Mad Catz Loses $11 Million on Rock Band 4 Bet

Mad Catz' co-publishing deal with Harmonix for Rock Band 4 wasn't beneficial for the hardware peripheral company.

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Mad Catz hasn't had a very good year, as its shares plummeted and executives left. Central to this problem was Harmonix's Rock Band 4, which Mad Catz helped co-publish. The hardware peripheral company took a downturn of 345 percent, going from a $4.7 million profit the previous year to a $11.6 million loss in fiscal 2016.

Mad Catz' co-publishing deal with Harmonix was signed at the start of fiscal 2016 (April 2015). Shortly after, Mad Catz failed to meet the terms of one of its creditors, Wells Fargo, when its yearly earnings didn't reach expectations. Its future was in question, though CFO Karen McGinnis said that it was "anticipating significant sales and gross profit from Rock Band 4." Harmonix invested a lot of money into making Rock Band 4's hardware, raising $15 million in equity funding a month before its launch in October.

The peripheral company didn't get the pay-off it was hoping for, however. It got hit by a $6.8 million loss; several executives to leave including the CEO when things didn't pick up. Shortly after that, Mad Catz laid off 37 percent of its work force, which is expected to save the company an estimated $5 million a year.

About a month later, Harmonix dropped Mad Catz for its competitor, PDP. The move was likely made because of Mad Catz' financial struggles. Harmonix's FAQ at the time said that Mad Catz would continue selling Rock Band 4 hardware. GamesIndustry.biz reports that the company still has $8.3 million of Rock Band inventory that it needs to sell before September 6. McGinnis said that if the deal wasn't terminated, then Mad Catz would have had to "invest additional development resources and tooling to design new hardware."

"Although the overall Rock Band 4 program was incredibly disappointing for us, exiting the relationship with Harmonix at this time allows us to focus our efforts on the development and execution of our other exciting and profitable product launches," she added.

Rock Band 4 has had a bit of a troubled history as well, with its crowdfunding campaign for a PC version falling well short of its goal and Harmonix employees posting anonymous positive reviews of the game on Amazon.

However, the rock and roll rhythm game continues onward. Harmonix recently teased plans for a new bass guitar peripheral, and it signed a new licensing deal with Fender that's good until 2027.

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