I chatted with both Rosensweig and Activision (ATVI) president and CEO Bobby Kotick yesterday about the move and where the gaming company is going in the year ahead.

“I love music and I love big brands,” said Rosensweig (pictured here), whose enthusiasm for music, especially for Bruce Springsteen, is well known in Silicon Valley. “I wanted to do something different, something fun and something that was going to be the next big space online.”

And, indeed, the online music gaming space is stronger than most other Internet businesses these days, with a lot of potential, having just started to tap into social networking, mobile and other interactive possibilities.

So far, as a retail and home phenom, Guitar Hero has been a huge success since its release in 2005, followed by several new versions. And the company will be releasing a hip-hop-themed DJ Hero–complete with a turntable–soon, for example.

But, to keep up the pace, it will now be Rosensweig’s job to feed the consumer beast as never before.

Kotick said he had spent a lot of time looking for the right exec to turbocharge the company’s online Guitar Hero network. Already, for example, he pointed out that 200,000 original, user-generated songs had been uploaded to its Web site, with many millions downloaded back.

He noted that the concept of the “release your inner rock star” fantasy that Guitar Hero taps into at home had still not gone online as much as it could, and added that the brand would be moving into more and more music genres.

“We already have a big online business, but we have not even reached into five percent of the installed base of gamers,” said Kotick (pictured here). “I wanted someone who could focus on this with a passion and who gets how to leverage what we have already built.”

Kotick said he initially had asked Rosensweig for suggestions about who would be good for the job, having gotten to know him when Rosensweig was COO of Yahoo (YHOO) and Kotick was on its board.

“It was funny, but as I started talking to him, I thought he was the perfect person for it,” he said.

And it was perfect timing too, with all the turbulence on Wall Street and in the private equity business. Rosensweig had already been thinking about getting back into operations, after his post-Yahoo stint at Quadrangle.

“There is a lot of uncertainty in the market, but what I really wanted to do was be part of developing a whole new space for an already hugely successful brand,” he said. “The growth opportunity and the ability to scale here is enormous.”

Rosensweig, who will start April 20, does have his work cut out for him, overseeing Guitar Hero’s game development, marketing and distribution.

(The division’s former head and the co-creator of Guitar Hero, Kai Huang, will report to him, while Rosensweig will report to Activision President Mike Griffith.)

Besides dealing with the weak economy, which the company signaled in its most recent quarter could bring trouble, the Guitar Hero behemoth must keep innovating.

Rosensweig is also facing competition when competitor Rock Band releases a Beatles-focused music offering in September. It is likely to be very popular, even though Guitar Hero has typically outsold Rock Band.

More significantly, some think the entire online music gaming trend has played out, with sales down year over year.

Not Rosensweig. “It is just the beginning of what it could be online in this business,” he said.

And, for those interested, here is the full press release:

Activision Publishing Names Media Veteran and Former Yahoo! COO Dan Rosensweig President and CEO of Guitar Hero(R) Business Unit

–Appointment Further Strengthens Company’s Senior Management Team

SANTA MONICA, Calif., March 23, 2009 /PRNewswire-FirstCall via COMTEX News Network/–Further strengthening its senior management team, Activision Publishing, Inc. (Nasdaq: ATVI) announced today that Dan Rosensweig has been named President and Chief Executive Officer of RedOctane, the business unit which develops the blockbuster Guitar Hero(R) franchise and soon to be released DJ Hero(TM).

Mr. Rosensweig will oversee Guitar Hero’s global operations including game development, hardware manufacturing, supply chain, logistics and marketing. He will report directly to Mike Griffith, President and CEO of Activision Publishing. Kai Huang, former President and CEO of RedOctane, who along with his brother Charles Huang created Guitar Hero, will continue working at RedOctane reporting to Mr. Rosensweig.

Mr. Rosensweig brings significant experience to Activision having served as Chief Operating Officer of Yahoo! from 2002 through 2006, where he oversaw the company’s worldwide operations including its product development, marketing, and advertising sales and the development and introduction of inventive new Internet advertising formats.

Additionally, he spent 18 years at Ziff Davis, most recently serving as President where he was responsible for the global operations of the company and the successful merger of ZDNet and CNET. He held several senior positions during his tenure at Ziff-Davis, including President and Chief Executive Officer of ZDNet, which he built from a standalone Ziff-Davis company to a publicly traded, highly trafficked Internet network, President of Ziff-Davis Internet Publishing Group and Vice-President and Publisher of PC Magazine.

Prior to joining Activision, from 2007-2009, Mr. Rosensweig served as an operating principal at Quadrangle Group, a private investment firm, where he focused on the firm’s media and communications private equity business.

“Under the leadership of Kai and Charles, Guitar Hero established the music gaming genre and became a global phenomenon,” said Mike Griffith. “With the addition of Dan’s proven operational expertise and leadership, we will continue expanding the franchise’s global footprint in new and innovative ways. Dan’s deep understanding of how consumers can be entertained online will be invaluable as we continue to build Guitar Hero’s complementary growth channels, further establish the franchise as an innovative music platform and develop relationships with new business partners.”

Robert Kotick, Chief Executive Officer of Activision Blizzard noted, “I had the great pleasure of working with Dan during his tenure at Yahoo!. Dan has a rare combination of deep business expertise, entrepreneurial instincts and an incredible passion for music. We are looking forward to leveraging his proven online experience to build upon the billions of hours of entertainment we deliver each year in the Guitar Hero network.”

“I am extremely excited for this opportunity to work with the talented Guitar Hero team, which has transformed the interactive entertainment landscape,” said Mr. Rosensweig. “With a platform and content that universally engages a wide range of audiences, Guitar Hero has incredible growth potential. I look forward to continuing to develop Guitar Hero into an even more successful enterprise.”

Former Yahoo COO and current Quadrangle Group partner Dan Rosensweig (pictured here) will take over as CEO and president of Activision Blizzard’s powerful Guitar Hero franchise, according to sources close to the situation.

Rosensweig will run the hot gaming company’s division, which is located in Silicon Valley, the result of its purchase of RedOctane in 2006, source said.

He is well known to Activision (ATVI) Chairman and CEO Bobby Kotick, who served on the Yahoo board for many years when Rosensweig was a key exec there. Both Rosensweig and Kotick have since left Yahoo.

It’s an interesting move for Rosensweig, who has been working in private equity since his departure from Yahoo (YHOO) in late 2006.

His name has been bandied about for several high-profile Web positions of late, and many thought he might take a political job, given that he was one of many digital execs involved in helping elect President Barack Obama.

But the weak market for investments and Rosensweig’s longtime experience and interest in eventually returning to operations–along with his well-known passion for music–are the likeliest motivators for the move to Guitar Hero.

Sources said Rosensweig will start his new job at Guitar Hero–which Activision could announce as early as tomorrow–in several weeks.

Running a major consumer brand like Guitar Hero seems tailor-made for Rosensweig, who worked at CNET Networks and Ziff-Davis before Yahoo. In addition, the jovial exec is well-respected in Silicon Valley, giving Activision a much more prominent presence here.

And the energetic Kotick (pictured below with me and, yes, Paula Abdul of “American Idol”–don’t ask) has long talked about turbocharging the largely retail Guitar Hero business online, as a way to further grow the music phenom.

User-generated music, as well as a plethora of online transactions and social networking, have been promising new revenue opportunities, Kotick has said.

(See video highlights of my interview with Kotick below on that topic and more at last year’s D: All Things Digital conference.)

Overall, despite the weak economy and a cautious forecast going forward, the Santa Monica, Calif.-based Activision is growing, with revenues up in the last quarter, due in large part to the popularity of its Guitar Hero and Call of Duty videogames.

Its fast pace, in contrast to rival Electronic Arts (ERTS), has been helped by its merger with Vivendi SA’s Blizzard Entertainment last summer. Blizzard’s World of Warcraft online game is also one of the most popular multiplayer games in the world.

Here’s a highlights video from my interview with Kotick at D6: