Thursday, May 05, 2011

Harmonix: The Complicated Price

From Gamasutra:
Viacom generated a tax benefit of approximately $115 million dollars with the sale of Guitar Hero and Rock Band creator Harmonix, according to its filings with the Securities and Exchange Commission.

When Viacom sold the developer for the surprising sum of $49.99 late last year, it was widely reported that it had done so in order to reap a major tax benefit for closing a sale by the end of 2010. With this figure officially revealed, this appears to have been the case.

I've heard many sources cluck-cluck-clucking that this means that the purchase price of Harmonix was $115 million.

That is not correct.

Yes, Viacom may have realized a $115 million tax benefit, but the purchaser of the company is not paying that tax benefit. So while Viacom may have realized an enormous tax benefit by selling the company, the company itself was not valued in that manner.

This is a mistake.

There's no question that the little plastic instrument genre has imploded in spectacular manner, but I believe the people at Harmonix are some of the most creative developers--ever. They develop games that are playable by an incredibly wide audience. Whatever they make will always be worth buying.

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