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Viacom To Seek 'Substantial' Refund On Harmonix Rock Band Bonus Dollars

MTV Games parent Viacom says it will seek a refund on "a substantial portion" of the $150 million in target-based bonuses it paid to Harmonix for the performance of Rock Band in 2007.
Viacom paid Harmonix some $150 million for its performance on Rock Band in 2007 when music games were booming. Now that they're not, it looks like Viacom wants its money back. Target-based compensation was part of the deal when Viacom's MTV acquired Harmonix late in 2006. The music game studio's stakeholders were promised incremental earn-outs for exceeding certain financial targets, and apparently received them. For example, in 2008, SEC filings revealed that Viacom had set aside more than $200 million in target-based compensation for Harmonix based on Rock Band's performance -- in the original game's first month on sale it sold more than 1 million units. Ultimately, "in 2008, we paid $150 million, subject to adjustment, under this earn-out agreement related to 2007 performance," says Viacom in a new SEC filing. "At December 31, 2009, we believe that we are entitled to a refund of a substantial portion of amounts previously paid, but the final amount of the earn-out has not yet been determined," the filing continues. The Rock Band franchise -- comprised of two console editions, the special The Beatles game, and the broad digital store of downloadable content -- has generated over $1 billion dollars in sales to date. But the music game category in general saw sales contract by as much as half throughout 2009, as high-priced, peripheral-equipped bundles failed to sell as well as in earlier years. Proponents of the genre say that the music game business is transitioning, not declining -- with peripherals at market saturation and controller interoperability at a high, the genre's revenue now comes from software sales and downloadable content, like track packs. But fewer hardware bundles sold means big year-over-year sales declines for companies like Viacom, which yesterday blamed lower Rock Band sales for a decline in revenues, claiming the franchise had a "challenging" year.

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