Could Activision Blizzard challenge Apple's iTunes?

Just as Apple Inc. (NASDAQ: AAPL) releases its new iPhone 3G to consumers today, the deal for Activision Blizzard, Inc. (NASDAQ: ATVID) has been finalized and rumors emerged that the combined game maker could create a digital music store to service its series of Guitar Hero games and challenge iTunes. The Financial Times reported Thursday that the company has a new service in the works as part of a "natural evolution" of the series and looks at Guitar Hero to become a "credible alternative to iTunes" via a majority ownership by Vivendi, which also owns the Universal Music Group.

The development of an online music store from the makers of Guitar Hero and World of Warcraft would be a profitable development for music publishers and investors, since downloadable content rakes in more money than simply offering music on game discs, according to a follow-up by Billboard on Friday. Part of this is due to continued spin-off games, especially the Guitar Hero franchise which saw Guitar Hero: Aerosmith and Guitar Hero: On Tour released in June. The fourth game in the main series is also due this fall and a Metallica-based game for next year.

Unfortunately, while any new music based digital store might offer a viable and intriguing challenge to Apple's iTunes Store, to date it still remains the industry leader despite previous attempts to dethrone it. No matter how much the music industry and other retailers dislike iTunes and Apple's hold on music and other downloadable media, the company still manages to maintain positive consumer relationships. This was made obvious today by the commotion over the new iPhone, which saw another price drop and technological advance.