media and entertainment company, not an established game publisher. It bought its way into the games business by acquiring Harmonix, but ultimately it didn’t have the infrastructure—and wasn’t willing to invest more—to support a top-tier game developer.
Even when Rock Band was doing hundreds of millions of dollars in top-line sales, sources say, Viacom was losing money. That’s in part because, lacking a means to distribute games widely, Viacom had to form a partnership with Electronic Arts, which took a big cut of the proceeds. The Chinese manufacturers of Rock Band game controllers took a big cut as well. And then the record labels took their cut. After enough of that, sources say, Viacom realized it couldn’t distribute the games in an efficient way, so it wanted out. (For example, Viacom didn’t have a retail sales force, and was not well-equipped to manage warehouses and ship products around the world.)
So the question is, who might buy Harmonix now? The list of potential acquirers is long. Big game publishers like Electronic Arts, Activision, Take-Two Interactive, Ubisoft, and THQ are all possibilities. Activision, which published the subsequent Guitar Hero games that compete with Rock Band (via Activision’s 2006 purchase of RedOctane, the publisher that owned the rights to the GH name), would be interesting because it could consolidate the category—which might actually improve the economics of selling these games. Or EA might make sense, since it has been Viacom’s distribution partner and knows the Rock Band franchise well.
Another possibility would be a big studio/publisher like Microsoft, Sony, or Nintendo. (Microsoft has released Harmonix’s Dance Central for the Xbox with Kinect.) And then there are other media and entertainment conglomerates besides Viacom, like Warner Bros. (which seems committed to sticking it out in the games business, from what I hear) and Disney, which also has been losing money with its games business. Lastly, private equity firms are rumored to be in talks with Viacom as well. One that might make sense as a potential buyer is Providence Equity Partners, which has invested in game maker and publisher ZeniMax Media in the past few years.
Even if Harmonix finds the right owner, of course, its future will depend on the market for music games and interactive content. If Rock Band and Guitar Hero are just a gaming fad, then it could all be over soon. But Harmonix is betting on the fact that these games are part of a bigger trend, one that will have its ups and downs, to be sure. Selling games that depend on hardware can be a risky business, but the future of Harmonix might be tied more to selling music content to the millions of households that already have the hardware.
