MKTG5MKTG5MKTG Chapter 1 Case Study: Harmonix Embrace Your Inner Rock Star Little more than three years ago, you had probably In 2000, Rigopulos and Egozy hit on a concept never heard of Harmonix. In 2005, the video game de- that would engage consumers, and Harmonix became sign studio released Guitar Hero, which subsequently a video game company. Where The Axe software pro- became the fastest video game in history to top $1 bil- vided an improvisation program with no set goal, most lion in North American sales. The game concept focuses video games were designed with a purpose and offered around a plastic guitar-shaped controller. Players press competition, which helped engage, direct, and motivate colored buttons along the guitar neck to match a se- players. At the time, the market for music-based games ries of dots that scroll down the TV in time with mu- had not fully developed, but especially in Japan, rhythm- sic from a famous rock tune, such as the Ramones’ “I based games, in which players would tap different com- Wanna Be Sedated” and Deep Purple’s “Smoke on the binations of buttons in time with a beat or a tune, were Water.” Players score points based on their accuracy. In becoming increasingly more popular. Harmonix created November 2007, Harmonix released Rock Band, adding two games, Frequency and Amplitude, in which play- drums, vocals, and bass guitar options to the game. Rock ers hit buttons along with a beat, unlocking tracks for Band has sold over 3.5 million units with a $169 price different layers of instruments in a song. Neither of the tag (most video games retail at $50 to $60). In 2006, games proved especially successful, however, as both Harmonix’s founders sold the company to Viacom for were very complex and the expense of generating initial $175 million, maintaining their operational autonomy interest proved too high for their publisher, Sony, to con- while providing them greater budgets for product devel- tinue funding them. opment and licensing music for their games. Harmonix’s Harmonix fi nally found some measure of success in success, however, did not come overnight. its 2004 release of Karaoke Revolution, in which players The company was originally founded by Alex would use a microphone or headset peripheral to score Rigopulos and Eran Egozy in 1995, focused around points singing along to pop songs. In a way, it allowed some demo software they had created in grad school and gamers to play the role and be a part of the music. In a company vision of providing a way for people with- 2005, when Red Octane, a company that had found suc- out much musical training or talent to experience the cess making peripheral video game controllers, contacted joy of playing and creating music. The founders believed Harmonix about creating Guitar Hero, their philosophy that if people had the opportunity to create their own for attracting gamers was based off a similar concept. music, they would jump at the chance. Their software, Guitar Hero put players in the role of the lead guitarist which they eventually dubbed The Axe, provided basic in a rock band, climbing its way to stardom. The game music composition tutorials and allowed participants to soundtrack, fi lled with remixes of classic American rock use a joystick to improvise solos along to popular music ’n’ roll hits, would appeal to a broader musical audience, tracks. They attempted to market their creation through and the guitar controller put the iconic instrument of an interface with Japanese karaoke machines, a demo American rock ’n’ roll directly in the player’s hands. The package deal with Intel, and even in an exhibition at game was released in November 2005, and when retail- Disney’s Epcot. And while the software always proved ers set up in-store demo kiosks, game sales went through technically impressive, people generally expressed little the roof. After the success of the fi rst game, even real initial interest in trying it out, or else it just didn’t seem rock stars began to pick it up, demonstrating its broad like they were having much fun. appeal. Music labels started to jump on the bandwagon, CASE STUDIES 1 allowing the licensing of actual songs rather than just 2. As a fi rm, how do you think Harmonix would de- composition rights. Rock Band 2, which came out in scribe its business? September 2008, includes songs by AC/DC and Bob Dylan. Gamers can also download additional songs, like The Who’s greatest hits, onto their Xbox 360s and Playstation 3s at $1.99 per song, only a dollar more than purchasing a song from Apple’s iTunes 3. To whom was Harmonix’s product directed, and music store. Licenses for Rock Band were secured for how did they create a product that would appeal songs by the Beatles, even before they were licensed to to that audience? iTunes or other electronic media stores. As the mar- ket for music video games has matured, sales are now expanding beyond the traditional gamers to fi rst-time gamers and even families. The Rock Band franchise has sold over 5 million units since its release in 2007, and with the release of Rock Band 2, the hits just keep on coming. Questions SOURCES: Don Steinberg, “Just Play,” Inc. Magazine, October 2008, 124–134; 1. What marketing management philosophy did Ethan Smith, Yutari Iwatani Kane, Sam Schechner, “Beatles Tunes Join Rock Band Harmonix use at fi rst, and how did their philoso- Game,” The Wall Street Journal, October 30, 2008. Available at http://online.wsj. phy change? com/article/SB122531701276881747.html (accessed January 5, 2009); Dan Gallagher, “Is ‘Guitar Hero’ Hitting Its Peak?” MarketWatch, December 12, 2008. Available at http://www.marketwatch.com/news/story/guitar-hero-rock- band-games/story.aspx?guid=%7B5CC35A95%2DB667%2D4E97%2DACB7%2 D3BA37BACA0FC%7D&dist=TQP_Mod_mktwN (accessed January 5, 2009). 2 CASE STUDIES.