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Activision exec to join

Dan Rosensweig, head of the game maker's Guitar Hero franchise, exits unexpectedly.

February 03, 2010|By Jessica Guynn and Ben Fritz

Reporting from San Francisco and Los Angeles — After less than a year on the job and amid tough times for music video games, Dan Rosensweig, head of Activision Blizzard Inc.'s Guitar Hero unit, unexpectedly quit Tuesday to become chief executive of online textbook-rental company

The former Yahoo Inc. chief operating officer and Quadrangle Group partner, who is well known and respected in Silicon Valley and media circles, was hired by Activision Blizzard CEO Bobby Kotick in March to bolster Guitar Hero, one of the video game publisher's three key brands, along with World of Warcraft and Call of Duty. Rosensweig, who got close to Activision's chief while Kotick served on the Yahoo board, was expected to rise in Activision's ranks.

Instead, he has taken the helm of a hot company in a hot space.

In November, of Santa Clara, Calif., raised $57 million in venture capital in a round led by Insight Venture Partners. The company has raised a total of more than $160 million.

Rosensweig leaves behind a company facing significant challenges. This fall was the busiest season ever for Guitar Hero with the release of four major sequels and spinoffs. All had modest or poor sales, NPD Group data showed.

Guitar Hero 5, for instance, sold just under 1 million units in the U.S. from September through the end of the year. Its 2008 predecessor, Guitar Hero: World Tour, sold 3.4 million units in the same period.

October spinoffs DJ Hero and Band Hero sold a so-so 789,000 and 590,000 units, respectively, while December's Guitar Hero: Van Halen bombed with just 64,000.

Total domestic revenue for music and dancing games plummeted 46% last year, according to NPD. Some of that was because of consumers shifting their spending from pricey hardware to less-expensive software, but the recession and declining interest in the genre seem to have played big roles as well.

People familiar with Activision's plans said the company would be releasing fewer retail sequels in the future and focus more on digital distribution

In an interview, Rosensweig said he was drawn to because it's a high-growth business in a $10-billion marketplace that serves an important function: helping students afford the rising cost of higher education.

Here's how it works: Students pay a fee to rent a textbook by the semester, quarter or summer. Renting versus buying can help students, who might spend up to $1,000 a year on textbooks., which opened its online store in 2007, has 117 employees. It has rented out more than 2 million titles and has an inventory of 4.2 million. It says it has saved students at more than 6,400 colleges $137 million. Hiring a high-profile CEO may signal loftier ambitions, such as an initial public offering.

The idea of renting textbooks has been around for decades but caught fire on the Internet. Even more competition is jumping in after Congress last year set aside $10 million to give grants to college bookstores to start textbook rental programs. Bookseller Barnes & Noble Inc. recently said it would launch a textbook rental program for college students through campus bookstores and websites.

"We think we can compete with anybody," Rosensweig said.

Activision is not replacing Rosensweig. Chief Operating Officer David Haddad will remain as the most senior executive in the Guitar Hero group and report to Activision publishing President Michael Griffith.

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