Viacom loses appeal to avoid paying $299 million over ‘Rock Band’

Viacom has been ordered to pay the piper.

The media conglomerate that owns Paramount Pictures has lost its appeal of an arbitration order to pay $299 million to the original shareholders of Harmonix, a game development studio that Viacom agreed to buy in 2006 for $175 million, plus performance-based bonus payments.

The setback is just the latest in a series for Viacom, whose ambitious foray into music video games has resulted in massive losses and acrimonious litigation. The ruling, from a Delaware Court of Chancery judge, was first reported Monday by The Hollywood Reporter.

The lawsuit stemmed from Viacom’s refusal to pay Harmonix bonus payments based on the performance of the “Rock Band” game franchise, which sold more than 10 million units but, nevertheless, lost money because of the high cost of creating the instruments needed to play the games. Viacom sold Harmonix in 2010 for a mere $50 for tax purposes, but realized a $50-million tax benefit from the transaction.

The lawsuit went into private arbitration last year, and Viacom was ordered in December to pay $383 million. It paid $84 million, but appealed the remaining $299 million in the Delaware Court of Chancery. Viacom lost the appeal.

Viacom, in a statement, hinted that the show wasn’t quite over.

“We are disappointed in the court’s decision, and are evaluating our options for the next steps of this process,” the company said.

Still, the New York media company, which also owns the cable channels MTV, VH1, Comedy Central and Nickelodeon, among other properties, already set aside $383 million for the adverse ruling during its fourth quarter ended Dec. 31.

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Twitter: @AlexPham