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Harmonix founders and shareholders sue Viacom

Tue 21 Dec 2010 9:15am GMT / 4:15am EST / 1:15am PST
Development

Bonus issue still under dispute as Rock Band developer accuses parent company

The founders and former shareholders of Rock Band creators Harmonix have filed a US lawsuit against parent company Viacom, accusing the media giant of attempting to evade paying agreed performance-based bonuses.

According to information obtained by website Gamasutra the group includes Harmonix founders such as Alex Rigopulos and Eran Egozy. Legal documents accuse Viacom of manipulating financial results in order to limit the size of the bonus payments.

Harmonix was acquired by Viacom subsidiary MTV Games in 2006, with the Guitar Hero creators establishing the Rock Band, and more recently Dance Central, franchises for the company. Despite a positive critical reception sales lagged behind rival Guitar Hero and the relationship between the two companies appeared to sour following the release of the first game.

Harmonix employees were awarded $208.7 million in performance-based bonuses in 2008, but Viacom then attempted to reclaim "a substantial portion" of these payouts due to supposed revenue declines.

The subsequent breakdown in relations between the two companies recently led to Viacom announcing it was to sell Harmonix, with several potential buyers reported to be interested.

It is the continued question of bonuses and potential refunds that lies at the heart of the new lawsuit, with the Harmonix group claiming that Viacom attempted to manipulate accounting figures in order to reduce the size of the payout, including purposefully avoiding reducing distribution fees with Electronic Arts in order to adversely affect Harmonix' financial results.

Harmonix also claimed that Viacom diverted benefits from the distribution deal away from Harmonix and back to itself, including commitments from EA to buy advertising on MTV Networks and other Viacom subsidiaries.

Also in dispute is a sum of $13 million held in an escrow account, payments from which were canceled three days before they were due, following an Indemnity Notice from Viacom relating to music game patent infringement.

Although Harmonix has been the subject of a number of lawsuits, most famously from Konami, the new lawsuit claims that the notice was incorrectly served and that the patents lawsuits in question had already been settled.

2 Comments

Terence Gage Freelance writer

1,288 120 0.1
Ouch - this is going to get messy. I can't say that Viacom seem to be treating one of their subsidiary companies very well; most notable and despicable to me is trying to reclaim performance-related bonuses.

If the whole sale of Harmonix doesn't seem to be going anywhere, it would probably be better for its founders and seniors to jump ship and form their own company a la Infinity Ward/Respawn. I'm sure with the recognised talent there they would have no trouble partnering with another big publisher.

Posted:3 years ago

#1

Graham Simpson Tea boy, Collins Stewart

219 7 0.0
Well that puts the kibosh on any sale, I can tell you that. No one will touch it with a barge pole now. Interesting use of the spoiler poison pill tactic by the employees. Either Viacom has to back down and settle or it's limbo land for Harmonix for the next 12-18 months.

Posted:3 years ago

#2

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