Activision (NASDAQ: ATVI - News) Blizzard, the games company formed by the merger of Activision with Vivendi's games unit, plans to capitalise on the popularity of its Guitar Hero franchise by developing an online music platform that could rival iTunes.

In an interview with the FT, Bobby Kotick, the chief executive of the new company, said creating a Guitar Hero online music platform was "the natural evolution" of a franchise that has sold close to 20m units and generated $1bn in revenues.

"I don't think there have been a lot of credible alternatives to iTunes but Guitar Hero certainly has that potential," he said, adding players could already download "note tracks" to use while playing the game.

The merger of Activision with Vivendi Games completed yesterday. The new company will benefit from Vivend's ownership of Universal Music, as well as payment and processing capability in "virtually every country", said Jean-Bernard Levy, the chief executive of Vivendi.

"These are all the things that enable you to be a successful competitor [to iTunes]," added Mr Kotick.

Activision Blizzard is understood to be competing with MTV Games for a deal with The Beatles management to bring out a guitar-based game featuring Beatles songs. Apple's iTunes has been denied access to the Fab Four's catalogue to date.

Activision has to decide what to do with $3.5bn of cash which was originally going to fund a tender offer. However, the offer price was set before a sharp rise in Activision Blizzard shares, which makes it unlikely to be taken up.

Mr Levy and Mr Kotick said the cash would either be returned to shareholders or used to finance acquisitions. They declined to comment on whether the company would enter the bidding for Take-Two, the games publisher behind the successful Grand Theft Auto franchise. Electronic Arts has launched a hostile bid for the company.

The merger of Vivendi Games with Activision has created a company with strengths in console and multi-player online role-playing games. Vivendi Games owns World of Warcraft, the world's biggest online role-playing game with more than 10m subscribers, while Activision has ties with Hollywood studios and produces the the Spider-Man and James Bond console titles.

The new company will also concentrate its efforts on global expansion. "We have a strong presence in Asia and when you combine the two companies there are going to be opportunities to grow, particularly in Europe," said Mr Levy.

The two men forecast a period of growth for games publishers, which would be fuelled by international expansion and new lines of business, such as merchandising and licensing, which have traditionally been dominated by Hollywood studios. "We haven't really capitalised on those areas," said Mr Kotick. "We're at the very early stages of how to leverage [our intellectual property]."