Kara Swisher

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Rosensweig to Leave Guitar Hero; Takes Over as CEO of Online Textbook Rental Start-Up Chegg

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Longtime Silicon Valley exec Dan Rosensweig (pictured here) is stepping down as CEO and president of the Guitar Hero division of Activision Blizzard to take a new job as president and CEO of Chegg, the top online textbook rental start-up.

Both companies confirmed the move, which is somewhat unexpected given that the former Yahoo (YHOO) COO landed the job running the top gaming franchise in March of last year.

It has been an eventful, but also a particularly tough year at Guitar Hero, in the face of yet another withering downturn in the gaming market.

While Activision (ATVI) introduced a new version of its flagship Guitar Hero game, as well as a new DJ Hero, Band Hero and a Guitar Hero: Van Halen version, sales were weaker overall, even though DJ Hero was the the No. 1 new game in both the U.S. and Europe.

Nonetheless, according to a recent report from research firm NPD Group, sales in the videogame space were down eight percent in 2009 from 2008.

And while Guitar Hero did gain market share as the most popular such game in its genre, most expect its trajectory to be downward.

Guitar Hero 5 sold slightly fewer than 996,000 units from September through December in North America, for example, according to NPD.

While global sales were better, Guitar Hero: World Tour, in comparison, sold 3.4 million units the year earlier.

In contrast, Rosensweig–who is probably much more suited to the pure Web space and the Silicon Valley scene–will be taking over a much faster-growing business at Chegg, based in Santa Clara, Calif.

It has become the front-runner in the increasingly competitive online textbook rental space.

To help maintain that lead, Chegg has garnered a huge $144 million investment kitty.

Top venture firms, such as Kleiner Perkins, Foundation Capital and, most recently, Insight Venture Partners, have presumably handed over that money to co-founders Osman Rashid and Aayush Phumbhra in hopes of big returns.

The pair started Chegg in 2005 at Iowa State University as a classified rental service, where books were the dominant item, but evolved its business to focus on actually doing the textbook rentals.

The company’s unusual name, Chegg, is a mashup of chicken and egg and its model is similar to that of innovative video rental outfit Netflix (NFLX).

Chegg now serves close to 7,000 schools across the U.S. and has a cute and student-friendly practice of planting a tree for every textbook rented, bought or sold.

With 120 employees in Silicon Valley and more at a warehouse operation in Louisville, Ky., Chegg claims it has grown over 600 percent year over year since its founding, although the start-up would not provide more specifics on financials.

A spokeswoman said that company rented more books in January of this year than all of last year and has saved students more than $137 million.

Typically, a rental costs a fraction of what buying a book outright does. It is ordered online and then sent to a renter, who then returns it.

All this activity has attracted a lot of interest from both big and small players, especially given the $10 billion college textbook business.

While one can assume that a lot of Chegg’s business will eventually move to digital downloads, especially as the use of e-readers explodes, the physical business is strong for the near term.

The Barnes & Noble (BKS) College division recently began testing a textbook rental program, for example, and is rolling it out to 25 U.S. colleges. And BookRenter is a smaller competitor.

But with Chegg, Rosensweig is getting to ride the lead horse in the space, taking over from current CEO Rashid.

In an interview a year ago, in fact, Rashid said, “I do not want to be a long-term CEO. My passion is solving the problem and getting the company to a place where it can be taken to the next step.”

While he will remain chairman, the entrepreneur has recently closed $7.5 million in funding for a new stealth start-up called Kakai. Sources have said it is focused on the even more crowded e-reader space.

The replacement for Rosensweig–who had been working in private equity since his departure from Yahoo (YHOO) in late 2006 and has also worked at CNET Networks and Ziff-Davis–will be the Guitar Hero division’s current COO, David Haddad.

Until he has something to say about Chegg, here is a video interview I did with Rosensweig in September, when the new version of GH5, as well as Band Hero and DJ Hero, were launching:

Here is the full press release from Chegg about the appointment:

Chegg.com Names Daniel Rosensweig As President and Chief Executive Officer

Appointment accelerates explosive growth of market leader in textbook rentals

SANTA CLARA, Calif., Feb. 2 /PRNewswire/–Chegg.com, the No. 1 online textbook rental company, today announced that it has appointed Daniel Rosensweig as its new President and Chief Executive Officer (CEO). Effective immediately, Rosensweig joins a company that closed $112 million in funding from Insight Venture Partners, Pinnacle Ventures and TriplePoint Capital in November. That round added to the already impressive list of investors including Kleiner Perkins Caufield & Byers, Foundation Capital, Gabriel Venture Partners and Primera Capital.

“We are thrilled that Dan is joining us as our President and CEO,” said Osman Rashid, co-founder and chairman of the board at Chegg.com. “Chegg.com has been growing at an exceptional rate, and now is the time to bring in a world class leader that has successfully managed high growth consumer businesses and innovative business models. With Dan’s breadth of global business experience and passion for the consumer, we know he is the right person to lead Chegg.com through the next phase of its growth.”

Rosensweig joins Chegg.com from Activision (Nasdaq: ATVI) Publishing’s Guitar Hero franchise, where he served as CEO and president, launching Guitar Hero 5, Band Hero and DJ Hero in 2009.

A proven leader, Rosensweig was previously the Chief Operating Officer at Yahoo from 2002-2006, where he oversaw the company’s worldwide operations including its product development, marketing and advertising sales.

Rosensweig started his career at Ziff-Davis, where he spent 18 years in a variety of senior positions, including president of the Ziff-Davis Internet Publishing group, vice president and publisher of PC Magazine and president and CEO of ZDNet, which he built from a standalone Ziff-Davis company to a publicly-traded, highly-trafficked Internet network.

“The opportunity to lead one of Silicon Valley’s fastest growing companies that offers real financial value to students is unparalleled,” said Rosensweig. “Chegg.com has a powerful business model and, I believe, the opportunity to transform the textbook industry.”

The high cost of textbooks is a real social and economic problem that is burdening millions of students and their families. Chegg.com’s innovative and convenient textbook rental model is helping relieve this burden and has already saved students more than $137 million.

“We invested in Chegg.com because of its impressive business model and unique value proposition – helping students and parents save on the overall cost of education,” said Deven Parekh, managing director of Insight Venture Partners. “With Dan joining the company, we are building a powerful consumer brand on college campuses across the country.”


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