Activision has shut down two of its studios, Underground Development and RedOctane, the company has confirmed following rumors of their closure.

Underground Development, responsible for the PlayStation 3 version of Enemy Territory: Quake Wars as well as the recent Guitar Hero: Van Halen, has been shut down completely while the staff responsible for the peripherals at the company’s main Guitar Hero creator RedOctane will be reporting to newly-appointed Guitar Hero boss David Haddad.

“As part of our overall strategy to release fewer skus for Guitar Hero in 2010 we are closing the Underground studios and relocating RedOctane to our Santa Monica headquarters under the leadership of David Haddad,” Activision said of the closures in a statement.

During a recent earnings call, Activision said it’s planning just two “major” releases in the music genre this year — a new Guitar Hero and DJ Hero 2.

Activision-owned RedOctane believes there’s still plenty of room in the industry for music games, untapped genres to look at and new technologies to make use of. “We’re really just at the beginning of music games,” co-founder Kai Huang says, adding that they’re constantly thinking about what genres and instruments to introduce to the audiences next. “In the U.S., country music is obviously very popular. Globally, classical music has always been very interesting. Latin music — there are just so many different genres of music and instruments that haven’t been tapped into yet,” he says, later noting that despite DJ Hero‘s apparent not-so-great sales, they’re planning it to become the year’s number one new intellectual property — something a certain heavily-armed game may take issue with.

As for how to play all those new genres, Huang says the Hero business is “definitely exploring” the possibilities upcoming motion control additions like Project Natal can offer, “… one of the areas we’re exploring certainly is camera technology and what you can do — track your movements and maybe have your characters on the screen do certain things you’re doing, or personalize it more so it can look more like you on stage rather than just be an avatar.”

Kai Huang, President and Co-Founder of RedOctane, sat down with Digital Spy and only had the nicest things to say about Project Natal. “We’ve definitely been evaluating Microsoft’s Natal technology along with a lot of other different technologies that could enhance the Guitar Hero playing experience,” Huang said, adding, “Natal is very interesting because there’s so many different things you can do with it, whether it’s the motion detecting, maybe sensing how you’re playing, or the ability to use it for interactivity purposes and taking advantage of it for party purposes.”

RedOctane’s newest game, Guitar Hero 5, has a fantastic casual mode called Party Play. As our review outlined, being able to pop in and out of songs, instruments and difficulties has never been easier. Now imagine Natal interaction logging a player in automatically by just recognizing their face or automatically turning on lefty flip. Big Brother is coming, and he’s gonna help you beat “Through the Fire and Flames”.

Metallica looks to be giving us the ultimate Guitar Hero experience when it debuts this spring on Xbox 360, PS3, PS2 and Wii. We’ve been following this game closely and previously brought you news on the second base pedal, lyric fiascos, tracklists and trailers. Today Activision has released a complete fact sheet for RedOctane’s latest crowd pleaser. Here is the lowdown as it stands:

Guitar Hero: Metallica will feature over 45 songs from their rockin’ career along with tracks from 20 other artists personally selected by Metallica like Slayer, Alice In Chains, Foo Fighters and Queen, all of which have influenced or had some connection to them along the road. After completing songs players can test their metal by playing through tracks again while insider trivia pops up revealing information on the songs lyrics and history as well as how the other bands are tied to Metallica.

For the first time in a Guitar Hero game, players will take on the roles of the band themselves, transforming them into legends Lars Ulrich (drums), James Hetfield (lead vocals, guitar), Kirk Hammett (lead guitar) and Robert Trujillo (base guitar) complete with signature moves. Besides being a great Guitar Hero game, the aim here is to bring players the feel of a genuine Metallica concert. Venues reflect their most memorable tours with real world locales such as Tushino Airfield and The Forum as well as themes from their album covers and music. Stages will have brand new custom camera angles, custom lightshows, special effects and even encores.

The inclusion of a second base pedal ups the challenge for the diehard (and insanely skilled) fans in the new Expert + difficulty. In this mode players will be getting a note-for-note translation of the actual song on many tracks. There will also be a redesigned guitar controller boasting advanced responsiveness.

Like those before, Guitar Hero: Metallica will have several game modes to choose from with single instrument or band career modes, Battle Mode, and online modes Face-Off, Pro Face-Off, Battle, eight-player Battle of the Bands and Quickplay. The Music Studio, GHTunesSM, and the Rock Star Creator from World Tour have all been given updates including samples from Hetfield’s ESP Truckster guitar and Tom Araya’s (Slayer) ESP base guitar. Other returning classics are unlockable venues, commentary, videos and behind the scenes footage, so no Metallica fan will go wanting.

In anticipation of its summer release, Activision, RedOctane and Vicarious Visions have started a developer diary to give fans a behind the scenes glimpse at how they made Guitar Hero road worthy. This first developer diary comes from Vicarious Visions CEO, Karthik Bala, who answers the question, “How do you recreate the essence of Guitar Hero for a portable without making everyone carry around a full size plastic guitar?”

Turns out it takes a lot of hard work and a whole lot of prototypes. Thankfully Activision and RedOctane gave them the chance and room to run with their ideas, some of which “were ridiculous… others a total disaster,” until they finally came up with a “Frankensteined” 3-button GBA cartridge that led to the final design.

Whether or not the above, newly released trailer for the game went through a similar thought process is unknown, but the result is entertaining nonetheless. At least in the “what the hell..?” kind of way.

Okay, so yesterday we got our first look at Guitar Hero World Tour and it got us all excited, even if we were worried about storage space. Today Activision has handed us their vision for the future of music gaming and probably one-third of upcoming YouTube home videos; and it’s coming this fall.

Guitar Hero is ready to answer Rock Band’s challenge for music-sim suprimo in a major way, guaranteeing “the most realistic drum experience ever in a videogame.” This authentic electric kit comes with three drums, two raised cymbals and a bass kick pedal. It has velocity sensitive drum heads made of soft rubber for proper bounce back and is designed to be easily set up, tore down and stored. Not only is there the new drum set, but a mic and a more responsive guitar.

World Tour will feature the largest on-disc set of music so far in a music-rhythm game. Promising only master recordings, it will have music from top name groups like Van Halen, Linkin Park, The Eagles, Sublime and many more. The good folks at Activision also boast the best and much more localized downloadable content than ever before.

In the video, we saw that players will get to create their own singles. This will be done with the new Music Studio mixer, so players can create digital music from scratch using all the different instruments and then play that song in-game. Players will be able to share their singles and original creations online though GHTunes (surely Activision can think of something more original than that?).

Living room rockers can go online to compete in single-player career mode as well as the new Battle of the Bands mode where two bands of four players can go head to head. Bands can customize everything from character looks, instruments used, the band’s logo and even their album covers.

So it looks like Activision is pulling out all the stops to make this the baddest music game ever. Dusty Welch, Head of Publishing for RedOctane says, “With the introduction of our advanced high-quality new wireless instruments (that’s right, wireless), in-depth customization options and advanced online functionality, the game enables music fans and gamers globally to share in the most social and expressive music experience ever.”

Guitar Hero World Tour will deubt this fall on Xbox 360 and PlaySation 3 (developed by Neversoft); the Wii (developed by Vicarious Visions); and the PlayStation 2 (developed by Budcat).

[See also: Guitar Hero World Tour gallery]