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Harmonix Earns $300 Million Bonus For Rock Band
by David Jenkins
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November 11, 2008
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Viacom will give Harmonix over $300 million for the success of Rock Band, as a result of sales exceeding expectations.
The bonus system was part of the acquisition agreement when MTV Games bought the developer in 2006. It first came to light in March of this year when parent company Viacom revealed that $208.7 million had been set aside in case the bonus became due.
According to a Viacom financial statement, the clause indicated that "to the extent financial results exceed specific contractual targets against a defined gross profit metric through 2008 former Harmonix shareholders will be eligible for incremental earn-out payments with respect to the years ended December 31, 2007 and December 31, 2008."
Although only a limited success in Europe the Rock Band series has been a significant hit in North America, both in terms of retail sales and downloadable content. A total of 7 million copies have been sold worldwide, with 26 million downloads.
According to a Bloomberg report, Harmonix founders Alex Rigopulos and Eran Egozy received $150 million last quarter for exceeding their performance targets. A final payment of over $150 million will be made in 2009.
Despite the large payment the high price of the game’s peripherals, including a guitar and drum controller, means that the 3 percent operating margin for Viacom is still significant. This margin is expected to increase to up to 10 percent by the end of 2009, once the bonuses are paid.
"We may not have anticipated the payment would be that high, but it's based on what they have achieved,'' Viacom spokeswoman Kelly McAndrew said to Bloomberg. "If they are making more money for us and we have to give a little back, that's OK."
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