Viacom is ordered to pay $383 million more to Rock Band makers

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Viacom Inc. has been ordered to pay an additional $383 million to the makers of Rock Band, the latest development in a long and costly saga surrounding the media giant’s failed attempt to enter the video game business.

In a regulatory filing, Viacom, the owner of MTV Networks and Paramount Pictures, said a private arbitrator ordered it to pay Harmonix’s former shareholders the money on top of a $150-million bonus payment that it previously made. The shareholders had been seeking a total of $700 million, or $167 million more than the accountants involved in the arbitration determined to be appropriate.

The dispute centers on bonus payments owed to Harmonix’s former owners under the terms of the 2006 acquisition of the Boston studio by Viacom, which paid $175 million upfront. The media conglomerate then paid a $150-million bonus for sales of Rock Band in 2007 but made no payment in 2008 and then sought a refund of nearly all the money it previously paid.

Though Rock band, sequels Rock Band 2 and 3, and spin-off The Beatles: Rock Band sold more than 10 million units, Viacom consistently lost money because of the high cost of creating plastic instrument controllers. In late 2010, it sold Harmonix to a New York private investment firm for just $50 and received a tax benefit of about $50 million on the loss.

Around the same time, however, the original shareholders of Harmonix filed a lawsuit alleging that they should not only be allowed to keep the original $150 million bonus but were also owed an additional $550 million.The suit triggered the arbitration for which the current decision was issued Dec. 19.

Viacom is not accepting the decision as a done deal, however. The company said it has filed a suit in the Delaware Court of Chancery seeking to vacate the resolution accountants’ decision because certain arguments and evidence were ‘improperly excluded.’

Walter Winshall, an early investor in Harmonix who has been leading the legal fight against Viacom, declined to immediately comment on the development.

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-- Ben Fritz