I've heard plenty of people ask whether Activision is overexploiting the "Guitar Hero" franchise, what with the annual core sequels, Aerosmith, Metallica, "On Tour" for the DS, etc. etc. But I have to say that this adorable little number, which I found in a box of Frosted Mini-Wheats, may really be the one that jumps the shark. All those buttons really do create noises that kinda resemble music. But somehow I can't imagine this is what the folks at Harmonix and RedOctane had in mind when they first started working on the game:

I wonder if this counts toward Activision's goal to double the number of "Guitar Hero SKUs in 2009?

It's finally online, or most of it anyway. Unfortunately, for reasons I'm not quite clear on, the recording is cut short just a little bit before the end. But we've got a solid hour from the panel that I hope proves interesting.

I think it was a great discussion abut the current state and future of videogame storytelling. Fellow speakers on the panel (which, I should note, was sponsored by Activision) were Activision R&D Filipo Costanzo, Game/TV/Movie writer Flint Dille, Neversoft Chad Findley, and game/movie writer and journalist Bruce Feirstein.

Apologies for the fact that the video is broken up into four segments, and the 15 seconds of black at the beginning of #1. And a special thanks to Stuart Oldham for uploading them all.

"Saw," one of the highest profile games left orphaned when Brash Entertainment went out of business, has been picked up by Konami.

Sources close to the project have confirmed that Konami has made a deal with Lionsgate, to whom the rights reverted when Brash breached its contract, and developer Zombie Studios. The game will come out this fall along with the sixth "Saw" film (I almost wrote "Saw VI," but that series is getting so long in the tooth I'm wondering if they'll take a cue from the seventh "Star Trek" movie and just drop the numbers).

Konami is an obvious choice to pick up "Saw," since it has experience selling horror with a little franchise called "Silent Hill." But the game almost took a very intriguing twist: no publisher at all.

Or rather, no traditional publisher. Several sources told me that after it got the game rights back from Brash, Lionsgate strongly considered holding onto it and jumping into the videogame business by making "Saw" its first self-published game. Like every other movie studio (some of whom have gotten into videogames, the rest of whom are considering it), Lionsgate was tempted by potential profits in the fast growing videogame biz. But in the end, execs there apparently decided they couldn't properly model sales, or weren't sure they could market a videogame, and went the safer route of licensing it to a new publisher.

The "Saw" game hasn't been shown publicly, as far as I know. But the many Brash ex-employees I interviewed late last year uniformly said that it was looking really good, nothing like the three embarassments the defunct publisher released in its brief year-and-a-half of existence.

Apparently they've got Jigsaw himself, Tobin Bell, doing voice work and the game looks to be a bloody, violent M that's just as hard as the movies' R. I don't know much about gameplay, but I gather that it's based on the puzzles that Jigsaw likes to rig for his victims in the films. I do know it's for PC, PS3 and 360. Which is a bit of a shame, because while I understand that the typical Wii and DS owners aren't exactly the target market, I can't help but think of all the disturbingly awesome things you could do in a "Saw" game with a touch screen or a Wii-mote. (If it's a hit, maybe they'll use the "Dead Space" example and follow it up with a Wii version).

As is common with movie licenses these days, Konami's deal with Lionsgate is long term, meaning that if the first one's a hit, the games could become just as much of a never ending -- and never endingly profitable -- institution as the movies.

Reps for Lionsgate, Konami and Zombie all declined to comment or didn't respond to requests for comment.

(That's a teaser poster Brash made for the game above. Unsurprisingly, whoisjigsaw.com isn't working anymore.)

Though it has literally hundreds of little casual games on its websites, Cartoon Network was late making its big splash in online gaming the way Disney has with "ToonTown," "Pirates of the Caribbean Online," "Pixie Hollow," and Nickelodeon has with "Neopets" and "Nicktropolis." But the cable network has finally launched its piece de resistance for its target audience of young boys and Variety critic Leigh Alexander, who knows something about young boys (I couldn't help it; Sorry Leigh!), says in her review they're the first big media company to do a true MMO (not a virtual world) for kids. She calls it "a 'World of Warcraft'-lite game that's the first [online game from a kids' cable network] to approach the quality, playability and potential for mass appeal of its older-skewing brethren."

 Leigh's particularly impressed by the action, the smooth learning curve, and the way the game brings together many disparate Cartoon Network shows with a unique visual style:

She also likes the sizable amount of free content the game offers. Though there are plenty of reasons to pay, this isn't one of those scams designed to make kids miserable who can't get Mom or Dad to cough up the credit card.

Though the controls and navigation leave a bit to be desired, Leigh's only real complain comes in the second "M" in "MMO." Cartoon Network apparently played it so safe protecting kids from predators, or saying bad words to each other, that there's no strong opportunity or reason to play together, or even talk and make friends.

Full review: FusionFall

Warner Bros. Interactive Entertainment is building quite the little videogame development hub in metro Seattle. The first game developer it bought was Monolith, back in 2005, which made the studio's first self-published game, "The Matrix Online." Monolith has gone on to form the core of WBIE's operations in many ways -- former Monolith head Jason Hall was WBIE's first top executive; the next Monolith head Samantha Ryan is now SVP production; many of the publisher's producers and other staff actually work out of Monolith's offices in Washington state, rather than WB headquarters in Burbank, CA.

Today WBIE bought Snowblind Studios, developer of its 2006 so-so seller "Justice League Heroes," as well as.two "Champions of Norrath" games for Sony Online and "Baldur's Gate: Dark Alliance" for Vivendi. It's almost certainly no coincidence that Snowblind is located in Bothell, WA, a whole seven miles from Monolith's HQ in Kirland, WA. I'm going to take a wild guess and say that given that they're in the same industry in the same community and have worked together on one game so far, the folks at both studios probably know each other really well.

WBIE's other developer, of course, is Traveller's Tales in the U.K., which it acquired in 2007 when "Lego Batman" was in the works. That's an entirely different animal, since it was a premium $200 million acquisition (no word what Snowblind cost, but I'd bet a lot less) and is pretty much off in its own universe making Lego games for family auds.

Snowblind was clearly bought to join Monolith in making titles aimed more at the core gamer crowd.

The only thing all three studios have in common, of course, is that they made the three biggest games that Warner Bros. has self published so far.

No word yet on what Snowblind will be doing for WBIE. The only game officially on its slate is XBLA actioner "Death Tank." WB may handle distribution on that, but I'd imagine it has much bigger plans.

Yesterday Electronic Arts reported terrible earnings with an enormous loss. Today THQ reported terrible earnings with an enormous loss.

But EA stock rose 11% today. THQ shares, meanwhile, have plummeted 15% in after-hours trading.

That means investors are actually more optimistic about EA's future than they were yesterday morning, but significantly less optimistic about the future of THQ than when they woke up today.

Why the disparity? In part it's because EA warned investors that it would be missing guidance back in December. THQ didn't provide any update since its last earnings report, in November. So the fact that revenue came in over 10% lower than expected and net loss was $192 million when THQ had said it would make a small profit came with no preparation (even if savvy investors must have sensed it was likely).

The fundamental difference between the two companies, however, is that EA's problem is really one of cost. It's spending too much and launching too many titles. Its revenue was actually up 10% in the December quarter from a year ago. As I wrote yesterday, EA has to recognize it's not the powerhouse it once was and cut costs in a smart way that maintains the products with the most market potential, supported with smarter marketing, made as often as possible for Nintendo's Wii.

At THQ, meanwhile, revenue was down 30%. It didn't just get too big for its britches. Its britches are rapidly shrinking. That's why EA CEO John Riccitiello can justifiably claim "Our expense base is geared to a business that assumes much more revenue." THQ's CEO Brian Farrell couldn't get away with that, since his company can't reliably assume what its revenue is. You know it's a bad sign when a company says the environment is so bad it's can't provide revenue guidance for the current quarter. But that's what THQ did.

Which is probably why investors don't have a lot of confidence THQ's cuts will do the trick, even though it's slashing a jaw dropping 24% of its workforce, compared to EA's 11%. Fundamentally, the two companies' plans are the same: cut back on the number of titles, support the few high end AAA releases aggressively, and develop more for the Wii. As Farrell summarized it: "Focus, focus, focus."

But there's more reason to think that will work for EA. It still has a reliably best selling suite of sports titles, most notably "Madden" and "Fifa." It has sequels to huge franchises like "The Sims" and "Need for Speed." It has a major license, "Harry Potter," that lends itself easily to gameplay. And it has some well respected developers like Bioware bringing out new properties.

THQ, by and large, is a big pile of question marks, beyond its solid annual seller "WWE Smackdown vs Raw." From its new UFC license to core gamer properties "Red Faction: Guerilla" and "Darksiders" to its new "Warhammer 40,000" MMO (we've seen how EA's "Warhammer Online" has struggled), there are no sure sellers. Its' only new positives in recent years have been "Saint's Row" and some decent Wii performers like "De Blob" and "Big Beach Sports."

It used to be that THQ's kids' licensed properties provided a reliable base. But it's about to lose the Pixar license and this year's movie, "Up," looks even tougher to adapt than "Wall-E" and "Ratatouille," both of which had disappointing sales. Nickelodeon properties haven't been performing that well (Farrell diplomatically told me last year "we'd love to see a new hit property from them"). And what it has to replace them are Marvel's new "Super Hero Squad" and a single movie from DreamWorks, "Master Mind." All this at a time when, as Farrell said on today's earnings call, "units for kids' titles are down across the board."

EA, fundamentally, is a company that needs to shrink and regroup. THQ has to stop its freefall and, quite frankly, justify its continuing existence. Nobody doubts that EA will still be around in five years, unless its gets acquired. THQ? As the market is proving, one can't be so sure. And it may not even make for much of an acquisition, since once you lose the licenses, all you're left with are a handful of solid studios, "Saint's Row," and "Warhammer 40,000." How much would you pay for that?

I know I wasn't the only one who had a bit of a "wtf?" moment when I found out yesterday that GameFly had bought Shacknews. What's the synergy between a videogame rental service and a popular, 14 year-old fan news site? After all, if Gamefly wants content to help its subscribers pick games, it can easily syndicate it. It already posts reviews from Gamespot, Gamespy, and IGN, as well as thousands of user reviews. And promoting its service on news sites is as easy as a simple advertising deal.

This morning I interviewed Gamefly co-founder and biz dev / marketing VP Sean Spector and his answer, quite simply, is that there is no synergy. At least in the short run. Spector says that Gamefly is simply interested in getting into the content business. And it's hard to see any other reason. Forbes.com theorized it may have to do with digital distribution, but it's hard to see what Shacknews offers on that front, besides the servers and bandwidth on its Fileshack download service. The challenge for Gamefly when games go digital in the future will be the DRM to make games rentals and getting around Microsoft, Nintendo and Sony, which will have their own services right on their consoles, and established PC services like Steam.

Given that it probably wasn't too expensive a deal, especially in the current economic climate, it seems like it really is just Gamefly diversifying it business a bit by entering a related field. Here's my conversation with Spector:

Why is Gamefly getting into the content business, particularly during this tough market for advertising?

We've always had our finger on the pulse of content as it relates to games because of our website. We have always in my mind done a good job of delivering a lot of different content. One thing we never had is news. When started looking at the news-oriented sites out that are out there we had three criteria: we wanted quality, credible news; a community that responded to it; and a good user experience. ShackNews hit all three of those in the bullseye.

So did you make the purchase because there were synergies with Gamefly or because it's a separate business you like?

I think more because it's a separate business we’re interested in. If it helps rentals, great. That's icing on the cake. The goal is to have a site that delivers really good content to gamers. We want to deliver all forms of content whether it's on disc or digital or a news story.

We’re taking a long term view. We believe in the videogame industry. Regardless of what’s happening in the world out there, the video game business is having the best year it has ever had. We think news and other information, other experiences are only going to get stronger

It may not be the easiest ad market right now, but we’ve got Gamefly to help support us and so we believe in the long view that this site and the quality of its content and community will weather the storm.

You say you want Gamefly to deliver all types of game content. So do you want the Gamefly brand to be associated with Shacknews?

They will remain two distinct brands, though I can see a point in time where Shacknews content appears on Gamefly.

We want to provide a really engaging experience to gamers whether it's on Gamefly or Shacknews, whether they visit both or one.

We think we've done a good job with Gamefly and we thought the Shacknews guys have done a really good job with their site. On the surface people may be wondering why we did this, but for us it makes a lot of sense.

Gamefly obviously has more resources than Shacknews had on its own. So are there things you want to do now to expand or change the site?

These guys have done a great job. It wasn’t a distressed asset. We don’t want to muck that up. So there are no plans for major changes.

We definitely think we can help grow Shacknews by utilizing our infrastructure, our development capabilities, and the Gamefly network to help expand its reach. As games get broader and broader, even more people will enjoy site.

So the editorial team will remain the same?

[Editors] Chris [Faylor] and Nick [Breckon] will continue to publish on the editorial side. [Founder] Steve [Gibson] is going to take time off. That was one of the impetuses of them wanting to sell. He has been running it for 14 years. It was all-consuming of his life.

What about Gamefly? How has it been doing amidst the recession?

All I want to say is that Gamefly had a good 2008.

In an otherwise dismal earnings report (is "dismal" becoming redundant before "earnings report" these days?), Time Warner pointed out a bright spot in its Warner Bros. entertainment unit: video games.

Particularly, "Lego Indiana Jones" and "Lego Batman," both of which were developed by Traveller's Tales, which WB bought in late 2007. In addition, "Lego Batman" was also published by Warner Bros., which means all the money it made came straight into WB's coffers, while most of the "Indy" moolah went to LucasArts.

After going through the declined in TV and DVD revenue at WB, Time Warner's earnings report notes that, "These decreases were offset partially by growth in interactive video games revenues, due primarily to the releases of LEGO Indiana Jones and LEGO Batman."

Of course, the first full year of owning any new subsidiary is always going to look good, because everything it makes is new revenue compared to the previous year. And of course we still don't know whether or when all that revenue can make up for the hefty $200 million or so that WB paid for the studio.

But still, hits are hits and WB could use them. And without Traveller's Tales, its only major videogame release would have been "Speed Racer," as well as "Tomb Raider: Underworld," which it distributed for Eidos. I doubt either one of those would merit a positive mention in earnings.

No wonder, then, that WB has a new Lego game, "Lego Battles," coming this summer, a DS-only title that reproduces classic fighting scenarios with the blocks like castles, pirates, and space. It's the first "Lego" game that won't be developed by Traveller's Tales, which has the Lego interactive rights. Instead it's being made by Canadian studio Hellbent Games.

The Lego franchise may be getting so big now that Traveller's Tales doesn't have the bandwidth to handle it all. The British studio hasn't announced its next project, though it's widely rumored to be "Lego Harry Potter," which sounds like about as surefire a hit as WB could conceive.

I started off writing a rather thorough examination of Electronic Arts' earnings, but then I realized it all boils down to one thing: EA is not the powerhouse it used to be. (If you don't yet know the basics of today's EA earnings report, you can get it here.)

The plain truth is clear in the numbers for fiscal 2010 (which starts April 1): EA cutting its planned operating expenses by $500 million, from $2.6 billion to $2.1 billion. And it's reducing the number of SKUs (one game released for three consoles counts as three SKUs) by 14% from fiscal 2009. If not for the delay of "Godfather Part II," "Sims 3" and "Dragon's Age: Origins" -- all of which are essentially done but EA says need a longer lead time for marketing -- that reduction would be about 20%.

EA, in other words, is 80% of the company it used to be.

Speaking in very carefully coded terms, CEO John Riccitiello essentially admitted this is the case on today's earnings call: "Our expense base is geared to a business that assumes much more revenue."

In the current economy, of couse, almost nobody is the absolute powerhouse they used to be. But EA has lost ground comparatively speaking. It's no longer even a clear no. 1 amongst the third parties in North America. EA's $1.65 billion in revenue last quarter was virtually even with Activision Blizzard's guidance of $1.6 billion (assuming that it actually meets its guidance, which it hasn't warned it won't). In terms of market capitalization, Activision Blizzard is now worth more than twice as much as EA ($12 billion compared to $5 billion).

And it's no longer much of a presence on the sales charts. "Madden NFL '09" for the 360 was EA's only game in the U.S. top 10 for 2008 or (ignoring "Left 4 Dead" which it distributed for Valve) the top 20 for the crucial December holiday sales month. "Clear and simple, our titles, did not perform to our expectations," Riccitiello stated flatly. EA just can't sell 'em like it used to.

Going forward, the company isn't expecting more revenue at all. It's revenue guidance for next fiscal year is identical to the current fiscal year: $4.2 billion. In other words: no growth.

Given all that, it's perhaps remarkable that EA is "only" laying off 11% of its staff, or 1,100 people. Then again, the figure was 6% in October and 10% in December, so who knows if it will rise again.

The plan now is to produce fewer titles, start marketing them earlier, and focus more on the Wii (EA's failure to prioritize the Wii has turned out to be an outright disaster, one that JR says they're trying to change).

An EA that produces fewer games with fewer people is simply not the industry force it was a few years ago. So who is? Activision, as I noted, is gaining, though that's in large part due to its merger with Blizzard. The real winner is Nintendo, which made $7.8 billion last quarter. A lot of that is hardware sales, but as the NPD charts demonstrate, it's also dominating on the software front. If anybody has become a videogame powerhouse at EA's expense, it's Nintendo.

Cutting the number of releases and overall costs, marketing smarter, and focusing more on the best selling consoles makes good sense. but the larger context is undeniable. The era of dominance for Electronic Arts has ended.

(The market, it should be noted, expected today's bad news from EA and responded positively to it plans to reflect reality by shrinking. Its stock is up 4% in after-hours trading)

The picture above is the Roman Empire. Get it?

Much more coming on EA's financial results from today's earnings. But right off the bat, I figured you'd all want to know what games are coming in the next year and when, along with how some titles performed in the past year.

Here's what to expect that we didn't previously know:

-The one new game announced (or more like surprisingly disclosed in response to a question) for the fiscal year starting April 1 was "Dead Space" for Wii. CEO John Riccitiello promised it's "absolutely going to be the same quality and fear factor you got on 360, PS3 and PC." The game definitely won't look as good, but I could see both the monster bashing and zero-G navigation working real nicely with the Wii controls.

-"Godfather Part II" was moved from February to the April-June quarter

-"The Sims 3 delayed from this quarter to June 2

-"Dragon Age: Origins" for PC was pushed back from this quarter to the holidays to coincide with the console version

-A "Battlefield: Bad Company" sequel is coming next winter

-So is "Dante's Inferno"

-And the long awaited "Mass Effect 2"

 -One "yet to be announced" movie tie-in is on the slate for this year, which I'm willing to bet is "G.I. Joe." I reported about a year ago that EA had the game in the works. The only question is whether EA will release it when the movie hits theaters in August, or later in the year with the DVD. Either way, it's surprising that EA still won't publicly confirm it's doing the game.

And the sales data from some of last year's big games:

-"Fifa '09" sold 7.8 million units worldwide. According to CEO John Riccitiello, it was the company's only "blockbuster"

-"Need for Speed: Undercover" sold 5.2 million copies. That's a big number, but its down from last year and below EA's expectations, which is why the company totally changed its plans for the franchise for this year (details here)

-MTV's "Rock Band 2" sold 1.9 million units through EA Partners. By comparison, last year the first "Rock Band" sold 1.5 million units, even though it launched two months later and only in North America.

-"Littlest Pet Shop" sold 2.8 million units, making it a very successful kids' franchise

-Valve's "Left 4 Dead" sold 1.8 million units through EAP.

-"Warhammer Online" has over 300,000 paying subscribers four-plus months after launching. That can't be too heartening for EA, especially considering that "World of Warcraft" added 500,000 subscribers from October through December.

-"Dead Space" and "Mirror's Edge," both of which have been somewhat disappointing for EA (the latter was actually very disappointing), did both sell more than 1 million units worldwide