Guitar Hero III to have a new developer; new multi-instrument Rock Band video game due out by year’s end.

Guitar Hero publisher RedOctane released yesterday Guitar Hero II for the Xbox 360. This is the first time the wildly popular GH franchise has appeared on an Xbox console. The game comes bundled with a special guitar controller for $90. You can also purchase the guitar controller separately for $60. Microsoft and RedOctane have already announced that extra songs will be available for purchase on Xbox Live Marketplace, although they have not announced release dates or pricing.

Guitar Hero has been at the center of considerable drama in the past few months. This shouldn’t be surprising considering how lucrative the franchise has been: GHII has already grossed well over $100 million on the PlayStation 2 alone. On Monday, RedOctane’s parent company, Activision, announced that it had settled a lawsuit against three former RedOctane employees who had been involved in developing the GH franchise. The three left RedOctane last year to start their own company, Lodestone Entertainment, to compete with their former employer by developing their own rhythm game. The settlement prohibits Lodestone from creating any drum-, guitar-, or synthesizer-based games for the next year. They are also prohibited from marketing Xbox 360 controllers for Guitar Hero II until six months after the game’s release.

Last September, the developer of the first two GH games, Harmonix Music Systems, was purchased by MTV Networks. A short time later, RedOctane announced that Guitar Hero III would not be developed by Harmonix (Tony Hawk developer Neversoft is taking over the franchise), leaving many to wonder what the acclaimed developer of one of gaming’s most popular franchises would do next. On Monday, Harmonix and MTV announced that they are working on a game called Rock Band. The game will allow up to four people to play songs together either on the same console or online via Xbox Live or the Playstation 3’s Playstation Network. There will be four different controllers: lead guitar, bass guitar, drums, and a microphone for the singer. Harmonix has confirmed that the Guitar Hero II controller will be compatible with Rock Band, so you won’t have to buy a second lead guitar.

With the backing of both MTV/Viacom and publisher Electronic Arts, Rock Band is sure to have a fantastic list of licensed songs and plenty of downloadable content. However, no song list has been released, and Harmonix has not commented on the price. Rock Band is expected to release by the end of this year.