Inside Pulse 12

Viacom Discontinues, Looks To Sell Harmonix

Massive media conglomerate Viacom issued a financial statement where they announced that Rock Band and Dance Central developer Harmonix Music Systems will be sold, and as a result, the company has been listed as “discontinued” in that report (below), and a Viacom representative told Wired that they are exiting the video games business, because of what CEO Philippe Dauman calls a lack of expertise in the console games market. Mr. Dauman stated that the company is instead focusing on “what (they) do best… creating world class entertainment”. Viacom owns MTV, VH1, Comedy Central and other key entertainment industry assets.

Harmonix was bought for $175m in 2006 by MTV, which is a subsidiary of Viacom, but never hit lofty sales expectations. Before being bought out and developing Rock Band, they developed the first two Guitar Hero games for Activision before taking giving the franchise to Neversoft. Despite the fact that the business is officially discontinued until Viacom can unload the company, Harmonix’s Manager of Communications John T. Drake noted on the company’s forums that support for both Rock Band and Dance Central would continue, and also noted that the next Rock Band DLC pack would be the Bee Gees. The company recently stated that all updates for RB3 after 10/26 would be incompatible with previous games.

There seems to be no shortage of companies willing to take on the developer, if Viacom is to be believed. Viacom’s Chief Operating Officer Thomas Dooley stated in a conference call to investors that “several” companies have expressed interest in buying the company. Speculation is heating up that Activision is one of the interested parties due to the claim a few weeks ago by Cowen and Company analyst Doug Creutz, who also noted to GI.biz that he believes Activision is going to be a leading candidate to absorb the former Guitar Hero developer and combine the resources between Rock Band and Guitar Hero. Electronic Arts is also being noted as a possible candidate for the acquisition, due to them distributing the Rock Band games and also to potentially keep them out of Activision’s hands.

Where the rhythm game industry goes after this is anyone’s guess. Both Rock Band and Guitar Hero have performed poorly at retail recently, most likely due to saturation of the genre by so many different games in both franchises. Rock Band has tried to be aggressive with themed games such as their highly acclaimed The Beatles: Rock Band and the more casual Lego Rock Band, whereas Guitar Hero has twelve titles for consoles, plus three On Tour games for the DS. Bill Harris at Dubious Quality notes that the DLC announcement that cut the first two Rock Band games out of the loop was the real “death” of what he called the “little plastic instrument genre”. I’m not sure I agree. If anything, the “death” has been slow and painful, as both companies have kept shifting out excessively expensive titles that need continual (and also expensive) DLC support in order to function properly, and with a lower user cap due to the fact that to properly play the latest entries in each series, you need to fill your living room with no fewer than three instruments, friends to play them, and a singer. I have two families sharing my house; I’d get strung up by my bollocks if I tried to sing while banging on a plastic drum, and I’m sure I’m not the only person in that situation. It would also be bitterly ironic if Activision – who started this particular genre down its death spiral by shoving Guitar Hero games down consumers’ throats and forcing MTV to play keep-up to avoid getting blown out of the market on sheer force of volume – ended up owning Harmonix when all was said and done.

Since speculation seems to be in season, allow me to put on my Pachter Hatâ„¢ and predict that Electronic Arts will pick up Harmonix. They have the most to lose, being the distributor of Rock Band and desperate to keep Activision from essentially monopolizing the music game market. Furthermore, the company has the resources to continue to support Rock Band as it strikes into its new niche – that of becoming a learning tool for playing actual instruments – to separate itself from Guitar Hero. They could also allow the developer to spread out into other games that don’t require expensive plastic instruments (remember, the company’s first games were Frequency and Amplitude). Finally, they could use a splash after some relatively negative news recently of NBA Elite’s cancellation and layoffs at their Canadian studios.

Either way, I feel the entire “little plastic instrument genre” needs a break simply due to consumer fatigue, regardless of who buys the company. Nonetheless, I have a feeling that despite a strong push, Activision won’t win this one. They have a lot less to lose than EA.

Viacom Financial Statement – Q3 ’10

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