Activision Establishes Leadership Position in Music-Based Gaming

Underscoring its commitment to broaden its product portfolio and deliver compelling entertainment experiences to consumers worldwide, Activision, Inc. (Nasdaq: ATVI) announced today that it has entered into an agreement to acquire video game publisher RedOctane, Inc. the publisher of the popular Guitar Hero franchise. This acquisition will provide Activision with an early leadership position in music-based gaming, which the company expects will be one of the fastest growing genres in the coming years.

Guitar Hero is the fifth highest teen-rated game ever released on the PlayStation^® 2 computer entertainment system with a 92 rating. The game challenges players to be a lead guitarist of their own rock and roll band. The game is sold with a guitar-shaped controller that lets consumers simulate playing the guitar for more than 30 popular songs that were made famous by such artists as the Red Hot Chili Peppers, David Bowie, and Ozzy Osbourne. Guitar Hero features six venues, eight unique characters, many guitars, and a range of difficulty levels, as well as a two-player mode that lets gamers challenge friends to see who rocks harder.

"Our acquisition of RedOctane perfectly aligns with Activision's strategy to broaden its portfolio by entering new genres that have strong global appeal," said Ron Doornink, Director and Strategic Advisor, Activision, Inc. "Guitar Hero integrates music and gaming in a unique and highly engaging way that delivers a compelling game experience for both the current- and next-generation consoles. The success we are seeing today is a strong indicator that Guitar Hero and the many potential extensions, new platform exploitations and international versions appear to be somewhat transition proof, as consumers are responding to this product on current-generation platforms in a manner that defies traditional late-cycle behavior. We think the online capabilities of the next-generation platforms offer new and well differentiated opportunities to create additional revenues from downloadable music, which today represents one of the most popular downloadable content categories."

Mike Griffith, President and CEO of Activision Publishing, Inc., added, "Activision's well-established worldwide distribution capabilities coupled with the strength of the Guitar Hero franchise, places us in a position today to capitalize on the millions of current-generation systems in the market. Just as we lead the industry in making music an integral part of the game experience, we will now be making music itself a game, which is appealing to audiences all around the world."

"RedOctane is incredibly excited about joining forces with Activision to lead the industry in the music-based gaming category," said Kai Huang, President and Co-Founder of RedOctane, Inc.

Charles Huang, COO and Co-Founder of RedOctane, Inc., added, "The powerful combination of our deep understanding of the music-based gaming category and Activision's global publishing infrastructure will enable us to realize our vision to remain the leader in music-gaming space."

Under the terms of the agreement, RedOctane will become a wholly owned subsidiary of Activision and the company's management team and key employees will sign long-term employment contracts with Activision. RedOctane will continue to be based in Sunnyvale, CA. The transaction is expected to close during the current fiscal quarter. The closing of the transaction is subject to various specific and general closing conditions. North Point Advisors acted as financial advisor to RedOctane. Financial terms of the agreement were not disclosed. Activision does not expect that this acquisition will have a material impact on its fiscal year 2007 earnings outlook.

 

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