Viacom to sell Harmonix

Rock Band developer offloaded; speculation begins that Activision could swoop for studio

Harmonix parent Viacom has announced that it will be selling the Rock Band developer, in the same financial statement which revealed that write-downs at the developer had helped to slash 59 per cent from Viacom's third-quarter earnings.

No buyer has come forward for the developer as yet, nor was any reason given, but discontinuation of the company's revenue streams and a re-evaluation of its market worth has cost Viacom $299 million.

Doug Creutz, of market analysis firm Cowen & Company, has speculated that it would make sense for Activision to buy Harmonix, reuniting it with the Guitar Hero brand.

"We speculated several weeks ago that, given the declines in the music genre, it would make sense to (re)combine the Guitar Hero and Rock Band franchises, thus we believe Activision Blizzard is a potential buyer," said Creutz in an email.

Generally, it was a healthy financial report for the MTV owner, with overall revenues up to $3.3 billion for the quarter ending September 30, compared to $3.17 billion for the same period a year earlier.

Nine month earnings and revenue also increased across the board, buoyed by healthy ad revenues from TV channels and strong performances from the company's cinematic releases, such as Jackass 3D.

"We are very pleased with the financial and operational results we delivered in fiscal 2010, which were the direct result of our continuing creative success. With a strong balance sheet and increasing free cash flow, we are delivering on our commitment to return capital to our shareholders with the institution of a quarterly cash dividend in the second quarter followed by the resumption of our stock repurchase program in October," said Viacom president and CEO Philippe Dauman.

Rock Band 3, the latest iteration of the music game franchise, was extremely well received critically, but failed to make any impression on the sales charts - selling only 7386 units in the UK on its week of release.

Harmonix also developed Kinect exclusive Dance Central, which released last week in the US and this week in Europe. No indication has been given as to who will offer continued support for the titles, nor what form it will take.

MTV, which is also owned by Viacom, purchased Harmonix for $175 million in 2006.

Slow sales of the Rock Band games had previously been highlighted as an important factor in financial downturn at Viacom, but more recent reports seemed to indicate that the tide was turning in Rock Band's favour.

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Latest comments (19)

Andrew Goodchild Studying development, Train2Game11 years ago
Interesting in that Dance Central seems like a sure hit in that a lot of people are buying kinect, and haven't got many titles vying for attention, DC being the one most people seem interested in. I guess that may make it the best time to sell.
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Tony Recchia Web 11 years ago
Now would be a good time for Microsoft to pad their portfolio of developers.
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Andrew Goodchild Studying development, Train2Game11 years ago
@tony. Good point. Especially one with experience working with kinect.
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Show all comments (19)
Gregg Baker Head of Community Strategy, Jagex Games Studio11 years ago
I wouldnt be surprised to see EA step in. For all Rock Band 3 has had less than impressive sales, I am just not sure if EA would be willing to surrender that title to Activision. Either way though the studio seems to have had a very high priced placed on its head. No one can doubt their level of creativity as they are a fantastic studio, but in a seemingly shrinking marketplace for music genre games it would be quite the risk to buy them.
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Terence Gage Freelance writer 11 years ago
I wonder if Viacom would be putting the Rock Band and Dance Central brands up for sale too, because if the latter is I wonder if Microsoft would be interested in Harmonix. However, it's not really typical of late for Microsoft to buy games developers. They seem quite content with their small portfolio of studios.

Which presents the question: is there another big publisher aside from Activision who would be interested in buying Harmonix? Given how demise of the music genre, would it be worth another publisher trying to get a foot in the door of a genre which is no longer the golden goose it once was...?
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David Wicks Editor / Co-Founder, Gamers Heaven11 years ago
I'd really hate to see rockband get merged into the GH series, RB has had better customer value since day one with all DLC up to RB3 DLC (which only works in RB3) working in almost every title and each track selling at 25% less then a GH track, every GH track is more expensive and only works with the latest game released at the time the DLC is released with no support for previous titles once a new one is on the shelves, RB also has considerably more DLC on offer the GH, all of which as far as i know will work in RB3 along with the ability to import tracks from previous games...
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Neil Alphonso Lead Designer, Splash Damage Ltd11 years ago
Savvy move Viacom, the market needs more Jackass sequels and fewer revolutionary interactive music products!
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Martin Brouard Executive producer, Frima Studio11 years ago
Hmm I'll cross my fingers for some NOFX goodness on Rock Band one day then :-)
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Terence Gage Freelance writer 11 years ago
@ Neil

You can't blame them for wanting to back down from a medium and a genre which is no longer making them money. At least (in this other news story) Viacom have gone on to explain that they don't have the experience with videogames and will focus on other sectors.

Hopefully someone will buy Harmonix who will give them the finance and freedom to continue to push their chosen genres forward, although Activision buying them to regain control of the Guitar Hero brand definitely makes sense from the publisher's perspective. Any idea if ZeniMax are planning on moving into the music genre?! ;)

Edited 1 times. Last edit by Terence Gage on 11th November 2010 5:51pm

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Andrew Goodchild Studying development, Train2Game11 years ago
I could see Konami being interested, seeing as rock band a guitar hero buried rock revolution, and konami have in the past been interested in rhythm action. In fact, I could see a lot of interest from Japanese publishers, partly for Rock band, but even more for Dance Central.
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Kenneth Bruton Producer 11 years ago
M$ has not had a great track record with acquisitions...looking at RARE, who has not had a sure-fire hit since its NINTENDO heyday, BUNGIE helped spur XBOX sales but was eager to spread its wings...they missed the boat with Bizarre Creations, and the list goes on...
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Private Industry 11 years ago
The most obvious would probably be EA if they want to continue RB since its easier to just buy them instead of getting a new studio into RB to continue it.

ZeniMax is currently on a shopping spree and most of the developers they have are core developers so rounding it up with a casual developer would be a possibility although not sure if they have the money for all the licensing regarding songs.

There would be also an odd possibility that Sony gets in on it, they do music games with Singstar, good connections to the music industry via Sony Music and Dance Central is by far the best Kinect game out there so taking away a very capable Kinect developer would kind of make sense in that way.
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Tim Ponting Director, Renegade PR11 years ago
The original $175m price tag for Harmonix was absurd, and MTV's purchase was the first in a series of mistakes that over-valued their contribution and potential future contribution. RB was a great product and Harmonix had lots to offer, but the price MTV paid has basically given Viacom an unacceptable financial hangover. Whoever was responsible for the $175m valuation is the Nick Leeson of the videogame world.

I used to work for Activision in a former life, and there's no doubt that when they bought RedOctane, they would also have bought Harmonix had the price been sane. Activision bough the brand, the game, the guys who invented it for less than $100m. Harmonix, who didn't 'invent' GH or own the brand... who would pay more for just them alone? The price suggested to Activision was absurd, and then MTV went and paid a MULTIPLE of that... And more than was paid for the GH franchise lock, stock and barrel. Read the Viacom financial statements about the earnouts for Harmonix directors too, even if the game underperformed. Lunacy.

As a side note, the $175m sale of Harmonix to MTV kicked off a series of development geniuses wondering 'if Harmonix is worth that, what the fuck are WE worth'... including Infinity Ward. And we all know how that one ended.

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Jamie Watson Studying Bachelor of Games & Interactive Entertainment, Queensland University of Technology11 years ago
i would be happy if EA brought them...having activision buy harmonix would pretty much create a monoply with both franchies merged into one and not much competion in the music sector...

EA or MS would be my pick...anyone but activison...
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Rupert Loman Founder & CEO, Gamer Network11 years ago
Well said Tim. And: Good to see you on the site!
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Christopher Bowen Owner, Gaming Bus 11 years ago
The irony of this?

A lot of the problems related to Harmonix doing poorly at retail relate to Activision, or more specifically, the fact that Activision loaded the market with so many naff music titles - some of which copy Rock Band so gregariously that they're sitting in the corner with a Dunce cap on their heads while their classmates laugh at them - that it saturated the market. Because of Activision consistently releasing a mediocre product, Rock Band had problems with later penetration. This is doubly ironic since Activision's in the driver's seat for acquiring the developer.
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Jamie Watson Studying Bachelor of Games & Interactive Entertainment, Queensland University of Technology11 years ago
activision+rock band = bad music game/s
EA=rock band = good music games

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Greg Wilcox Creator, Destroy All Fanboys! 11 years ago
I'd say the genre is near dead because it keeps pricing out new users in addition to dumping too many games on them. RB3 is spectacular, but who has money for all those instruments (with no band package deal this time out) and when you consider the absurdity of REAL guitars for a music game that cost more than the actual game does, it starts getting silly.

When only a rock star can afford to play today's music games, it's time to scale things back a bit, innovation be damned...
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Terence Gage Freelance writer 11 years ago
I agree that Harmonix' valuation at nearly a fifth of a billion dollars was simply absurd. I mean, they developed a great product but as Tim pointed out, came to MTV with nothing as Activision had already tied down RedOctane and the GH franchise.

It would make sense that EA might be interested in picking up Harmonix, but I'm just not sure they'd want a big cash investment into the music genre, given its decline in the last couple of years. I don't think the genre's failings are entirely due to Activision's 'Hero' brand having saturated the market; I think there are too many products that are too similar, and people are probably getting a bit sick of all the plastic peripherals taking up space in their living room. Not to mention the price, of course.
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