordings.

  • i_love_my_ds

    Posted Aug 10, 2006 5:41 pm PT

    i just want a wii or gamecube version!!

  • PS3_3DO

    Posted Aug 10, 2006 5:38 pm PT

    Can't wait to get the Next Gen version of Guitar Hero!!!!!!

  • topraman517

    Posted Aug 10, 2006 5:38 pm PT

    Please let Guitar Hero 3 have ALL the original recordings and no covers.... and add more depth to the game, a story mode or something.

  • white_sox

    Posted Aug 10, 2006 5:35 pm PT

    awesome game, im glad its exclusive

  • zub1

    Posted Aug 10, 2006 5:24 pm PT

    I hope the money will get us some licensed music .

  • bob_nope_none

    Posted Aug 10, 2006 5:17 pm PT

    does this mean that it wiil be coming to other consoles? i mean they wanna make money right?

  • SolidSnake_92

    Posted Aug 10, 2006 5:14 pm PT

    cool!

  • Rudy25

    Posted Aug 10, 2006 5:07 pm PT

    Cool, now to celebrate, release all of the Guitar Hero 2 songs!! Seriously whoever doesn't have this game, GET IT! Your missing out.

  • lvlUNE3B

    Posted Aug 10, 2006 5:07 pm PT

    More Guitar Heroes!! It's awesome. Keep that cooming Activision. *2 thumbs up*

  • WolfSkill5544

    Posted Aug 10, 2006 4:57 pm PT

    cool, keep rocking with guitar hero!!

  • Charlie2688

    Posted Aug 10, 2006 4:53 pm PT

    Cool!

  • Imallvol7

    Posted Aug 10, 2006 4:48 pm PT

    best game ever, Activision made a great move in aquiring them.

  • thorsen-ink GameSpot staff member

    Posted Aug 10, 2006 4:47 pm PT

    Just look at it this way: GH has the potential to be as big--or bigger--than DDR. How much money have all the DDR games made. And think of all the crazy spin-offs: Punk Guitar Hero, '80s Metal Guitar Hero, Grunge Guitar Hero, '70s rock guitar Hero, etc. Don't think Country Guitar Hero would work, tho--too slow. Banjo Hero might, tho!! They could also have crazy '80s keyboard guitar hero for a New Wave spin-off. This thing will mint cash for a decade.

  • 4esth

    Posted Aug 10, 2006 4:39 pm PT

    "At 80 bucks a pop i can why it made 100 million"

    It didn't make 100 million, Activision BOUGHT RedOctane for that amount.

  • ronaldmonster

    Posted Aug 10, 2006 4:35 pm PT

    At 80 bucks a pop i can why it made 100 million

  • NeoGamer741

    Posted Aug 10, 2006 4:29 pm PT

    RedOctane is good at what they do. When I see their name on a game/peripheral, I know I won't be disappointed. Congrats guys; I'm sure they are having a massive party, haha.

  • SCboy79S

    Posted Aug 10, 2006 4:26 pm PT

    Good for them. All because of a rythme game too. I broke a serious rule in buying that game... NEVER buy a game that needs a peripheral. And yet it's one of the games that I love playing the most.

  • jasonmacrillo

    Posted Aug 10, 2006 4:21 pm PT

    i hope they let red octane do what they do best without that much influence from activision... red octane knows what gamers want in a guitar game

  • srraven

    Posted Aug 10, 2006 4:20 pm PT

    RedOctane and Guitar Hero started at E3's Kentia hall and now look at them,being bought for 100 Million $ *Dr.Evil laugh*.

    I bet they never,ever expected that.

  • mariomaniac92

    Posted Aug 10, 2006 4:20 pm PT

    Dayum....For a rhythm game.

  • Jakob

    Posted Aug 10, 2006 4:18 pm PT

    Hefty pricetag but RedOctane is probably worth it. The Guitar Hero franchise will only continue to grow and appeal to more customers in the future. I know for sure that I'm hooked!

  • blackIceJoe

    Posted Aug 10, 2006 4:17 pm PT

    Well of course it will cost a lot to make a great game. i can't wait to see the next Guitar Hero on the PS2. I would love to see this one the Guitar is wireless that would be real nice. Plus if I am reading this right we could see a new Guitar Hero in 2008. If so that would be real neat I would hope by then it would make the jump to either the 360 or PS3.

  • VScalar

    Posted Aug 10, 2006 4:17 pm PT

    $100 million for what is essentially a one-franchise developer? I'm not sure that this was a smart move by Activision.

  • diablobasher

    Posted Aug 10, 2006 4:15 pm PT

    *too tired for business mumbo jumbo*

    Guitar Hero rawwks

  • D3s7rUc71oN

    Posted Aug 10, 2006 4:15 pm PT

    Wow $100 million, I'm sure Activision will be able to recoup in the long run; besides they are a huge publisher.

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