Harmonix ex-shareholders suing Viacom

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This one’s a little complicated, so bear with me. A group of former shareholders in Harmonix, including founders and many of the company’s early investors have filed a lawsuit against the developer’s parent company Viacom.

It all stems from the media conglomerate’s acquisition of Harmonix back in 2006. According to Gamasutra, who has a copy of the complaint, Viacom purchased the Rock Band developer for 175 million dollars plus an earn-out bonus. That last bit is where things get sticky. The suit claims that the agreement would have seen Viacom paying these shareholders a sum of as much as 3.5 times all profits earned from Rock Band in 2007 beyond a minimum of 32 million dollars.

In other words, for every dollar of profit in excess of 32 million dollars which Viacom earned off this rapidly growing market, they were set to pay $3.50 to Harmonix shareholders. Clearly, they didn’t know what they had and the music genre continued to explode, with Rock Band achieving nearly 400,000 copies sold in a month.

The former shareholders argue that this is where Viacom started to behave dishonestly. They allege that Viacom did not make efforts to reduce costs, passing on opportunities to negotiate a better distribution deal with Electronic Arts. They further allege that a 2008 re-negotiation of the EA distribution agreement involved commitments of millions of dollars in advertising buys from Viacom subsidiaries with no reduction of distribution fees until 2009, after all earn-out agreements had expired.

In addition to this, there is disagreement over 13 million dollars held in escrow from the time of the purchase of the studio.

Okay, I’m not a lawyer and have no way of knowing exactly what agreements were made when and by whom. From the information which has been made available, Viacom may have done some things wrong here and the story painted by the plaintiffs is grim. But a lot of it also just sounds like shrewd business, the kind only really big companies can play at. It doesn’t all sound very fair but I can’t tell if it’s also something which should be illegal.

Exclusive: Harmonix Ex-Shareholders, Including Founders, File Suit Against Viacom [Gamasutra]


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