Source: See below.
What we heard: In 2006, MTV's purchase of Harmonix raised some eyebrows, thanks to its $175 million price tag. However, the studio's first MTV-branded effort, Rock Band, had appeared to have come close to breaking even. According to Sunday's financial report from MTV parent Viacom, some "1.1 million bundles" of the game were sold in North America in 2007, generating over $185 million in revenue. According to NPD, both the bundled and unbundled versions of the game have sold over 1.475 million copies in the US alone, generating just above $238 million in revenue as of January 31.
While successful, Rock Band still hasn't yet met the billion-dollar payday of the Harmonix-created Guitar Hero franchise, which Activision picked up for under $100 million in 2006. And now comes news that Rock Band may be breaking even after all. Today in the wake of a report on the journalism insider site Paidcontent.org, numerous game-news outlets reported that in 2007, Viacom paid Harmonix a $208.7 million bonus for its work on the Xbox 360, PlayStation 3, and PlayStation 2 title--which, according to EA, is also Wii-bound.
The official story: Unfortunately, as is often the case in the always-on-deadline, fruitfly-lifetime-long news cycle, many outlets jumped the gun. According to the actual 10-K form filed with the Securities and Exchange Commission, Viacom has set aside $208.7 million in expectation of incentive payments for both 2007 and 2008--which will be doled out incrementally through 2009 if Rock Band revenues are above certain profit projections.
Uncondensed, Viacom's financial reports says the following: "To the extent financial results exceed specific contractual targets against a defined gross profit metric through 2008, former Harmonix shareholders will be eligible for incremental earn-out payments with respect to the years ended December 31, 2007 and December 31, 2008. At December 31, 2007, a liability of $208.7 million has been recorded in Other liabilities on the Consolidated Balance Sheet for the expected earn-out payment. We expect to have a final payment with respect to the year ended December 31, 2008 done in 2009."
Bogus or not bogus?: Bogus that Harmonix and its shareholders have already received nearly $209 million in bonus payments. Not bogus that, over the course of two-plus years, the studio and its backers could receive such payments if Rock Band, which is currently available only in North America, proves profitable. And that prospect seems likely, give the fact the game will generate much more revenue in harder forms of currency when it goes on sale in Europe and Australasia later this year. Another major factor is the game's downloadable content--which was at 2.5 million songs and counting.
However, one big question question remains. How much must Rock Band make to meet Viacom's "defined gross profit metric" and earn its makers a fee akin to a Rolling Stones world tour?