Rock Band dev suing parent company

Harmonix sale turns sour with lawsuit.

The sale of Rock Band developer Harmonix by parent company Viacom has turned sour after the developer filed a lawsuit that alleges Viacom "diverted opportunities" from Harmonix for its own benefit so it wouldn't have to fork out millions in performance-related bonuses.

An ex-shareholders group, which includes Harmonix founders Alex Rigopulos and Eran Egozy, reckons Viacom manipulated costs to avoid a performance-related payout, according to Gamasutra.

Viacom bought Harmonix in 2006 for a whopping $175 million, but millions more were expected to be paid in performance-based earnings.

Harmonix claims it should have received 3.5 times any gross profit in excess of $32 million earned in 2007 – with no cap. The 2008 payment would be under similar terms, but gross profit would have to be over $45 million.

The ex-shareholder group alleges Viacom "diverted opportunities" from Harmonix for its own benefit so it wouldn't have to fork out the cash. The claim revolves around Viacom's Rock Band distribution deal with EA Partners.

Apparently, Viacom realised that for every $1.00 of distribution fees that Harmonix saved during 2008, it would have to pay an additional $3.50 of earn-outs to the ex-shareholders.

As of March 2009, the Rock Band franchise had surpassed $1 billion in sales in North America alone.

Viacom paid Harmonix shareholders $150 million for 2007. However, it has never paid out for 2008.

Earlier this year Viacom claimed it was "entitled to a refund of a substantial portion of amounts previously paid". The reason why remains a mystery.

A resolution accountant is crunching the numbers to work out who owes who what and how much. But the lawsuit takes issue with Viacom's behaviour after it purchased Harmonix.

Rock Band 3 launched in October this year to almost unanimous critical acclaim. Eurogamer's review turned up a 10/10. "Breathtaking in ambition and crafted with the skill of a studio that's been making music games for 15 years, Rock Band 3 is Harmonix's masterpiece – a towering achievement not just for the genre, but for the medium itself," wrote Johnny Minkley.

But the game failed to set tills ringing, leading some analysts to question the viability of the music game genre.

In November Viacom announced its intention to sell Harmonix. It said it made a loss of around $65 million for the financial quarter. "That loss reflects how we've been informed by the potential buyers we've been talking to," Viacom said. The loss would have been half that number otherwise.

"Third parties have a different economic view of Harmonix. It will be worth more to them than it is to us," said the media giant. That's why it's selling.

Earlier this year Harmonix's Rigopulos declared, "I absolutely do not believe that rhythm-action gaming has reached its peak."

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About the author

Wesley Yin-Poole

Wesley Yin-Poole

Deputy Editorial Director  |  wyp100

Wesley is deputy editorial director of ReedPop. He likes news, interviews, and more news. He also likes Street Fighter more than anyone can get him to shut up about it.


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