It was the computer game that finished off the air guitar, but the developers of Guitar Hero, which sold 40 million units, hope to revitalise a depression-hit games market by diversifying into house and hip-hop too.

Activision Blizzard, the games publisher, will launch DJ Hero on October 30 — a game that comes with a plastic turntable on which players can scratch in time to chosen songs.

The game’s arrival is not without controversy, however. Although Activision claims that it is stimulating demand in the music industry, a battle over who makes off with the profits continues.

DJ Hero also arrives at a point when the computer games market has been suffering. The British market was off by 15 to 20 per cent in the first half of the year, and innovation is badly needed in an industry light on hits after last year’s top-selling Grand Theft Auto and Wii Fit titles.

Dan Rosensweig, chief executive of the Guitar Hero division of Activision, says that computer games have turned out to be a “later cycle business than were expected”, after the industry recorded recession-busting growth last year.

So, perhaps surprisingly for a £90 game, he tries to pitch DJ Hero as “better value for money” than buying a single £15 DVD. Games tend to be watched more than films, but Mr Rosensweig adds that Activision had decided to include more songs with each of its games to give consumers a better deal. DJ Hero includes 85 songs — alone “worth nearly £90” says Mr Rosensweig — including special “mash-ups” featuring combinations such as Daft Punk, the French electronic duo, with Queen, the stadium rockers, in remixed material.

Screen Digest, a specialist media consultancy, estimates that the global computer games market will improve in the second half, aided by stronger pre-Christmas releases, including a new Guitar Hero 5 and The Beatles: Rockband, its principal competitor, both of which came out last month. It predicts an overall decline of $1 billion (£602 million) in the value of the market this year, down from the $30 billion achieved last year.

Piers Harding-Rolls, an analyst with the firm, says that he expects music games to fare better than the overall trend. “The music genre has been a big revelation in the third generation of consoles; it has helped broaden the demographic of console users”. So far this year Activision has shipped 2.2 million Guitar Hero games, according to Screen Digest, although more will go to retailers by Christmas.

Mr Rosensweig, a former chief operating officer at Yahoo!, expects that Activision will sell more Hero games by volume than last year, making it the second-largest franchise in the world this year, behind the same company’s Call of Duty first-person shooter. But, by value, Mr Rosensweig concedes that sales will be lower, although he does not not predict by how much, because more people are buying software rather than titles with the more expensive instruments included.

Yet, the success of Guitar Hero and other music games remains controversial in the music industry, where some of the music majors have complained that Activision offers poor royalty rates for their material. Edgar Bronfman, the chief executive of Warner Music, last year complained about the “very paltry licencing fee per song” offered by Activision.

Warner Music’s view has not changed since, and is shared by rival Sony Music. Both majors are reluctant to license their artists’ material to the games because they think that they get little in return. One senior music industry executive says: “Typically the royalty rate for licensing a song on a compilation was about 10 cents a song. We are getting offered 1 to 1.5 cents, and we don’t think that’s enough.”

Critics say that the games do not even help to drive CD or download sales elsewhere, unless the effort is made to produce a band-branded special edition. That happened with The Beatles: Rockband, made by Activision’s rival, the Viacom-owned Harmonix, and which helped to generate first-week sales of 2.25 million Beatles albums, helped by in-store promotions.

But, of course, not all bands are the same as the Beatles. EMI’s hope that DJ Hero will help Daft Punk to break into the US market is optimistic.

Activision is 54 per cent-owned by Vivendi, the French media and telecoms group that also owns Universal Music, which is the world’s largest music company.

Not surprisingly, Universal artists feature heavily on Hero games, with rapper Eminem involved with promoting a special deluxe £140 version of DJ Hero. That will undoubtedly sell to hip-hop fans, but if the critical voices are to be believed, it is the computer games business that is winning out over the music industry in the battle for profits.

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