OK, it sounds like the press has this “Harmonix for sale” thing mostly wrong. At least in terms of what it means for the Cambridge, MA-based company, and the future of its business. Earlier this month, New York-based Viacom (NYSE: [[ticker:VIA]]) announced it has put Harmonix up for sale after losing money on the business for the past few quarters. Viacom said it is in discussions with several potential buyers and will keep supporting the business until a sale is completed.
Harmonix was quick to post on its gaming forums that the news doesn’t affect the ongoing support of its Rock Band and Dance Central franchises in any way. Reached by e-mail, Alex Rigopulos, the co-founder and CEO of Harmonix, declined to comment on Viacom’s announcement or its significance to the company. Rigopulos had granted me an interview back in September in which he talked about the future of the business more generally. (He didn’t say anything about it being for sale.)
But people outside the company are talking, and an interesting picture has emerged. Several sources, who asked not to be named, say Harmonix and Viacom were a poor match in terms of their business models and capabilities. More specifically, it’s well established that Viacom did not have the expertise to make money from Harmonix’s games. So, while most of the press has harped on the fact that sales of music games have slumped in the past two years—definitely part of what’s behind Viacom’s decision—it’s clear that Harmonix should be able to find an owner that’s a much better fit. What that means for any future success remains to be seen, however.
“There are very few [game] developers that can consistently generate 90-plus Metacritic-scored games. That is incredibly rare, and that means they’re very valuable,” says Nabeel Hyatt, founder of Cambridge, MA-based Conduit Labs, now part of gaming giant Zynga. “Those developers will always have a buyer.”
Some quick background: Harmonix was founded in 1995 by Rigopulos and Eran Egozy, both MIT Media Lab alums. The music gaming company toiled in relative obscurity until its breakout hits Guitar Hero, Guitar Hero II, and Rock Band. In 2006, MTV Networks, part of Viacom, paid $175 million to acquire Harmonix. At the time, it seemed like a good fit; MTV is all about music, and so is Harmonix. [Disclosure: I’m in a band with one current employee and one former employee of Harmonix. The band, Honest Bob & the Factory-to-Dealer Incentives, has songs in Harmonix games.]
At its core, though, this is an acquisition that didn’t work out. Philippe Dauman, CEO of Viacom, spelled out the problem in his remarks last week. “For us, it is about focus,” he said. “The console games business requires an expertise and scale that we don’t have.” In other words, Viacom is a
