Viacom sold Harmonix for $50, saved $50 million on taxes
Viacom Inc. sold Rock Band video game developer Harmonix Music Systems for virtually nothing in exchange for a big tax benefit and offloading its liabilities.
Last month, the media conglomerate sold Cambridge, Mass.-based Harmonix to New York private investment firm Columbus Nova for an undisclosed amount. At the time, people close to the situation said Viacom wanted to close the sale by the end of 2010 to reap a tax benefit in the year, but financial details were not disclosed.
On Tuesday, a person familiar with the matter confirmed that the sale price was just $50. However, Viacom has told its major investors that it received a 2010 tax benefit of about $50 million based on losses in its investment. It paid $175 million to acquire Harmonix in 2006 and then shelled out an additional $150 million for its financial performance in 2007. Viacom is trying to recoup most of that $150 million and is now enmeshed in a legal battle with Harmonix's former owners over how much it contractually owes in performance-based payments.
Along with the tax benefit, Viacom has also told investors that it offloaded about $100 million in liabilities owed by Harmonix that have been assumed by its new owner.
The Harmonix purchase ended up being a dud for Viacom, as it was not able to structure costs to make a profit on Rock Band and Rock Band 2 in 2007 and 2008, and then was struck by a rapid decline in consumer demand for music video games in 2009 and 2010.
News of the sale price was first reported by AllThingsD.
-- Ben Fritz