Sources have confirmed to us that Activision has closed Iowa City-based developer, Budcat Creations. Since being purchased by Activision, the studio has been focused on the PlayStation 2 and Wii versions of the Guitar Hero and Band Hero franchises for the publisher.

Whispers suggest that 70+ positions were eliminated with this closure, but reports suggest that Activision is providing a rather generous severance package for those let go. Employees apparently had no prior indication that the studio was going to be closed until they were greeted by security guards and consultants who informed them that the studio was being closed and they were being let go.

Despite claims from employees that they didn’t know the studio was going to be closed, they apparently were aware for some time that sales had not been going well for both Guitar Hero and Band Hero on the PlayStation 2 and Wii. The company was in the process of working a plan to transition to a digital title development model, with the studio only recently releasing its first offing called Piz Maze on the iTunes Apps Store.

Activision acknowledged the closing of the studio, saying that it was part of their process to “…ensure that development resources are aligned with their title slate and strategic goals.” We are doubtful that Activision’s explanation and severance package will be of much consolation to those whose jobs were eliminated so close to the holiday season.