Report: Harmonix buyers pay $49.99, accept company liabilities

by Alexander Sliwinski on Jan 4th 2011 10:30AM

Got $50? Sorry, buddy, you totally missed out on buying Harmonix. All Things Digital's Peter Kafka reports that the Rock Band and Dance Central studio's re-independence cost investment group Columbus Nova $49.99.

Of course, the math gets a little tricky from there: Harmonix's buyers assumed responsibility over liabilities, including "music rights fees ... responsibility for lots of unsold games and equipment sitting on warehouse shelves." The sale will reportedly net Viacom $150 million in tax benefits -- it spent $175 million to buy the music company in the first place.

Kafka also notes the "fire sale price" can't be comforting to Harmonix employees, as he believes the studio is "likely going to be facing a very serious restructuring."

Source: All Things Digital

Tags: columbus-nova, Dance-Central, Harmonix, microsoft, nintendo, playstation, ps3, Rock-Band-3, Viacom, wii, xbox

Reader Comments (45)

$49.99? Why did the two companies settle on that number? Why not $1? Strange.

@logicbus
Columbus traded a Wii game for Harmonix.

@Jamp

I paid double for rock band 3

@logicbus Because it's a much better deal than $50.

:(

that.....says it all really

Columbus Nova are a bunch of dumbasses. If they had made the purchase through Amazon, they could have gotten a $10 game credit with the company.

@copa - Luckily, when they realize their mistake, they can trade the company back in to Amazon for a twenty dollar gift card. Everybody wins.

I guess Harmonix spent a lot of money on the tech for Rock Band 3 and its real guitar and MIDI keyboard. I doubt it will sell enough to make the money back on the niche products. Hindsight is 20/20 but they had the following going against them:

1) Few people actually want to play real guitar.
2) Keyboards are not the most rocking instrument.
3) The rest of the features in Rock Band 3 are not that interesting. People just want more songs.
4) The music game fad is dying.

As somebody who plays real guitar I am really interested in the Squire real guitar but I am in the small the majority. Most people just want to pretend to play guitar and there is nothing wrong with that. I just think Harmonix should have realized that.

I thought for a second that Harmonix should have diversified and maybe developed a FPS or something but they really can't when their name is Harmonix Music Systems. Maybe they should have just did the wise financial decision and crapped out another squeal with nothing really new like Guitar Hero to stay in the black.

@FriedConsole
"2) Keyboards are not the most rocking instrument. "

Probably one of my favorite parts of any NIN song.

@sicsided

+1000000000

March of the Pigs anyone?

@FriedConsole Harmonix themselves said Keyboard was the #1 most requested feature to be added to Rock Band.

And despite your list, I think they just wanted to make a great game.

@FriedConsole
We don't even know if the extensive "extra" hardware inventory is full of the newest instruments. It might be, but the article didn't say. I'd say it's just as likely that it's a bunch of Rock Band 2 and Rock Band Beatles...even Rock Band 1 controllers. By the time Rock Band 3 was coming out, there was already a discernible chill in the air for the genre, and I doubt they overproduced the "expert" instruments. Without more info, we have no way to know, though.

This is pretty sad for the company. It's extra sad that this follows a pretty standard bell curve for product sales...you got your early adopters, your maturity and your trail off. Saying "people just want more songs" is pretty much 90% of what they were doing. Hindsight tells us that Rock Band is a product, and not a platform. Making all the new installments and DLC was only milking a single product as it moved through its life cycle.

They started out with games like Amplitude, maybe they need to go back there. My favorite music game of the last six months is Bit.Trip Beat.

Too bad most of the gear has been MIA for the months since launch. I still don't have the MIDI adapter I preordered.

I don't really care anymore, though, since I found out the "Pro" drum charts have been botched and open-hat is on blue and crash is on the hi-hat. Pretty much impossible to get 1:1 matching on a MIDI kit unless you buy a $1000 drum brain and three extra cymbals.

I'll never buy another Rock Band game as long as I live. I respect what they've done with the guitar and keyboards, but there's still no "Pro" singing (match the octave, anyone?) and the drum charts are less than fun to play on a real kit.

Long live Guitar Hero: double bass and correctly mapped cymbals.

@FriedConsole I thought for a second that Harmonix should have diversified and maybe developed a FPS or something but they really can't when their name is Harmonix Music Systems. Maybe they should have just did the wise financial decision and crapped out another squeal with nothing really new like Guitar Hero to stay in the black.

So For you if a company dont flood the market with more pointless FPS is doomed?

@jsx92 "Long live Guitar Hero", one of the many phrases that burns my ears.

@FriedConsole Yes. Hold out for the Squier guitar. I bought the mustang and while it can teach you technique, it feels NOTHING like a real guitar. I also dislike having to pay an extra dollar for the privilege of learning a song i already have to pay for in order to add it to the game. Looks like the price tag was too hefty for most fans of the series. The learning tools are not as great as I had hoped either. You can only learn parts in time with the actual song, there isnt really a freestyle mode to try and develop chops using the guitar and keys. The game is still great but it isnt THAT surprising that its not doing well.

@jsx92

Are you serious with that statement about GH? The only reason that the music genre made it this long is BECAUSE of Harmonix and Rock Band. Plus, your lowly GH would not even have drum or mic capabilities were it not for Rock Band.

@cronodude Being Music Systems means nothing, remember they released a racing game for the PS2: Eyetoy Antigrav

Any competent executive would realise that Harmonix do not need any restructuring - they just have to stop releasing $200 niche games. Imagine the kind of awesomeness they could create if they were working on more conventional games or stuff like Bit.Trip

@Haggard But I like Rock Band... and we've already got Bit.Trip Beat to be Bit.Trip Beat.

@Haggard

While I don't think they should completely give up on RB(and don't think they will), I wholeheartedly agree. They could even go back and make a couple games like Frequency and Amplitude and release them on XBLA and PSN. Let them develop a new IP, release a few downloadable games and keep up with the RB DLC for the next couple years and I guarantee you they'll be right back on top.

@wcarnation
I more mean the creativity they could bring to the bitesize downloadable format, and I love Rock Band too - but apparently in these trying times you can't base a business on it. And by 'conventional games' I mean regularly priced standalone experiences (perhaps without peripherals? :O ), not space marines hiding behind metre-high walls.

Viacom owned Harmonix for a few years. Did they ever pull money out of them or was it a complete loss on Viacoms part?

@Jack Kevorkian Corporate accounting can make one story look different from lots of angles. Officially Viacom claims to have lost $90 or so million all together. They spent $175 mil on Harmonix, then had bonuses of $150 mil, another $100 mil in other bonuses, licenses (Beatles were supposedly $50 mil) and so on.

However, Rock band 2 was at around $492 mil in revenue at the end of '09, I think Viacom had expected to come close to break even on 2 and then roll in it when 3 came out... but the market was dead. Probably there was small profit at some point, but a corp the size of Viacom has no interest in small profits. Especially not with the huge bonus contracts and the reported $100 mil it cost to develop part 2. Who knows what 3 cost.

But there was also a story a week or two ago that there was a dispute over the bonuses. Don't know how that turned out, but could play into the $49.99 sale price.

@Burritoclock Thanks for the detailed info. Missteps were obviously made, but I think that was to keep up with constant releases of GH...which really couldn't be helped.

@Burritoclock

It gets even fuzzier though with the lawsuit that the Harmonix founders filed claiming that Viacom hid revenue through an advertising deal with EA. Basically the suit alleged that rather than pay direct revenues for distributing Rock Band, EA instead agreed to purchase a certain amount of advertising across various Viacom properties. However much that advertising deal was worth is apparently not included in the overall revenue attributed to the Rock Band series.

It really just comes down to genre dying. And they should consider changing the DLC structure. A subscription service should be introduced for DLC, pay a flat fee per month and have access to ALL DLC in the RB library

RIP Music Game Fad: It was fun for awhile...

@TheBatman4141

It was...when the first Guitar Hero was released on the PS2.

a terrible news story. Harmonix doesnt deserve this. Rock Band 3 is one of the best games ever made, and the periperhals make parties so much fun.

This is really sad, despite its inevitability. Harmonix has always been known for making good games that were relevant in the music game genre and innovating on their past releases. They were the anti-Activision/Neversoft, who simply puked out more Guitar Hero every 6 months. And what do they get for it? Sold by their parent company for the price of a game.

Why does this keep happening in the games industry? Talented people that deserve better keep getting destroyed while Bobby Kotick sits on his throne made of cash, pisses all over the industry, and gets handed millions of dollars every year.

@masterinsan0
Well, just make sure you keep supporting the little, talented guy, and don't buy any games with the activision label.

The genre has gotten the life sucked out of it. once the Guitar Hero brand got whored out the genre went to hell... Unless it finds a way to re-invent its self RockBand will die soon after the other spin-offs of the genre.

@F minus

Rock Band did a pretty good job of whoring itself out as well.

Unfortunately for Harmonix, who probly did not want to saturate the music gaming market as much as Activision went and did, their gimmick is not as profitable as it used to be.

Harmonix set up the perfect market for this kind of thing with DLC for the hardcore and occasional retail releases for casual players, but thos days seem to be almost over.

Although, over the holiday shopping season I did see some people buying Band Hero bundles from Walmart (yes, BAND Hero), so maybe if Harmonix retroactively advertises Beetles Rock Band and Rock Band 3 they can get money from the late adopters.

Does the "$150 million in tax benefits" kind of mean we Americans are paying for Viacom's loss?

A shame if this kills Harmonix. I've put more hours into Rock Band than any other game. It's the only real social/drinking videogames out there that even non-videogamers tend to enjoy, even if they are apprehensive at first.

Put a couple of shots of Bushmills into anyone, and they'll happily sing Bon Jovi.

So Viacom made tremendous profits with these games, and did so this year in its various other arms, and by lying about the value of the company, they get massive tax breaks that deny Viacom's just share of the government overhead that makes its ability to do business possible.

Stay classy, Viacom.

In reality, C Nova was able to purchase Harmonix with a tax break, leveraging money C Nova didn't have.

Guess what is next on the dead fad list? 3D. I give it two years. James Cameron is the only person capable of making decent 3D media so far and the wave of Avatar won't last forever.

Too bad 3D is not a fad. 3D projection is an immature technology with loads of room for improvement, and the science of stereo imaging has been in practice since the 1500s.

It's the next logical step in display technology, and a finicky market won't hold back the progress of science, sorry.

I don't believe this speaks for doom and gloom at Harmonix.

By assuming the liabilities, Viacom is likely released from it's responsiblities to pay the Harmonix Bonus for 2008, 2009, and 2010. Whatever they may be.

The royalty liabilities would go hand-in-hand with taking ownership of all the existing games and hardware. Because Harmonix will now be selling the games and instruments itself, it'll be responsible for paying the royalties accrued.

This likely means an end to the 3.5x profit bonus that Harmonix was getting, and instead getting something more reasonable.

Also, despite the music gaming being down, it doesn't mean that it hasn't continuted to be profitable. 2008 was a banner year for music gaming, no year since has been as good for the industry.

Personally, I think Rock Band 3 is exactly where the genre needed to go. Giving music gamers a means of upward progression, not just with the controller instruments, but with a real guiltar.

I still have yet to get any of these things but i do want them. i always read how horrible the drums are made and it always puts me off until new versions come out.

@albokay What? The only time the drum were crappy were when RB1 first released. The RB3 drum kit w/ cymbals is great!

As long as DLC is making money for them it doesn't have to be doom and gloom. People may not be buying new iterations of the franchise, but that doesn't mean they'll stop expanding their existing library.

Course, a big issue will be trying to remain relevant from a marketing point of view.

I really hope Harmonix recovers. They have only helped to push the industry forward. If it was not for the economy and waning interest, they would still be at the top of their game.. financially.

Looks like they paid 50 bucks too much for a company that makes games that nobody cares about anymore.

Why not make a Tony Hawk game instead? That fad is just as dead as the plastic-musical-instrument genre is now.

Rock Band 3

Report: Harmonix buyers pay $49.99, accept company liabilities

Reader Comments (45)

Posted: Jan 4th 2011 10:42AM logicbus said

Posted: Jan 4th 2011 11:06AM Jamp said

Posted: Jan 4th 2011 11:13AM Miami Prodigy said

Posted: Jan 5th 2011 11:11AM Rocketboy said

Posted: Jan 4th 2011 10:43AM Billlop said

Posted: Jan 4th 2011 10:44AM copa said

Posted: Jan 4th 2011 11:45AM BananaBoat said

Posted: Jan 4th 2011 10:47AM FriedConsole said

Posted: Jan 4th 2011 11:01AM sicsided said

Posted: Jan 4th 2011 11:33AM superklye said

Posted: Jan 4th 2011 11:45AM wcarnation said

Posted: Jan 4th 2011 12:08PM sigma8 said

Posted: Jan 4th 2011 2:25PM jsx92 said

Posted: Jan 4th 2011 3:28PM cronodude said

Posted: Jan 4th 2011 3:56PM wcarnation said

Posted: Jan 4th 2011 4:12PM VaultBoy said

Posted: Jan 4th 2011 4:56PM Mixer23 said

Posted: Jan 4th 2011 7:59PM TubaDude49 said

Posted: Jan 4th 2011 10:53AM Haggard said

Posted: Jan 4th 2011 11:46AM wcarnation said

Posted: Jan 4th 2011 4:59PM Mixer23 said

Posted: Jan 6th 2011 1:17AM Haggard said

Posted: Jan 4th 2011 10:58AM Jack Kevorkian said

Posted: Jan 4th 2011 11:21AM Burritoclock said

Posted: Jan 4th 2011 12:38PM Jack Kevorkian said

Posted: Jan 4th 2011 12:59PM Courtney said

Posted: Jan 4th 2011 11:03AM Tradio said

Posted: Jan 4th 2011 11:19AM TheBatman4141 said

Posted: Jan 4th 2011 12:13PM thisredengine said

Posted: Jan 4th 2011 11:25AM bshido said

Posted: Jan 4th 2011 11:25AM masterinsan0 said

Posted: Jan 4th 2011 12:03PM HydrophobicFish PSN ID Hydrophob said

Posted: Jan 4th 2011 11:32AM F minus said

Posted: Jan 4th 2011 2:15PM Vcize said

Posted: Jan 4th 2011 11:52AM Lerkero said

Posted: Jan 4th 2011 12:22PM Peter Godly said

Posted: Jan 4th 2011 12:31PM Dustin F said

Posted: Jan 4th 2011 12:40PM Jack Kevorkian said

Posted: Jan 4th 2011 2:15PM jsx92 said

Posted: Jan 4th 2011 1:56PM Adinnieken said

Posted: Jan 4th 2011 5:39PM albokay said

Posted: Jan 4th 2011 5:55PM Tegolin said

Posted: Jan 4th 2011 11:02PM Crayola Q Pants ESQ said

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