You know, I keep hearing about this Spore game. It's set to be released by Electronic Arts (NASDAQ: ERTS) to the Nintendo DS and to computer platforms later this week. There's been so much buzz surrounding it, and for good reason. Not only does it sound pretty neat and imaginative, but it was designed by Will Wright, the man who brought the world the Sim franchise. As I understand it, the player's goal is to guide a microbe through the process of evolution until it becomes a society blessed with enough intelligence so as to confer the capability of interstellar travel. Wild stuff, right? Remember, Wright is a genius, and the Sim games have certainly brought in a lot of dough for EA.

But how will the game be received? Is it too complex, too brainy for most gamers? Or, will Spore take the whole Sim concept into a new stratosphere of success? Are we witnessing the birth of a new, marketing-friendly super-franchise that will appeal to a broad demographic? Like I say, the buzz is strong. Yet, I didn't realize the title was coming out this week until I read this recent press release, which is using some celebrities to promote the game. Go figure, I guess.

I think Spore will be a hit, but I'm not sure it will be a big enough hit to move EA's stock back to its 52-week high, certainly. The publisher has such a deep portfolio of games, so this one title won't necessarily move the needle. But the celebration of Spore forced me to take another look at EA and wonder if the company's stock might be an interesting play ahead of the holiday season.

Investors have to find this frustrating. I know I hate it when this happens to one of my stocks. GameStop Corp. (NYSE: GME) issued its Q2 numbers today. The numbers were a thing of beauty for the most part. Yet, the stock goes nowhere. And yes, I know this is a bad market day, but still, I thought a little pop was in order. As it is, shares are down about 1% as I write.

Sales increased almost 35% to $1.8 billion. The bottom line saw an increase of well over 100%, coming in at $0.34 per diluted share. According to this article, expectations were for $0.28 per share. So, do you see where I'm coming from? Expectations were beat, and growth was stellar... come on, investors, give the stock a bid! Granted, the article mentioned something I noticed as well: the gross margin declined. Okay, it declined. But same-store sales simply rocketed like a spacecraft at a growth rate of 20% during Q2. That has to be worth something ahead of the holiday-selling season. Games from Electronic Arts Inc. (NASDAQ: ERTS), Activision Blizzard, Inc. (NASDAQ: ATVI), and Nintendo Co., Ltd. (ADR) (OTC: NTDOY) powered the quarter. And guess what? They're going to power the next two quarters, too. We have new iterations of Guitar Hero, Call of Duty, and Rock Band to look forward to. Oh, and Lego Batman. Seriously, don't discount that latter title. A lot of Sony Corporation (ADR) (NYSE: SNE) PlayStation 3s and Microsoft Corporation (NASDAQ: MSFT) Xbox 360s will move off shelves, and that little system called the Wii is going to be the hottest console again this Christmas. Oh, and then there's the DS. GameStop sells 'em all.

GameStop beat its own guidance, and I think it has a great chance of continuing to beat its own guidance in the near future. That aforementioned article mentions that investors are concerned with slowing growth in the video-game universe. Okay, point well taken, I suppose. But GameStop is such a great brand in its sector, and consumers have come to know it as the go-to place for entertainment software. And as hardware continues to become cheaper, and as the installed user base rises, GameStop should benefit. The shares haven't done well this year, declining over 30% on the year-to-date timeframe as of this writing. The stock is much closer to its 52-week low than to its 52-week high. It's weak. But, I also think it's cheap. If you have a long time horizon, you may want to check GameStop out. If you're a quicker trader, you may want to wait for the stock to come back about $5 toward its 52-week low (if that happens).

Disclosure: I own Activision Blizzard; positions can change at any time.

Warner Music Group (NYSE: WMG) reported third-quarter earnings numbers on Thursday (for more earnings news, see here). Revenues increased a scant 5% to $848 million. The bottom line saw a net loss of 6 cents per share. According to Earnings.com, analysts were expecting a loss of 18 cents per share. So, expectations were soundly beat.

But should investors be completely enamored of the performance? There were some interesting growth rates sprinkled throughout the release. Indeed, digital revenues increased over 39%, and operating income from continuing operations jumped almost 11%. Free cash flow, as defined by the company (management adds back net cash paid or received for investments excluding short-term investments) soared 63% during the quarter, coming in at $93 million. However, during the nine-month period, free cash flow declined 47% to $37 million. Furthermore, net cash from operations decreased 1% and 6% for the third quarter and nine-month period, respectively.

In my opinion, investors should not be completely enamored of the performance. I see a mixed-bag here. I'd need to see some better long-term growth rates in the cash flow, and healthier top-line appreciation, to become intrigued. Warner Music obviously wants to leverage digital revenues as much as possible and adjust to the new landscape that the music business finds itself currently navigating. Interestingly enough, CEO Edgar Bronfman, Jr. is a bit angry at Activision Blizzard's (NASDAQ: ATVI) Guitar Hero and Viacom's (NYSE: VIA) Rock Band music-gaming systems. According to this article, the CEO thinks that the song-licensing fees for the games are too low. This, of course, shows just how popular and significant music-gaming has become.

Well, you can't win 'em all. I certainly found that out with Viacom's (NYSE: VIA) latest quarterly results. The media company delivered the complete opposite of my expectations. Let's go through the numbers.

Revenues for the second quarter increased 21% to almost $3.9 billion. Net income from continuing operations expanded 19% to 64 cents per share. That beat the estimate I was using by three pennies (other sources listed a lower estimate for earnings). No matter how you slice it, Viacom showed Wall Street how it's done.

Now, let me admit how wrong I was. I thought media networks would shine during the quarter and that the film division might not do as well. Operating income at media networks increased 4%, while Paramount and its colleagues increased their segment's profit by almost 300%! You can thank the new Indiana Jones movie, as well as Marvel's (NYSE: MVL) Iron Man and DreamWorks Animation's (NYSE: DWA) Kung Fu Panda, for bringing the crowds into the multiplex and the money into Viacom's coffers.

Viacom (NYSE: VIA) is due to report Q2 earnings on Tuesday, July 29, after the market closes. What will be in store for the media company and fierce competitor of Disney (NYSE: DIS), News Corp. (NYSE: NWS), Sony (NYSE: SNE), and Time Warner (NYSE: TWX)? According to data at Zacks.com, the company may report something in the vicinity of $0.61 per share, which would be good for 12% growth on the bottom line. Viacom has a reasonable chance of beating the estimate, based on past history.

There will be a few key elements that investors will be looking at. One product that has been a driving factor for Viacom's success is, believe it or not, a video game. Rock Band, which competes against Activision Blizzard's (NASDAQ: ATVID) Guitar Hero titles, has been a boon for the company, and the MTV segment specifically. The game, which is distributed by Electronic Arts (NASDAQ: ERTS), will have a sequel coming out this fall, and I hope management enlightens Wall Street about how it feels it will do against Activision Blizzard's new iteration of its own musical-gaming system and how it plans to promote it. Will there be any special synergies between MTV and the sequel? Watch for data on the number of song downloads that Rock Band is fueling.

When I took a look at Viacom's last earnings report, I found that the media-networks division was doing great business. Its operating income had jumped 15%. The media segment, which includes the valuable MTV Networks, should do well again in Q2, and I would expect something close to this kind of growth rate. However, I would be watching for signs from management that the economy may be affecting advertising. Going forward, this will be the challenge for MTV, Nickelodeon, etc. And speaking of Nickelodeon, are there any initiatives on the board to counteract the incredible growth that the Disney Channel has seen thanks to properties such as Hannah Montana? Investors should listen to the conference call for information about marketing plans and new shows, as well as merchandising schemes for the upcoming holiday season.

Billboard reported Monday that MTV Games, a division of Viacom Inc. (NYSE: VIA), will release the second installment of the popular Rock Band game this September. Rock Band first came out late last year in direct competition with Activision Inc.'s (NASDAQ: ATVI) Guitar Hero franchise, but where Guitar Hero only offers guitar simulated play, Rock Band offers a wide range of instruments and vocal game play. Rock Band also features an online store where users can download additional tracks for the game.

Rock Band 2 will be released at a time when a number of other music-related games, and according to MTV Games the game will feature "new and 'improved' drum and guitar controllers, a larger soundtrack, and new online modes and customization options." Additionally, all previous controllers and downloaded songs will also be compatible with the new game, so players will not lose those features or be required to buy new input devices. The game will initially only be available on Microsoft Corporation's (NASDAQ: MSFT) Xbox 360 platform but will expand to other systems by the end of the year.

Rock Band and Guitar Hero alike have revolutionized many listeners' interface with the music they love, simply because it expands the "play-ability" of many users who may not have ever picked up or tried to play actual instruments. Those listeners aren't lazy by any means, but these two game franchises expand the experience of playing music in a way that has never been possible before.

The Financial Times reported last week that representatives for The Beatles, Activision Inc. (NASDAQ: ATVI), and MTV Games, a division of Viacom Inc. (NYSE: VIA), are in talks about developing Beatles-themed video game versions of Guitar Hero and Rock Band "in a move that could pave the way for a broader licensing of the Fab Four's catalog." Although the final deal would eventually be worth several million dollars, it would have to win over both Apple Corps and the EMI Group, the two companies that oversee the band's business interests and the master recordings.

The Beatles have been one of the major artists to resist any move into the digital world, but if such a deal were to occur it would likely happen simultaneously with any move by The Beatles into digital stores and the digital market. In the past year and a half, numerous rumors have appeared that cited 2008 as the year that would see the move, including comments made by Olivia Harrison, George Harrison's widow. Unfortunately, no such appearance by the band into stores like Apple Inc.'s (NASDAQ: AAPL) iTunes or Amazon.com Inc.'s (NASDAQ: AMZN) MP3 Store has happened even with a new management team led by former Sony BMG executive Jeff Jones.

Any deal would send a massive shockwave through the music industry and no doubt come with numerous marketing and advertising techniques that have become popular and successful in recent years. Although many Beatles purists and fans might be put off by an iTunes-themed commercial featuring The Beatles and the band's music, the exposure provided by such a method would increase awareness of the band to younger and newer audiences.

Activision Inc. (NASDAQ: ATVI) doesn't want to let Rock Band have all the fun. According to Reuters, Activision wants to turn its Guitar Hero platform into a truly direct competitor to its colleague. Come the fall, the publisher will release Guitar Hero World Tour, a package that will include a guitar, a microphone, and a drum set. There will be online capability; players will also be able to create their own tunes via a suite of digital-music tools. And all the major platforms from Sony Corporation (ADR) (NYSE: SNE), Microsoft Corporation (NASDAQ: MSFT), and Nintendo Co., Ltd. (OTC: NTDOY) will be getting this game.

Rock Band, which is developed by Viacom, Inc. (NYSE: VIA)'s Harmonix and sold by Electronic Arts (NASDAQ: ERTS), is no longer unique now that Activision has expanded the depth of its famous brand. Indeed, Guitar Hero still thrived even in the face of Viacom's music game, but it looks like Activision is taking no chances; the publisher obviously realizes that, as time goes on and upgrades to Rock Band come along, the Guitar Hero franchise might see eventual erosion of its fan base as the fad matures. Evolution would certainly be justified at this point.

Yet, I am of two minds about this move. On the one side, I can understand why this had to be done. And I can see why it should work out; after all, Activision's brand equity when it comes to this Guitar Hero game is incredible. Seriously, if you don't know, a lot of players out there, both hardcore and casual, love this platform. However, there's another side to me that wonders if traditionalists won't necessarily enjoy the aspect of the additional instruments. Do they add value, or do they now make the brand seem clunky and complicated? On a gut level, I always theorized that those who chose Guitar Hero over Rock Band relished the fact that it was just one guitar. Then again, going back to the brand-equity thing, maybe current players will now want to try out a more complex musical-gaming experience since the Guitar Hero name is attached.

Electronic Arts (NASDAQ: ERTS) issued Q4 and full-year numbers on Tuesday. The competitor of Activision (NASDAQ: ATVI), THQ (NASDAQ: THQI) and Take-Two Interactive (NASDAQ: TTWO) reported adjusted fourth-quarter revenues of $919 million, which was good for a 50% increase. Earnings per diluted share were $0.09 on an adjusted basis, also representing a 50% jump. For the full year, adjusted revenues jumped 30% to $4 billion and earnings per diluted share rose 36% to $1.06. Not too bad.

EA, according to Briefing.com, also beat Wall Street's expectations by quite a bit. EA was forecast to only break-even on a non-GAAP basis, so the difference was a nice $0.09. In terms of operational cash flow, EA increased the metric by 33% during the fourth quarter, but for the full year, operational cash flow decreased 15%. Ah, such is life, I guess. Nevertheless, EA produced 27 titles that sold over a million units this year -- three more than in the previous year. Fifteen of its titles sold over 2 million units -- five more than the last fiscal period. Titles such as Army of Two and Rock Band, as well as various sports franchises, drove the results.

Things sound pretty good, don't they? EA is definitely a major force on the Sony (NYSE: SNE) PlayStation, Microsoft (NASDAQ: MSFT) Xbox 360 and Nintendo (OTC: NTDOY) Wii platforms. But EA has had some challenges during this console cycle, and there is the perception that it needs a major merger to combat the threat posed by the Activision and Vivendi Games transaction. And let's not forget that Activision is on fire all on its own. That's what the whole attempted takeover of Take-Two is all about.

I really want to turn bullish on Midway Games Inc. (NYSE: MWY), but there's no way I can do that right now. The company's stock is below $3 a share, and it's there for a reason. But, let's first look at a couple positives from the software publisher's latest earnings release. Net revenues shot up 170% to $29.9 million in Q1; that beat expectations, according to Briefing.com. And the net loss per share also beat expectations by a penny -- it came in at $0.29 per diluted share on an adjusted analysis.

But, that net loss is worse than the previous year's net loss of $0.20 per diluted share, also adjusted. Like I say, someday I want to report that Midway has turned the corner and is a buy. I simply can't do that, even though I recently bought the publisher's catalog title Rampage: Total Destruction for the Nintendo Gamecube and am having a great time with it -- guess it goes to show that you can't always judge a company's stock by the fact that you enjoy its products. One thing that Midway needs to do is perhaps seek some synergy from Viacom, Inc. (NYSE: VIA)'s MTV and Nickelodeon channels. Sumner Redstone is, after all, the controlling shareholder of Midway. Granted, THQ Inc. (NASDAQ: THQI) deals with the Nickelodeon characters at the moment, but in the future, Redstone needs to figure out a way to use his media assets to promote Midway and perhaps funnel some licensing deals to the publisher. MTV is certainly doing well with its own video-game ambitions via Rock Band, which is sold by Electronic Arts Inc. (NASDAQ: ERTS).

One thing I must point out is that, since my last article about Midway, the stock is up. This was mentioned to me by a reader. So, in objective trading terms, if you went against my opinion, you would have made money, no question. However, I have to stick to my guns and say that I personally wouldn't play the volatility in Midway's shares. Yes, you could luck out with it, maybe Redstone will come along one day and buy out the remaining shares at a big premium (doubtful, at least the big-premium part). I wouldn't want to speculate on such an outcome; I am still content with my Activision, Inc. (NASDAQ: ATVI) shares as a way to play video-game investing.

Disclosure: I own shares in Activision; positions can change at any time.

Remember Motley Crue? They were a popular hair band in the 1980s, and they're still around today. In fact, in an effort to remain cool, the Crue will be releasing its new single on the Rock Band video game platform. Rock Band comes courtesy of Electronic Arts Inc. (NASDAQ: ERTS) and Viacom, Inc. (NYSE: VIA), the latter being the owner of developer Harmonix. It is also the competing music game to Activision, Inc. (NASDAQ: ATVI)'s Guitar Hero franchise.

I'm an Activision shareholder, and I'm always watching for signs that the Guitar Hero phenomenon might be on its way out. No, I haven't seen any convincing ones yet, but since Reuters made a mention of this Crue deal, it caught my attention. As one might imagine, I would have preferred to have seen Crue release the song through Guitar Hero, but whatever, guys, have a blast with the competition! (Yeah, I'm not bitter or anything). The Crue will also be promoting Rock Band while it's on tour, according to this press release.

So, users will be able to download the song, called Saints of Los Angeles, via the online stores of Sony Corporation (NYSE: SNE) and Microsoft Corporation (NASDAQ: MSFT). I wish Motley Crue luck with its EA-Viacom hookup, but I prefer playing the current music-video-game trends via Guitar Hero through my Activision shares, which are currently trading well above my cost basis. The shares haven't done much lately, but I'm not ready to sell just yet... rock on, Activision!

Disclosure: I own shares in Activision; positions can change at any time.

Electronic Arts Inc. (NASDAQ: ERTS) shares are trading higher today on a bunch of varied news items. First, the company announced a launch date for is popular "Rock Band" game for the Nintendo Wii. Second, the stock was added to Goldman Sachs Conviction Buy list. Lastly, the company's Chief Financial Officer Warren Jenson will resign at the end of the month. If you think that the company won't fall by too much in the coming months, then now could be a good time to look at a bullish hedged trade on ERTS.

After hitting a one-year high of $61.62 in October, the stock hit a one-year low of $43.62 in February. ERTS opened this morning at $50.33. So far today the stock has hit a low of $50.00 and a high of $51.08. As of 12:30, ERTS is trading at $50.31, up $0.62 (1.3%). The chart for ERTS looks neutral and improving, while S&P gives the stock a negative 2 STARS (out of 5) sell rating.

For a bullish hedged play on this stock, I would consider a May bull-put credit spread below the $40 range. A bull-put credit spread is an options position that combines the purchase and sale of put options to hedge risk in case the stock doesn't do what you think but still leverage nice returns. For this particular trade, we will make a 5.3% return in just two months as long as ERTS is above $40 at May expiration. Electronic Arts would have to fall by more than 20% before we would start to lose money.

If I had a dime for every time a person asked me "Is Rock Band ever coming out for the Nintendo (OTC: NTDOY) Wii?" I'd have more money than Electronic Arts (NASDAQ: ERTS) and Viacom (NYSE: VIA) combined. Seriously. Now, though, Wii fans can see the light at the end of the tunnel because Rock Band debuts on the popular platform on June 22 of this year. I don't think any gamer on the planet expected the title to not come out for the Wii.

Not only is this great news for Wii users, but it's also excellent information for shareholders of EA and Viacom. As Richard Driver pointed out, the game is a valuable asset for Viacom. EA benefits because Rock Band is the publisher's answer to Activision (NASDAQ: ATVI)'s Guitar Hero franchise. In fact, Nintendo really stands to benefit this summer from both Guitar Hero and Rock Band because a version of the former will be coming out for the Nintendo DS handheld. There's definitely going to be a rock rumble happening when the dog days are upon us, although I'd expect that Rock Band for the Wii will have a much bigger impact. That doesn't seem too hard to predict considering that music games of these types work better on consoles, in my opinion.

This is going to be one hell of a test for Activision, EA, Viacom and the Wii. Will users adopt Rock Band in droves? Will the Guitar Hero franchise be threatened? In theory, the Wii is a console for casual gamers who just like to play some tennis or a few of the extremely fun midway diversions that can be found in the awesome title Carnival Games -- will they go for something more expensive and more involved? My prediction -- Rock Band will be a hit, but it won't sell a ton of units until the holiday shopping season is upon us. Can't wait to see what happens come June. Till then, rock on, my friends!

Disclosure: I own shares of Activision; positions can change at any time.

MTV, a part of Viacom, Inc. (NYSE: VIA), revealed to Billboard Thursday that the digital stores for the popular video game Rock Band saw the number of downloadable songs ("levels") more than double in the last two months. The more than 6 million downloads easily beats the 2.5 million that were purchased between the release of the game in November and when MTV last reported download figures in January.

In an effort to streamline the purchasing process, MTV will also be releasing a new software update to the game this week. The new update allows players to purchase downloadable songs from within the game itself, versus exiting the game and using the platform marketplaces. According to Billboard, "the new Rock Band Music Store feature instead allows gamers to browse, preview and purchase tracks through an interface included in the game" and "will be available as a free download later this week."

Rock Band has enjoyed quick success in the last four months, and with the large sales figures and new changes, the video game indicates a new market the music industry should be able to tap into. The online community within the game can only help spur greater sales as well, with players hoping to connect with new songs that can be added to the store and the game. Another doubled increase may be too much to look toward in the next period, but more growth is certainly bound to happen.

As I've said before, I love reading the monthly videogame sales stats from marketing research outfit NPD. February was yet another nice month for the industry. Software continues to move off retail shelves at a robust clip; sales in this department were up 47% year-over-year last month.

Activision (NASDAQ: ATVI) and its incredible Call of Duty 4 title -- yes, I am an Activision shareholder and will probably promote any of its games to my friends and acquaintances, but if you think I'm wrong on this one, go check it out for yourself, it does rule something fierce -- continued its reign at number one, selling 296,000 discs. Activision also did well with Guitar Hero III for the Nintendo (OTC: NTDOY) Wii, selling 222,000 copies of the game. Rock Band, the music game from Electronic Arts (NASDAQ: ERTS), did well on Microsoft's (NASDAQ: MSFT) Xbox 360 -- over 160,000 rockers heeded the call to play some classic tunes.

As one might expect, the Wii sold the most consoles in February. Sony (NYSE: SNE) came in second with its PlayStation 3 unit, and the Xbox 360 was third. Microsoft says a shortage of systems hurt the company; I don't doubt that claim, the 360 did seem a bit hard to come by at some retail channels last month. But it'll be back in competitive mode in the coming months, I'm sure, making certain that Sony doesn't rest on its laurels. I expect sales for software to continue doing well, and just wait till the next holiday season -- I agree, it's too early to be talking about that, but it'll be here before you know it., and I expect it will be another banner selling period. And I can't wait to see what software title will be on top for the current month -- Super Smash Bros. Brawl for the Wii came out this past Sunday, keep in mind. If you told me you haven't heard of this title, I'd be surprised -- it really was the story of the week (or, should that be wiik; stupid pun, gotcha). A couple of GameStop (NYSE: GME) locations in my area held some tournaments, and from what I heard, they were quite lively.

Disclosure: Steven Mallas owns shares of Activision; positions can change at any time.