Rock Band developer's founders suing Viacom

Alex Rigopulos and Eran Egozy among Harmonix ex-shareholders who claim multimedia giant manipulated costs to prevent bonus payouts.

39 Comments

This year began with media giant Viacom revealing it was seeking a "substantial" refund of the $150 million in bonuses it paid to the shareholders of Harmonix, developer of the Rock Band games. Now, 2010 is ending with Harmonix filing suit against its soon-to-be-former owner, claiming it manipulated costs to evade payments due to the studio's shareholders under a profit earn-out agreement.

Harmonix's founders are suing their employer.
Harmonix's founders are suing their employer.

According to a copy of the complaint obtained by industry site Gamasutra, a group of the initial shareholders in Harmonix, including cofounders Alex Rigopulos and Eran Egozy, accuse Viacom of manipulating the earn-out payments by "diverting opportunities from Harmonix for its own benefit."

Among those opportunities was a chance to renegotiate fees with Electronic Arts, which distributes the Rock Band games. Instead of reducing the fees--and thereby increasing profits, which would lead to larger earn-out payments for Harmonix--Viacom allegedly arranged for EA to buy millions of dollars' worth of ads on Viacom's various networks in 2008. The suit contends that the EA/Viacom deal would then reduce EA's distribution fees in 2009, after Harmonix's earn-out period had expired.

According to the suit, "Although a reduced 2008 EA distribution fee would have increased Harmonix's gross profit and operating profits in 2008, Viacom realized that every $1.00 of distribution fees that Harmonix saved during 2008 would require Viacom to pay an additional $3.50 of earn-outs to the [ex-shareholders]."

Saying that Viacom's actions have "damaged" the former shareholders, Harmonix is asking for the equivalent of the earn-out payments it would've received had the EA fees been reduced in 2008. Also, it is seeking the value of EA's advertising commitments, as well as $13 million currently held in an escrow account.

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jinzo9988

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Viacom got 60-70 videos unjustly removed from Youtube from it's take-down notices just before officially suing Youtube for copyright infringement as if Youtube themselves were uploading the clips. Not only has it been proven that Viacom uploaded their own copyrighted material under false user names to pass off as the average Joe(thus making themselves guilty of the practice they're suing over?), Viacom also steals videos from Youtube and other places wholly created by the average Joe and puts them up on Spike.com and other video hosting websites without asking for permission... the very thing they're angry about, only Viacom themselves are doing it while Youtube is just hosting uploads from other people. It's hilarious stuff. Needless to say Viacom should lose every suit every time, even if they sued me for assault after I kicked the CEO square in the balls.

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hannify

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Sequel to Team America: Team America: Suets you sir

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hannify

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Wow, Viacom you dirty rats

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Yajarobi

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I'm with Haromonix on this one. Viacom selling the business stating "It doesn't make enough money", is very closely related to all the things Harmonix is alleging.

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Avatar image for Phil-teh-Pirate
Phil-teh-Pirate

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TL: DR I'm not even going to pretend to understand anything I just read, but hey, aslong as they are doing it for the right reasons.

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Gelugon_baat

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A ruling in the favor of Harmonix would discourage big-name publishers from inking deals that would appear favorable to potential business partners but still vague enough that they can be expediently manipulated for their benefit when needed. They would have to resort to take-it-or-leave-it deals that are obviously advantageous to them, which would scare away a lot of potential partners. Either that, or they have to give deals that would be very advantageous to the potential partner with fewer returns for themselves - but shareholders won't like that. A ruling in the favor of Viacom will discourage developers from going into deals without examining them much more thoroughly - thus losing funding that could have been gotten earlier, while publishers are left to languish with money that they cannot spend on developers. (In the corporate world, money that cannot be spent is useless money.) A court ruling in the favor of either is a lose-lose situation; there would be a loss of trust between publishers and developers, and the consequences are going to trickle right down to us consumers.

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Avatar image for Gelugon_baat
Gelugon_baat

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This, like so many other lawsuits involving corporate interests, is a game of "chicken". Either sides are taunting and threatening the other, waiting for the other to come forth with a settlement. Because neither party would want a court ruling, which is guaranteed to crimp the way that private entities like these operate.

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BlueFlameBat

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I read the whole article and I'm still having a lot of trouble understanding it, but considering Viacom bullied YouTube into pulling a bunch of videos, I wouldn't be surprised at underhanded deeds by this company.

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Xplode_77

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Wow, everybody is sueing everybody!

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CamoBullo

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Sue the ever-lasting crap out of them. Viacom's greediness stops now.

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Freezezzy

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@PsycoticlySound I was gonna post a comment of my own, but you just perfectly summed up what I was thinking. +1

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Crazyguy105

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I wouldn't be surprised if Viacom really did avoid payouts.

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chibi-acer

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In the end I'll leave it to the courts to decide, but it wouldn't surprise me at all if Viacom did indeed tweak agreements just to avoid a payout.

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SgtFlutter

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It's really hard to side with either of them when the bonus their fighting for is more money than I'll ever see in my life.

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MadGamer132

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uh oh!

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zeebenzene

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first of all, I don't care at all about the premise. I just hate viacom's guts and hope it dies a horrible death. So.. Yeah Harmonix, even thought I hate their games.

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Death_Blade_182

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Screw Viacom, I hope Harmonix wins o:

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PsycoticlySound

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Ordinarily, a developer suing their parent company would be seen as an act of desperation. But there are two things here that I feel justify this move: 1. Viacom demanding a refund of a BONUS they had given Harmonix. If they had the nerve to pull a stunt like this, who's to say they wouldn't do more to sabotage Harmonix for the sake of money. 2. Harmonix has been nothing but good to its fan base. When they promised weekly DLC, they delivered. When they promised to create not just a music game, but a music platform, they delivered. And when they promised to create the most in-depth, refined rhythm game to-date, they even delivered upon that. So all things considered, I can say I fully stand behind Harmonix in this lawsuit. They deserve this win.

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MJ12-Conspiracy

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I'm honestly surprised that Viacom even allows MTV one of their subsidiaries to release games through EA when Viacom is in with Activision. I don't see the suit going very far because of this.

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squalasura1

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Viacom is the definition of a greedy, bully corporation. They use thier money and influence to push around and beat up on smaller companies. They probably deal with a dozen Harmonixs a week, and probably lose to very very few. You dont become Viacom by letting pissant companies like ?Harmonix show you up. Go Go Harmonix!

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Hopkins_J

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What a bunch of s***. Harmonix needs to grow up and get over it. Viacom made the smart move for dumping them.

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Bigbudd0045

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i know its the synthesis of me being a gamer and a law student, but i really want to see viacoms SJ Motion in response...then assuming it doesnt settle, which it likely will, id love to see the motions on the briefs.

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TheWickedEnd101

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hope harmonix wins,i hate viacom they totally raped youtube -_-

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TheWickedEnd101

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[This message was deleted at the request of the original poster]

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Mudvayne84

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Go Harmon... wait... Go Viac..... oh yeah none of us knows what's really going on because this is what Harmonix claims Viacom "allegedly" did... This isn't fact yet. Those of you that say "go Harmonix" just say that because they make a game you like. Gotta love comments here on business news.

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Avatar image for Taix34
Taix34

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GO HARMONIX Sue The pants Off them!

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ichc1000x

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Go Harmonix!!

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Nosnitsttam

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i think viacom had this coming since they're going out of their way to screw harmonix. first they announce that they're going to drop a company that produces the best rhythm game available and then they say they want a "substantial refund" of the money they paid that company in bonuses (for doing exactly what they were paid to do) BACK? that's just cold

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Evz0rz

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As much as Viacom was just using typical business mentality by getting rid of something that wasnt going to make them much more money, I still have to say good on Harmonix. I just find it wrong that Viacom can so quickly get rid of the developer that produced the most refined rythm game we have yet to see

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NColdhardt

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Goodluck Harmonix!

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KillerBill316

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Activision ruined the genre. That's what happens when you beat it to death with the same crap. You force other people to do the same.

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kaziechameleon

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GO GO GO, I'm behind harmonix founders on this one.

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MasterTheHero

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Here's what damaged these music games in my opinion. 1.) Having to constantly buy new "hardware" in the form of guitars, drums, pianos, mics. Some of those items would break easily forcing a replacement. (Not cool.) 2.) Guitar Hero flooding the market without really adding anything new except for "buy more kits." The innovation kind of stopped appearing and I wouldn't call that terrible music maker a real innovation. 3.) Limited singleplayer appeal. There's a reason why not everyone is a musician. Only die hard fans of the game try to practice and master all songs, but most people just casually play a few tunes. Well, most people who just casually play will get bored of playing by themselves. 4.) Same thing with singleplayer, unless you have a big family who also game, it's difficult to always get at least 3 other friends (4 with keyboard) to come over and play. Unless you're hosting a party every week most of the time that game will sit in the shelf unused because you can't get your friends to come over. In my situation my friend actually has brothers who love to play the game and would probably buy every rockband release that would come out, but not everyone has a small army living in the same home. These games were a great idea, unfortunately the market was just too niché for it to really be successful.

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ParisSun

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A bunch of greedy people suing each other for being greedier. Business as usual, nothing to see here people, move along.

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IdolConverge

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@ stalkerx3000 True dat.

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firehawk998

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Heres a better idea. Why not sue Activision . They have released god knows so many Guitar Heros in a year that move itself caused a significant damage to the music industry.

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Timmy_Gwar

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@stalkerx3000 I really wouldn;t blame the economy on this one so much as i would blame unnecessary greed.

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okassar

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If you feel that someone benefited from or copied off your work without permission or full reimbursement, you absolutely have the right to sue and should. It is theft of work and potential. Last time I checked, theft was bad.

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stalkerx3000

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In todays economy, you gotta sue people to stay in business.

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