Editing Harmonix (section)

=== Sale by Viacom ===
On November 11, 2010, Viacom stated that it was in talks with potential buyers for Harmonix, having already marked the unit as a discontinued operation to write off a $299 million loss for its 2010 third-quarter earnings statement.<ref>{{cite news | url = https://www.wsj.com/articles/SB10001424052748703848204575608160054525710 | title = Viacom Net Falls 59%, Plans to Sell Harmonix | first = Nathan | last = Becker | date = 11 November 2010 | access-date= 11 November 2010 | work = [[Wall Street Journal]] }}</ref> Such talks had been in place since September 2010, before the release of either ''Rock Band 3'' or ''Dance Central''.<ref>{{cite news | url = https://www.wsj.com/articles/SB10001424052748703848204575608160054525710 | title = Viacom to Unload 'Rock Band' Unit | work = [[Wall Street Journal]] | date = 12 November 2010 | access-date = 15 November 2010 | first = Sam | last = Schechner}}</ref> Viacom president and CEO, Philippe Dauman, stated the reason they were selling the company was to refocus Viacom as an entertainment creator, and that "the console games business requires expertise [Viacom doesn't] have".<ref>{{cite web | url = https://gigaom.com/2010/11/11/419-viacoms-dauman-harmonix-sale-is-about-focus-digital-dollars-not-dimes/ | title = Viacom's Dauman: Harmonix Sale Is About Focus; Digital Dollars, Not Dimes | first = David | last = Kaplan | date = 11 November 2010 | access-date = 11 November 2010 | publisher = Paid Content | archive-date = 11 March 2015 | archive-url = https://web.archive.org/web/20150311085727/https://gigaom.com/2010/11/11/419-viacoms-dauman-harmonix-sale-is-about-focus-digital-dollars-not-dimes/ | url-status = dead }}</ref> Viacom also recognized that without dedicated resources to support video game development, the company was not able to take advantage of efficiencies the dedicated video game publishers have.<ref>{{cite news | url = https://latimesblogs.latimes.com/entertainmentnewsbuzz/2010/11/viacom-looks-to-sell-rock-band-developer-after-years-of-losses.html | title= Viacom looks to sell Rock Band developer after years of losses [updated] | first = Ben | last = Fritz | date = 11 November 2010 | access-date= 11 November 2010 | work = [[Los Angeles Times]]}}</ref> Martin Peers of the ''[[Wall Street Journal]]'' noted that Viacom lacked the physical distribution channels that other entertainment companies like [[Time Warner]] have, and instead were forced to rely on [[Electronic Arts]] to distribute the game and cut into their potential profits.<ref>{{cite news | url = https://www.wsj.com/articles/SB10001424052748704658204575610671422176704 | title = Viacom Hits Wrong Note | date = 13 November 2010 | access-date= 13 November 2010 | work = [[Wall Street Journal]] | first = Martin | last = Peers }}</ref> Industry analyst Michael Pachter suggested that while ''Rock Band 3'' and ''Dance Central'' would generate significant revenue in 2010 holiday sales, Viacom likely made the move to sell Harmonix while the developers were doing well and in the news.<ref>{{cite news | url = https://www.boston.com/business/technology/articles/2010/11/12/viacom_will_sell_harmonix_as_rock_band_sales_wane/ | title = A game they couldn't win | work = [[Boston Globe]] | date = 12 November 2010 | access-date= 11 November 2010 | first = Hiawatha | last = Bray }}</ref> [[Electronic Arts]] CEO John Riccitiello, commenting on the potential purchase of Harmonix by his company, called Harmonix a "falling knife" in regards to the diminishing size of the rhythm game market since 2009, and stated that "more people have been cut trying to catch falling knives than have benefited from getting the timing exactly right".<ref>{{cite news | url = https://www.bloomberg.com/news/2010-11-30/electronic-arts-chief-riccitiello-hunts-video-game-bargain-bin-for-deals.html | title = Electronic Arts Hunts Video-Game Bargain Bin for Acquisitions | first = Sarah | last = Rabil | date = 30 November 2010 | access-date = 30 November 2010 | publisher = [[Bloomberg L.P.]] }}</ref> John Drake of Harmonix affirmed that Viacom would continue to support Harmonix until the sale is complete, and the developer would still continue their normal operations for their games which is unaffected by the sale.<ref>{{cite web | url = http://www.rockband4.com/forums/showthread.php?208088-Response-to-Questions-about-Viacom-Selling-Harmonix | title = Response to Questions about Viacom Selling Harmonix | first = John | last = Drake | date = 11 November 2010 | access-date = 11 November 2010 | publisher = Harmonix Music Systems | archive-url = https://web.archive.org/web/20101114020543/http://www.rockband.com/forums/showthread.php?208088-Response-to-Questions-about-Viacom-Selling-Harmonix | archive-date = 14 November 2010 | url-status = dead }}</ref>

In late December 2010, Viacom announced that it had sold Harmonix to Harmonix-SBE Holdings LLC, a holding company for the family office of investor Jason Epstein. Epstein is a senior managing partner at investment firm [[Columbus Nova]], though the buy-out of Harmonix was conducted by Epstein personally, and not Columbus Nova. The terms of the sale were undisclosed, though estimated at $200 million.<ref>{{cite news | url = https://www.theguardian.com/technology/2010/dec/24/rock-band-developer-sold-by-viacom | title = Viacom sells Rock Band game studio | first = Josh | last = Halliday | work = [[The Guardian]] | date = 24 December 2010 | access-date = 24 December 2010 | location=London}}</ref> This sale returned Harmonix to its origins as an independent developer. The resulting sale did not affect present or future support plans for Harmonix' games; Harmonix retained the intellectual property rights for ''Rock Band'' and ''Dance Central'' in the sale, allowing Harmonix Music Systems to continue to develop these series.<ref>{{cite magazine | url = https://www.gameinformer.com/b/news/archive/2010/12/23/-viacom-sells-harmonix-to-columbus-nova.aspx | archive-url = https://web.archive.org/web/20101226065644/http://www.gameinformer.com/b/news/archive/2010/12/23/-viacom-sells-harmonix-to-columbus-nova.aspx | url-status = live | archive-date = 26 December 2010 | title = Viacom Sells Harmonix To Columbus Nova | first = Meagan | last = Marie | date =23 December 2010 | access-date = 23 December 2010 | magazine = [[Game Informer]] }}</ref><ref>{{cite web | url = http://www.mtv.com/news/gaming//2010/12/23/harmonix-viacom-split-rock-band/ | title = Harmonix Leaves Viacom, Can Continue Making 'Rock Band' And 'Dance Central' | first = Russ | last = Frushtick | date = 23 December 2010 | access-date = 23 December 2010 | publisher = MTV | url-status = dead | archive-url = https://web.archive.org/web/20101225120339/http://multiplayerblog.mtv.com/2010/12/23/harmonix-viacom-split-rock-band/ | archive-date = 25 December 2010 | df = dmy-all }}</ref> According to Peter Kafka of the ''[[Wall Street Journal]]'', the sale of Harmonix was heavily discounted, possibly as low as fifty dollars, the equivalent of a [[fire sale]] and allowing Viacom to claim certain tax benefits; meanwhile, the new independent owners would assume all ongoing liability for Harmonix' projects, including music licensing fees and unsold inventory.<ref>{{cite web | url = http://mediamemo.allthingsd.com/20110104/viacom-sold-rock-band-for-a-song-a-really-really-cheap-song/?mod=ATD_skybox |title = Viacom Sold Rock Band for a Song. A Really, Really Cheap Song. | first = Peter | last= Kafka | date = 4 January 2011 | access-date = 4 January 2011 | publisher = All Things Digital | work = [[Wall Street Journal]] }}</ref> Viacom later affirmed that they received nearly $115 million in tax benefits from the Harmonix sale.<ref name="viacom tax benefits">{{cite web | url = https://www.gamedeveloper.com/business/viacom-confirms-major-tax-benefits-from-harmonix-sale-lawsuit-defense | title = Viacom Confirms Major Tax Benefits From Harmonix Sale, Lawsuit Defense | first = Frank | last = Cifaldi | date = 29 April 2011 | access-date = 29 April 2011 | website = [[Gamasutra]] }}</ref> Following the purchase, Harmonix underwent a restructuring in February 2011, laying off about 12-15% of the 240-person staff.<ref>{{cite web | url = https://www.gamasutra.com/view/news/32880/Staff_Cuts_Hit_Rock_Band_Dance_Central_Creator_Harmonix.php | archive-url = https://web.archive.org/web/20110209033550/http://www.gamasutra.com/view/news/32880/Staff_Cuts_Hit_Rock_Band_Dance_Central_Creator_Harmonix.php | url-status = dead | archive-date = 9 February 2011 | title = Staff Cuts Hit Rock Band, Dance Central Creator Harmonix | first = Leigh | last = Alexander | date = 7 February 2011 | access-date = 7 February 2011 | website = [[Gamasutra]] }}</ref> Shortly after this, Activision announced it was shuttering its ''Guitar Hero'' division and cancelling planned games for 2011, which many journalists considered to mark the end of the rhythm game genre; Harmonix's Director of Communications, John Drake, in response to this closure, called the news "discouraging", but affirmed that Harmonix would continue to invest itself in further ''Rock Band'' and ''Dance Central'' developments for the foreseeable future.<ref>{{cite web | url = https://www.gamasutra.com/view/news/32983/Harmonix_We_Will_Continue_to_Invest_in_Rock_Band.php | archive-url = https://web.archive.org/web/20110214063350/http://www.gamasutra.com/view/news/32983/Harmonix_We_Will_Continue_to_Invest_in_Rock_Band.php | url-status = dead | archive-date = 14 February 2011 | title = Harmonix: We Will Continue to Invest in Rock Band | first = Mike | last = Rose | date= 11 February 2011 | access-date = 11 February 2011 | website = [[Gamasutra]] }}</ref>

While Viacom sought a buyer for Harmonix, shareholders of Harmonix, including founders Rigopulos and Egozy, filed a lawsuit against Viacom, alleging misconduct in providing performance payouts in line with the terms of the purchase of Harmonix by Viacom. Harmonix' suit contests that while Viacom had paid Harmonix $150 million for success of the ''Rock Band'' series in 2007, the shareholders are due a substantially larger sum for continued success in 2008, as determined by their proxy, Walter Winshall. Viacom countered the claims, stating that Winshall rejected various offers made by Viacom for the payout. The lawsuit also contends that Viacom has withheld $13 million in payouts from 2007, which Viacom had claimed at the time were to cover potential losses in patent lawsuits that were initiated against Harmonix by Activision and Gibson which have since been settled out of court.<ref>{{cite news | url = https://latimesblogs.latimes.com/entertainmentnewsbuzz/2010/12/harmonix-shareholders-sue-viacom-as-part-of-dispute-over-hundreds-of-millions.html | title = Viacom, Harmonix former shareholders in fight over Rock Band payments worth hundreds of millions [updated] | first = Ben | last= Fritz | work = [[Los Angeles Times]] | date = 21 December 2010 | access-date = 22 December 2010 }}</ref> Viacom has stated it would "vigorously" defend itself in this lawsuit,<ref name="viacom tax benefits"/> and initiated a counter-suit in September 2011, suing Harmonix for $131 million believing the $150 million payout was overcalculated.<ref>{{cite web | url = https://www.eurogamer.net/articles/2011-09-20-viacom-sues-harmonix-for-USD131m | title = Viacom sues Harmonix for $131m | first = Fred | last = Dutton | date = 20 September 2011 | access-date = 20 September 2011 | website = [[Eurogamer]] }}</ref> In late 2011, [[BDO USA, LLP|BDO USA]], the contract-assigned arbitrator on the matter, concluded that Viacom owed $383 million to Harmonix in addition to the money already paid out, a total of $708 million when combined with the initial purchase by Viacom and initial $150 million advance payment in 2007. Viacom disputed this figure, claiming that BDO's report excluded specific evidence supplied by Viacom.<ref>{{cite news | url = https://latimesblogs.latimes.com/entertainmentnewsbuzz/2011/12/viacom-rock-band-harmonix-383-million.html | title = Viacom is ordered to pay $383 million more to Rock Band makers | first = Ben | last = Fritz | date = 27 December 2011 | access-date =27 December 2011 | work = [[Los Angeles Times]] }}</ref><ref>{{cite web | url = https://www.gamedeveloper.com/business/viacom-owes-former-harmonix-shareholders-383m-says-accountant | title = Viacom Owes Former Harmonix Shareholders $383M, Says Accountant | first = Frank | last = Cifaldi | date = 28 December 2011 | access-date = 28 December 2011 | website = [[Gamasutra]] }}</ref>

Of the $383 million owed to Harmonix, Viacom agreed to pay $84 million in part to settle the 2007 payments, leaving the dispute for the 2008 payments in court. In August 2012, the [[Delaware Court of Chancery]] dismissed Viacom's claims, and ordered the company to pay Harmonix the remaining $299 million, though Viacom stated that it was seeking what further options it had.<ref>{{cite web | url = https://www.hollywoodreporter.com/thr-esq/viacom-rock-band-million-court-361322 | title = Viacom Hit With $300 Million Court Ruling in 'Rock Band' Case | first = Eriq | last = Gardner | date = 13 August 2012 | access-date = 13 August 2012 | work = [[The Hollywood Reporter]] }}</ref> Viacom appealed the decision, but the previous judgement was upheld by the Delaware Supreme Court in July 2013.<ref>{{cite web | url = https://www.polygon.com/2013/7/17/4532194/viacom-loses-harmonix-lawsuit-must-pay-299m-disputed-bonuses | title = Viacom loses Harmonix lawsuit, must pay $299M disputed bonuses | first = Samit | last = Sarkir | date = 17 July 2013 | access-date = 17 July 2013 | website = [[Polygon (website)|Polygon]] }}</ref>