The answer shouldn’t be a surprise, but somehow the performance Gamestop reported this morning managed to catch Wall Street off guard anyway.

The company’s revenue of $1.74 billion was in line with estimates, but earnings of 23 cents a share missed consensus by five cents. More worrisome is that the company had to knock down its guidance for the rest of the year and says that comparable store sales will be down between four percent and eight percent through 2009. Now Gamestop (GME) shares are trading down five percent in a flat market.

Did I mention that this shouldn’t be a surprise? Game sales, once thought to be immune to the recession, have been slumping for months. Turns out that a tough economy may indeed prompt more gamers to huddle in the basement in front of their Xboxes, but it won’t prompt them to buy new games (used ones may be a different story).

Gamestop says it’s still optimistic that coming games, like yet another Call of Duty sequel from Activision (ATVI) and yet another version of Halo from Microsoft/Bungie (MSFT), will help perk things up. But I’m interested to note that the company didn’t cite the new Beatles version of Rock Band, from Electronic Arts (ERTS) and Viacom’s (VIA) MTV as a catalyst.

By the way, for fantasists who persist in pretending that the Beatles are coming to iTunes at Apple’s (AAPL) event next month: Stop! It’s not true.

On the revenue-seeking side, BoomTown’s Twitter Business Plan Count-Up hasn’t yielded any real keepers yet. There is a real contender, though–since Jennifer Aniston so publicly broke up with her boyfriend, John Mayer, on account of his Twitter “addiction,” BoomTown suggests offering “Twitter rehab” for those not willing to lose their relationships just yet. Not sure how zoning would work on that one, but the profit margin could be nice. The Guardian’s Changing Media Summit in London didn’t provide a lot of hard answers to the revenue question either, but it did gather the curious together to discuss the matter further, ponder the Next Big Thing, and talk about what the media company of tomorrow looks like. And, perhaps proving that during hard times Americans love an unlikely hero (a Seabiscuit for our own economic disaster?), Steve Wozniak escaped elimination from “Dancing With The Stars” for yet another week–undoubtedly due to the will of the people and their appreciation of his determined and goodhearted willingness to look silly on national television. The Pillsbury Doughboy bit probably didn’t hurt, either.

On the cost-saving side, MediaMemo wrote about job and salary cuts at the New York Times (NYT). The job cuts were on the business side, but the company slashed all of its nonunion salaries by 2.5-5 percent. It will ask for similar cuts from its unionized newsroom employees, in a spirit of “shared sacrifice.” Google (GOOG) sacrificed 200 more jobs, this time from sales. One of the most drastic signs of recession, however, may be the fact that Condé Nast’s higher echelons are cutting back on chauffeured cars to get them around Manhattan.

According to Digital Daily, It was Black Thursday at IBM (IBM) on the 26th, with 1,674 job losses (and counting). 5,000 jobs are expected to be cut overall, with many of the lost U.S. positions being transferred offshore. Better news over at Viacom’s (VIA) MTV games–according to new statistics, the company’s Rock Band franchise recently surpassed $1 billion in North American retail sales, making it the number one title of 2008 across all genres, based on revenue. And that’s before Beatles: Rock Band even comes close to shipping. That’s the kind of magic shown so far by Palm’s (PALM) forthcoming Pre handset, which–without a price or a release date–has boosted the company’s share price more than $7 based on little more than a CES debut and some enthusiastic analysts. Digital Daily noted that not everyone feels magical, but the launch will tell.

Over in Personal Technology, Walt Mossberg offered quick reviews of the iPhone apps he uses most often and that make the shiny Apple (AAPL) gadget worth the price. In Mossberg’s Mailbox, Walt pointed out the usefulness of IE8′s compatibility button, which makes the browser act like IE7 in certain instances, on Web sites that were coded around the peccadilloes of the earlier versions of the Microsoft (MSFT) software. Other readers had questions about ordering broadband service without a land line and burning movies to Blu-ray discs using an iMac. Katie Boehret spent the week testing out a new TV from Samsung–the first to integrate with the Yahoo (YHOO) Widget Engine, which enables viewers to watch shows and access the Web on the same large screen. Her thoughts are in The Mossberg Solution.

More next week.

Not bad for a product that’s been around just 15 months. And, remember, these are pre-Beatles: Rock Band sales. When Viacom’s MTV Games ships that title on 9/9/09 (Get it? “Number nine, number nine, number nine.”), the franchise will be well on its way toward the $2 billion barrier, though it make take quite a bit longer to reach it. The public’s appetite for music games like Rock Band and rival Guitar Hero is said to be cooling, with sales expected to be flat in 2009. “[These games are] certainly losing steam,” Pacific Crest Securities analyst Evan Wilson told the Los Angeles Times recently. “This year will establish the direction that this genre will go. Maybe it continues to take off. Maybe it tops out at 15 percent of the software market. Or it could just turn out to be a fad. I think the latter two scenarios are most likely.”

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.”

So no surprise that Dauman had little to say about his company’s giant, glacial lawsuit–two years and counting–against Google (GOOG) over copyright infringement at YouTube. But for the record, Dauman still thinks… something will happen, someday.

“We’re in U.S. litigation-land. We are in discovery. A lot of documents have been produced. One thing about technology, there’s so many more documents now,” Dauman noted, accurately. And so what does that mean? “We continue to be confident in our position. There’s not much more we can say, and there will be an outcome.”

So there you have it.

Dauman did say that his suit helped push Google to install a filtering system that susses out videos that shouldn’t be on the site (more on that soon). And he did say that his son, Philippe Jr., continues to enjoy working at Google–a hire that Dauman says both he and Google CEO Eric Schmidt signed off on. “He’s doing very well there. He loves it, it’s a great company.”

Now, there’s a new option for these digital performers: Wii Music from Nintendo. This $50 game was designed for Nintendo’s hugely popular $250 Wii gaming system, of which there were more than two million sold in November alone, according to the company.

Wii uses motion-sensitive controllers to move characters in games. A game of tennis in Wii Sports, for example, works when you swing the Wii remote like you would a tennis racket. The Wii’s simple graphics and adorable Miis (on-screen cartoons designed to look like you) appeal to the non-gaming set, inciting parents to challenge their kids to games of Wii Golf and spurring senior centers to start Wii Bowling leagues.

People playing Wii Music use the remote as a musical instrument.

Nintendo carries this cutesy, user-friendly style of video gaming over to Wii Music, where the remote works as a musical instrument, cheerful songs abound and a white-wigged character named Sebastian Tute gives instructions. Along with Sebastian, the Tutes — a musically gifted group of Miis that would give the Von Trapps a run for their money — appear and demonstrate how to play various types of music and instruments.

Though it’s comparably priced, Wii Music differs from games like Guitar Hero and Rock Band in many ways, and there are understandable reasons why a frequent user of those games would shun Sebastian and the Tutes. For starters, teenage fans of Guitar Hero and Rock Band who like the games’ variety of popular songs may gripe about Wii Music’s selection, which includes the likes of “My Grandfather’s Clock” and Beethoven’s “Ode to Joy”; none of Wii Music’s songs are more recent than the late 1980s.

Perhaps the biggest difference is that, in Wii Music, you aren’t using a few fake instruments like a guitar or drum set. You are instead manipulating the Wii controller to simulate one of many instruments depicted on screen. There’s even one “instrument” called Dog Suit — a dog suit that, when worn by a Mii, uses canine barks in place of notes. Another key difference is that, aside from one game, Wii never penalizes you for playing an incorrect note in a song, because you can’t play a bad note — every press of an imaginary key or strum of an invisible string plays the correct note.

A musically gifted group of Miis — on-screen personas representing players — demonstrate how to play various types of music and instruments.

This “no mistakes” environment is a little bit like a sports league in which every kid gets a trophy. Wii Music got a bit too saccharine at times, like when I scored a lousy 43 out of 100 points in a game and Sebastian Tute assured me that points didn’t much matter so long as I played the way I wanted to play. But for people who are learning about music and don’t want to worry so much about playing the right note, OK: Wii Music fosters a freedom to experiment with style by allowing users to improvise and explore variations of songs.

Outside of the Games section, you are the judge of your own performance, rating it however you see fit, or not at all. Wii Music is divided into Jam, Lessons, Videos and Games. My favorite section was Games, which included conducting a song in Mii Maestro, hitting the right note at just the right moment in Handbell Harmony and arranging Miis from lowest to highest note in Pitch Perfect.

The more activities I completed, the more instruments and songs were unlocked and available for me to use; off the shelf, each copy of Wii Music starts out with 27 instruments, but over 60 can be unlocked in the game. In Lessons, Sebastian Tute explained the importance of each instrument in a song and the role that it played. Before I played drums in a reggae song, he explained that reggae drums lay down an eight-beat rhythm. In the Japanese style of music, I learned how to play and recorded myself playing all four parts of a song: taiko drum, bells, shamisen, a three-string guitar-like instrument that puts bass in the song, and flute.

If you’d like, you can opt to save your performances as music videos when you’re finished. These include your mistakes — err, improvisations — and some other funny effects like views of the audience members as they bob their heads listening to you play “Twinkle, Twinkle, Little Star.” Album covers can be made for these videos, and the finished product can be sent to other friends’ Wiis if they also have Wii Music. Those friends can play over parts of your song and send the revised video back to you. While you’re playing songs, small black notes with faces on them called Be-Bops appear in the bottom right of the screen and work as a metronome would, steadily keeping the beat.

But cool accessories like guitars and microphones that are used to play music with other games aren’t available for Wii Music; instead, you must use your trusty Wii remote and Nunchuk to make one of four motions: piano-type, guitar-type, trumpet-type or violin-type. These four motions work to play a variety of instruments in different music styles, but some are easier to pretend to use than others.

While playing the imaginary trumpet I held the remote like one, pressing its 1 and 2 buttons like trumpet keys. But playing the piano uses the same motion as that which is used for playing drums — a downward hitting motion with the remote and Nunchuk — and this felt more like using a hammer than playing a piano. If you own a $90 Wii Balance Board, you can use it in drum mode in addition to the remote and Nunchuk. I tried this briefly, and it was fun to use the balance board in place of drum pedals.

Wii Music isn’t meant to replace a music lesson, but it’s intended to get people thinking about music and their own music style, without fear of making mistakes. It’s fun, unintimidating and will even teach you a thing or two. Just steer clear of the Dog Suit, if you can help it.

• Discuss: Share reviews of videogames and systems in Journal Community.

Edited by Walter S. Mossberg

• Mossberg Solution will return, Wednesday, Jan. 14. Email us at mossbergsolution@wsj.com. Find this and other columns and videos online free at the All Things Digital Web site: http://walt.allthingsd.com

MTV and Harmonix Come Together for Unprecedented Deal

Exclusive Agreement Set to Bring The Beatles Music to Fans for the First Time in Interactive Form Here, There and Everywhere in 2009 …

The Beatles’ extraordinary music and phenomenal legacy is set to rock across the universe in the form of a video game …”

– Excerpts from Apple Corps/MTV Games/Harmonix press release

So those reports that the Beatles’ Apple Corps was in talks with Rock Band developers MTV Networks and Harmonix over the creation of a Beatles-themed videogame? True.

According to a Beatles pun-riddled joint press release from Apple Corps Ltd., MTV and Harmonix this morning (what, no “Everybody’s Got Something to Hide Except for Me and My Monkey”?), the companies have inked an exclusive agreement to develop what they exuberantly describe as “an unprecedented, experiential progression through and celebration of the music and artistry of The Beatles.”

“The project is a fun idea which broadens the appeal of The Beatles and their music,” Beatle Paul McCartney said in a statement. I like people having the opportunity to get to know the music from the inside out.”

“It’s cool,” added Yoko Ono Lennon, perhaps dreaming of a “Rock Plastic Ono Band” edition of the game. “I love it and hope it will keep inspiring and encouraging the young generation for many decades.”

No word yet on how much of the Beatles catalog is involved here–or if it will feature a “Revolution 9″ minigame. But that’s beside the point, really. The fact that the band, which has long refused to distribute its music digitally, has licensed its catalog at all is a triumph for MTV Networks. This is a monumental adjustment in the Apple Corps approach to digital distribution and one that could herald future deals with Apple’s (AAPL) iTunes service (Beatles fan Steve Jobs must be beside himself today), Amazon and others.

In May, video game software sales rose 41% on a year-over-year basis. Pacific Crest’s Evan Wilson, in his review of the data, noted that console hardware sales saw little benefit from the launch of Take-Two’s (TTWO) Grand Theft Auto IV. He also noted that third-party titles continue to find it difficult to gain any traction on the Nintendo Wii. He notes that 10 of the top 15 tiles for the Wii are produced by Nintendo, accounting for 78% of unit sales on the Wii.

The top revenue generating games in the month were GTA IV, Wii Fit, Mario Kart Wii, Activision’s (ATVI) Guitar Hero III and Rock Band.

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