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Rock Band still not profitable for Viacom photo

It's hard to argue that Rock Band isn't a really, really big success. Just recently it was revealed that the latest edition of the game, Beatles: Rock Band, sold pretty darn well in its first month. One would then assume that some of the money that Viacom fills their swimming pool with constantly is made up of the mad profits from the series. It seems, however, that at the moment Rock Band is more of a leak in that pool than a hose adding more to it. According to some inside sources at The Kartel, a recent report from Credit Suisse highlights the fact that the franchise will lose Viacom $90 million by the end of 2009. While credit Suisse simply showed that the problem was there The Kartel guys highlight six reasons that such a successful franchise could still be in the red. 

  1. Viacom purchased Harmonix for $175 million.
  2. They subsequently gave Harmonix a bonus of $150 million for hitting sales expectation in 2008 and will deliver another $150 million to them at the end of this year most likely. (Guess the guys at Harmonix are in the black, huh?).
  3. MTV Games Senior Vice President Robert Picunko claims it took nearly $100 million to develop Rock Band.
  4. Peripherals cost money and the margin for profit is extremely low. Rock Band has four of them in every set.
  5. In the second quarter of 2009 it appears that Viacom made between $50 - $82 million worth of extra Rock Band 2 product because they overcompensated thanks to Rock Band selling out too quickly. Keeping overstock also costs money.
  6. Song licenses cost money. Lots of money. The Beatles license is reported to have cost upwards of $50 million.

It can also be noted that Rock Band's sales haven't always been that fantastic, as a soft retail year brought them down. With all this it becomes a bit clearer to see how Viacom could still be $90 million in the hole when it comes to Rock Band. However, Credit Suisse also says that the company shouldn't fear as they should be able to move into profitability with the franchise some time next year. Investing in a quality product for long term benefit instead of quick initial gain? Sounds like Wall Street needs to learn a thing or two from Viacom.


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20 comments | showing # 1 to 20

dwolfwood's Avatar - Comment posted on 10/24/2009 11:09
dwolfwood
Considering most new businesses take 5 years to turn a profit and noting how much was spent overall in the course of the buyout, I'd say they're doing great. Another year like this and their profits should be through the roof.

Songs are still hella expensive to download. I think they'd make more money by selling each song for about .25USD and just packaging in around 40 songs per expansion. More people would buy more.

Or something similiar. I just know, as someone who buys a lot of crap as DLC, $2/song is not the equilibrium price.
CitizenErased's Avatar - Comment posted on 10/24/2009 11:10
CitizenErased
This had better not effect the pumping out of new songs every week!
That's what makes Rock Band so delicious.
moose39's Avatar - Comment posted on 10/24/2009 11:23
moose39
Rock Band is still king with it's exporting and (good) offerings of weekly downloadable content. The fact that the Queen and Jimi Hendrix tracks are exportable from Lego Rock Band is DELICIOUS
Vedicardi2's Avatar - Comment posted on 10/24/2009 11:27
Vedicardi2
"Suisse highlights the fact that the franchise will lose Viacom $90 million by the end of 2009."

Do they forget about Lego Rock band and how many more sales all versions of RB will get during the holidays?
fetusmilk's Avatar - Comment posted on 10/24/2009 11:28
fetusmilk
well once they start pumping out rock band games like GH they might start bringing in more money, cause you know,putting out more games means more income. right activision ,right?
EternalDeathSlayer's Avatar - Comment posted on 10/24/2009 11:45
EternalDeathSlayer
No Vedicardi2, they aren't forgetting that. They're telling you that the franchise is still not profitable for them. Remember, they payed 175 mill for the company, 100 mill to develop the game, and have already payed HMX 150 mill on top of the 150 mill they owe them. Plus 50 million for The Beatles.

That's 625 million dollars.

3 million copies of full Rock Band sets at 200 bucks wouldn't even match that amount of money in terms of profits. Remember, slim margins due to plastic instruments.

Sounds like Viacom went the console platform route of losing money now to gain it later, like MS and Sony keep doing every generation with their consoles.

Hope it all works out for them.
iEro-Sennin's Avatar - Comment posted on 10/24/2009 11:52
iEro-Sennin
I agree with dwolfwood. I was considering getting RB Unplugged but the prices of the songs instantly turned me off.
agentgray's Avatar - Comment posted on 10/24/2009 11:54
agentgray
"Song licenses cost money. Lots of money. The Beatles license is reported to have cost upwards of $50 million."

This. This is why entertainment industries of this type are dying. We're talking about 45 songs written by four guys of whom two are dead. I know there are other factors, but 50 million of them?
BlackDove's Avatar - Comment posted on 10/24/2009 12:15
BlackDove
When I think about the things I feel sorry for, Viacom is at the top of my list.

Such a sad state of aff...

FUCK VIACOM.
BluDesign's Avatar - Comment posted on 10/24/2009 12:33
BluDesign
Considering that there's piles of plastic instruments lined up on the walls of retail shelves in every store I go into, one would think that they could just STOP making the instrument bundles and release the game as a standalone title only for once. Not everyone wants a brand new guitar with every new title.

That said, the only reason why I bought a Rickenbacker for Rock Band Beatles was because I wanted a wireless guitar and wanted something nice and different. If they wanted to curtail the profit loss on this, they would do well to just stop developing new instrument based features (which is something Activision ought to do with Guitar Hero), and focus on continuing to pump out disc only editions. The instruments themselves can definitely be bought separately, but again, not everyone's looking to get a new guitar every year so you don't have to bust out those bundles all the time...
Shin Oni's Avatar - Comment posted on 10/24/2009 12:42
Shin Oni
Well maybe if they stop trying to milk the franchise via Guitar Hero, they wouldn't be losing so much at the moment.

just sayin. We really don't need a rock band every year...especially when they're constantly releasing song packs for DLC.
Xzyliac's Avatar - Comment posted on 10/24/2009 12:48
Xzyliac
This should be expected because Harmonix' business model is built around the long term. It'll be 5 or maybe even 10 years before that model kicks in. And with the economy it could be a tough trail to treed.

This is where they really need to emphasize that whole "Rock Band as a platform" idea. Pumping out disc and plastic instruments could hurt them later on.
strangerdanger's Avatar - Comment posted on 10/24/2009 12:59
strangerdanger
"4. # Peripherals cost money and the margin for profit is extremely low. Rock Band has four of them in every set."

Drums, mic, guitar. That's three.
Vedicardi2's Avatar - Comment posted on 10/24/2009 13:15
Vedicardi2
"They're telling you that the franchise is still not profitable for them."

But they're also saying.

"the franchise will lose Viacom $90 million by the end of 2009."

Which is what I am referring to. The year isn't over.

Just look at the comment above. They don't even know what they're talking about.
KraazyCraig's Avatar - Comment posted on 10/24/2009 13:24
KraazyCraig
i would be willing to help them out and purchase Rock Band 2 for the Wii... if it ever gets released in Australia!
I dont understand what has taken them so long
RonBurgandy2010's Avatar - Comment posted on 10/24/2009 15:25
RonBurgandy2010
Hey, it's not my fault. I bought RB 2 and have spent (I think) over $100 on DLC. That's what happens when you get addicted.
jadenguy's Avatar - Comment posted on 10/24/2009 15:41
jadenguy
I also spent that much on DLC.
Doomsday Forte's Avatar - Comment posted on 10/24/2009 15:49
Doomsday Forte
You also have to realize, Rock Band has...what, at most five or six iterations (iPhone, two numbered games, PSP version, Beatles, Lego coming soon), whereas Guitar Hero has nearly 40 different versions across every single platform known to man. And RB doesn't have as many iterations because from what I understand, RB has a ton more songs available so there's no real need for separate games like GH Van Halen, GH Aerosmith, GH Metallica, GH Echo and the Bunnymen, etc.

GH is arguably the more popular of the brands too.
Mike's Avatar - Comment posted on 10/24/2009 16:19
Mike
"But they're also saying 'the franchise will lose Viacom $90 million by the end of 2009'. Which is what I am referring to. The year isn't over."

What's difficult to understand? They're forecasting a $90 million dollar loss by the end of the year. That forecast would *include* forecasted holiday sales. Which means that without the traditionally strong holiday sales boost for videogames, Viacom will lose a lot more than $90 million by the end of the year.
tehredbaron's Avatar - Comment posted on 10/26/2009 15:51
tehredbaron
I've got another reason: screwing every territory that isn't North America.

Seriously, Rock Band 2 isn't even out in Australia yet.
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