Viacom hits Harmonix stockholders with $131 million suit

Media conglomerate seeking to recover funds it claims to have overpaid as part of bonus-based payout to Rock Band consortium.


Viacom purchased Rock Band-creator Harmonix for a reported $175 million in 2006, but it didn't take long for the media megacorp to regret that decision. The rhythm game genre proved to be a bubble, and Viacom has since early 2010 been seeking to reclaim a substantial portion of the $150 million in performance-based bonus payouts made to the original stakeholders in Harmonix.

The Shake Down isn't likely a move that'll appear in Dance Central 2.
The Shake Down isn't likely a move that'll appear in Dance Central 2.

With those stakeholders largely stonewalling Viacom's efforts, the media corporation is shifting the field of battle to the courtroom. On Friday, Viacom filed suit against a host of Harmonix stakeholders in the US District Court for the state of Delaware as part of its effort to reclaim $131 million in performance-based compensation it claims to have overpaid.

According to a copy of the suit, which was obtained by The Hollywood Reporter, the overpayment resulted from contractual earn-outs that were paid on a preliminary basis. These earn-outs were to be "equal to 3.5 times the amount by which gross profit exceeds $32 million in 2007 and $45 million in 2008."

Based on this contractual agreement, Viacom states that it made an initial calculation of $149,770,149 for the 2007 earn-out payment. That disbursement occurred in September 2008.

However, by June 2009, Viacom determined that it had overpaid on these bonuses, revising the actual payout amount down to $17,942,169. The company said that it advised stockholders of this revision in advance, stating also its intention to reclaim the excess $131,827,980 it made in payments. These efforts, however, have so far gone rebuked, thus precipitating the legal action.

For their part, Harmonix's stockholders believe Viacom actually owes them more than the $150 million that Viacom has already paid out. Late last year, the group sued Viacom claiming it manipulated costs to evade payments due to the studio's shareholders under the profit earn-out agreement.

In late 2010, Viacom unloaded Harmonix to a private holding company for a nominal $50 and the presumably much larger assumption of all debts associated with the company. The studio is currently at work on Dance Central 2.

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