Seven45 Studios is announcing today its plans to revive the ailing music video game business with a new twist on Guitar Hero style games. Its new game, Power Gig: Rise of the SixString, uses a new kind of faux guitar and a unique kind of drum set.

The game is inspired by rivals such as Rock Band and Guitar Hero, but it uses instruments that are much more like musical instruments than the current toy-like game controllers, where you press colored buttons to mimic the sounds of real instruments in time with multi-colored cues scrolling across the screen. The game could be innovative enough to breathe new life into the music game market if the company can get it working right.

Seven45 Studios is a brand new game developer that was created as a division of First Act, which was founded by Bernard Chiu and has made a fortune selling children’s guitars at Wal-Mart. The company has been working on the design of the game and instruments for three years.

The music game category became a billion-dollar market after the debut of the innovative Guitar Hero in 2005. But by 2009, the market was over-saturated and over-hyped titles such as The Beatles Rock Band and Guitar Hero V were disappointing, with sales dropping from $1.4 billion in 2008 to $700 million in 2009.

The new guitar game peripheral is an actual six-string guitar that gives the music game a more authentic music experience without being overly complicated. You can also use a virtual AirStrike drum set by banging drumsticks in the air above a platform on the floor. The platform can detect the movements of your sticks via infrared signals. So when you swing a drumstick, you don’t actually hit anything. But if the drum platform detects your strike properly, you will hear music play and see the proper note light up on the game screen.

It’s sort of like the Nintendo Wii’s accelerometer-based controller, but the motions you go through are the same as playing real drums. The tough thing will be to convince people that they can play more realistically, have fun, and learn something while they’re banging sticks against thin air.

I tried it out. I must admit I am a horrible judge of music games but have played enough to know what a neophyte’s experience should be like. The guitar worked as advertised, but the drums didn’t. I hope they improve it by the time of launch. It’s easy to mess up because you have to hold the sticks a certain way and then strike them at the air about a foot or so above the drum platform. It’s not terribly accurate, but I’m told it takes practice to get used to it.

There’s time to fix it, or at least tune it for the needs of non-musicians like me. The game debuts in October on the Xbox 360 and the PlayStation 3. While the execution may be weak so far, I think the ideas behind the game are sound. The goal is to let kids have fun in the fantasy world of rock stars in the game, but to also impart real-life guitar lessons.

You can use the guitar by pressing down on a string, holding a pick and strumming with it. The guitar isn’t terribly complicated; you don’t have to tune it to be able to play the game. The Six String Guitar controller can be plugged into any guitar amp. If you break a string, you can replace it with any electric guitar string.

Pricing will be released later in the year. All of the songs will be based on original master recordings.  To help draw a crowd, the company has licensed music for the game from rock stars including Eric Clapton, the Dave Matthews Band, and Kid Rock. These artists haven’t licensed their music for games before.

“I was never interested in pressing buttons on a guitar to entertain myself or anyone else,” said Kid Rock in a statement. “The reason I signed up with Power Gig is because this game is a way to not only have fun, but also to play real notes on an actual guitar! Anyone can now rock out—even if they have never shredded before in their life.”

The odds of success are tough. MTV and Electronic Arts are working on Rock Band 3. And Activision Blizzard is preparing to launch Guitar Hero Warriors of Rock. These are big companies that won’t surrender their market share without a fight. But at least someone is trying hard to bring back innovation to the music game category. On another front, Activision Blizzard announced DJ Hero 2, a follow-up to its DJ-oriented game from last fall. That game is also an attempt to appeal to different audiences; it debuts this fall.