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Viacom To Sell Rock Band Creator Harmonix

Media giant and MTV parent company Viacom says it will sell Boston's Harmonix, creator of the Rock Band franchise, following massive contraction in the once-booming music genre. [UPDATE: Harmonix comments added.]
Viacom's been impatient with the music game genre's massive contraction for some time, blaming challenges for disc-based retail in general for its lower sales over the year. Now the media giant says it will sell Boston-based Harmonix, creator of the Rock Band franchise and Kinect's Dance Central, reclassifying the studio as a "discontinued operation." Viacom subsidiary MTV paid $175 million plus a potential hundreds of millions in performance-related pay for Harmonix in 2006, when games like Guitar Hero were beginning their ascent to explosive popularity. But when consumers came under increased economic pressure during the global downturn, high-priced peripheral-equipped titles became more prohibitive. Further, many users acquired the necessary instrument controllers with the first wave of music titles, so even brisk sales of sequels at the stand-alone disc price produced year-over-year revenue declines. Finally, once music games were largely perceived to have reached market saturation, their revenues shifted from retail to add-on content like tracks, albums and other DLC. This means Harmonix can't play quite the same role in revenue generation for media giant Viacom any longer. In the company's third fiscal quarter, sales rose 5 percent to $3.33 billion, while profits were up 7 percent to $461 million. Earlier this year, the company blamed revenue declines on lower sales of Rock Band, following The Beatles: Rock Band's much quieter-than-expected launch. Viacom even said in February it would try to reclaim some $150 million in target-based compensation it had paid to Harmonix -- bonuses it gave the developer for hitting Rock Band sales targets. Although by that time the franchise had achieved over $1 billion in sales, the significant change in music game sales led the parent company to try to seek a refund on those earnouts. By summer's end, Viacom had warned that it was considering writing down Harmonix's value, claiming the studio's $300 million goodwill -- an amount among the net value of an acquisition -- was overstated due to the genre's 'softness' and could be re-adjusted. Although no details were revealed on potential buyers for the franchise, Harmonix said on its community forums that it'll continue its own business as usual. "This morning’s announcement does not affect the ongoing work at the studio as we continue to support our existing franchises, Rock Band and Dance Central," said company rep John Drake. "As stated earlier, Viacom is in discussions with several potential buyers and will continue to fully support the business until a sale is completed," he added.

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