Viacom must pay $383 million more to makers of Rock Band

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LOS ANGELES — Viacom Inc. has been ordered to pay an
additional $383 million to the makers of “Rock Band,” the latest
development in a long and costly saga surrounding the media giant’s
failed attempt to enter the video game business.

In a regulatory filing, Viacom, the owner of MTV
Networks and Paramount Pictures, said accountants in a private
arbitration process determined that it owes the money to former
shareholders of Harmonix Music Systems Inc. on top of a $150 million
bonus payment that it previously made. The shareholders had been seeking
a total of $700 million, or $167 million more than the accountants
determined to be appropriate.

The dispute centers on bonus payments owed to
Harmonix’s former owners under the terms of the 2006 acquisition of the
Boston studio by Viacom, which paid $175 million upfront. The media
conglomerate then paid a $150 million bonus for sales of Rock Band in
2007 but made no payment in 2008 and then sought a refund of nearly all
the money it previously paid.

Although “Rock Band,” the sequels “Rock Band 2” and
“3,” and the spin-off the “Beatles: Rock Band” sold more than 10 million
units, Viacom consistently lost money because of the high cost of
creating plastic instrument controllers.

In late 2010, it sold Harmonix to a New York private
investment firm for just $50 but received a tax write-off of about $50
million on the loss.

Around the same time, however, the original
shareholders of Harmonix filed a lawsuit alleging that not only should
they be allowed to keep the original $150 million bonus but also that
they were owed an additional $550 million. The suit triggered the
arbitration for which the current decision was issued Dec. 19.

Viacom is not accepting the decision, however. The
company said it has filed a suit in the Delaware Court of Chancery
seeking to vacate the accountants’ decision because certain arguments
and evidence were “improperly excluded.”

Walter Winshall, an early investor in Harmonix who
has been leading the legal fight against Viacom, declined to comment on
the development.

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©2011 the Los Angeles Times

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