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[Update] Harmonix And Mad Catz Dispute Rock Band 4 Hardware Demand

by Mike Futter on Jun 03, 2016 at 10:14 AM

Update 2: Mad Catz has responded to Harmonix's assertion that the company was unable to keep hardware on shelves during the holiday season. However, the companies do now agree on who ultimately terminated the relationship.

In response to our inquiry, Mad Catz CEO Karen McGinnis says that her company was forced to discount hardware during the holiday months. “As we have publicly disclosed, it was Harmonix who terminated the agreement, under their rights to do so," she says. "And, while we agree that it is important to get inventory levels correct for any product, including Rock Band 4, it is clear to us that consumer demand for Rock Band 4 did not meet expectations, resulting in excess inventories not only for Mad Catz, but for our retail partners, as well as discounting in retail prices during and after the holiday season. Looking ahead, we continue to share a vested interest in the success of Rock Band 4.”

There is a stark contrast between the two perspectives, with Harmonix claiming Mad Catz couldn't keep up, and Mad Catz claiming both it and retail outlets were flooded to the point of requiring discounts. Without hard numbers for targets and retail sales, it's hard to determine the full picture.

Update 1 (June 3, 2016 @ 10:18 a.m. Central): Following publication of the original story, Harmonix approached us about its relationship with Mad Catz. A company representative tells us that it chose to end the relationship, in contrast with Mad Catz's statements during its earnings call on June 2.

"Rock Band did well for us, selling within the range we anticipated," said Harmonix CEO Steve Janiak in a prepared statement. "In fact, many of our retail partners struggled to keep up with demand during the holiday season. With a business like Rock Band that involves hardware, if you are manufacturing that hardware you need to get the inventory levels right - with most of it available at retail in time for the holiday selling season."

We know that there were Xbox One adapter shortages at launch, but the implication here is that Mad Catz had trouble keeping up with demand during the busy holiday. The $8.3 million in inventory it is currently holding would then have arrived after the holiday season closed, when demand had tapered off.

We've reached out for further comment from Mad Catz, which will be deeply discounting its stock to move it by the September 6 deadline. We've also reached out to PDP, Harmonix's new hardware partner, which will likely be selling its peripherals at full price right after Mad Catz holds its fire sale to clear out remaining stock. 

Original Story (June 3, 2016 @ 9:00 a.m. Central):

Yesterday, Mad Catz announced it had suffered an $11.6 million full year loss that can be tracked back to its bad bet on Harmonix’s Rock Band 4. Mad Catz has bailed out of the relationship, because it refused to invest in additional designs that Harmonix requested.

With $8.3 million in inventory sitting on warehouse shelves ($6.8 million of which has been written down), Harmonix is looking to new partner PDP for its next peripheral rollout.

Harmonix announced today that it has extended its deal with Fender through 2027. The company also released a teaser video strongly hinting that new, Fender-style plastic instruments are coming.

Rock Band 4 will be getting some new features this fall. An expansion pack will add synchronous online multiplayer and additional content.

For more on Rock Band 4, check out our review.

 

Our Take
Rock Band instruments have crippled Mad Catz, caused the ouster of three top executives, and have put the company severely into the red. Hopefully, PDP struck a smarter deal and won’t overproduce these instruments. It really doesn’t seem like the market is there for new Rock Band peripherals, making this a puzzling move.