In the Media Lab, it had been enough for Rigopulos and Egozy to create magical demonstrations. That was the end product. It took them years to learn that technical awesomeness was no longer enough. "We had this naive assumption that if we made something that had a lot of 'Wow, how'd they do that?' factor, it would sell," Rigopulos says.
In 1997, Harmonix, which had grown to a staff of about 25, self-published The Axe. A few reviewers marveled at it, and it sold about 300 copies. Rigopulos and Egozy spent months working a deal in which Intel might bundle a demo of The Axe with Intel-based PCs. Once people tried it, they'd be hooked! During a call with Intel that wasn't going well, the automated conference system ran out of time and hung up on everyone. "We tried calling back," Egozy says. "No one picked up. There was no follow-up e-mail. That was the last time we ever spoke to those people."
Rigopulos revised the business plan every year, always building around the core vision of letting nonmusicians make music. "The introduction section didn't change, but what we were going to do changed from year to year," he says. "It was this exercise in fiction writing."
Still, Rigopulos and Egozy were well pedigreed and impressive, and there was a lot of money looking for technologically sophisticated start-ups, and Harmonix raised about $10 million in 10 years. Financing would arrive just in time. "There were at least a couple of rounds where if we didn't get them closed before the next payroll, it would have shut down the company," Rigopulos says. The founders whittled away their equity to stay alive. Soon, Rigopulos and Egozy owned "way less" than half of Harmonix (they won't be more specific). They had few qualms about it; it was do or die. "Cash is oxygen. Cash is life," Rigopulos says.
The investors didn't want control, and that allowed Rigopulos and Egozy to continue getting clobbered by reality. In 1998, Harmonix won a deal to put its Axe technology in a music-making exhibit at Disney's (NYSE:DIS) Epcot. It was a technical marvel, as usual, and the job cost about three times more to do than it paid. The same year, Japanese giant Softbank (OTC:SFTBF) invested $2 million. In 1999, the Taiwanese computer maker Acer also invested $2 million. By then, some investors were asking things such as whether the company might consider changing its name to Harmonix.com and how it planned to get "eyeballs." A plan that finally had an Internet component, a website with play-along music, quickly failed.
The vision and the software had hit a wall. The company was burning through $1 million to $2 million a year. Sales were nil. "To a large degree, my sense of self-worth was tied up in the company," Rigopulos says. "Everything we were doing was built upon a founding premise that the world was full of people who feel this urge to make music. We certainly felt it. Every time we were smacked in the head by one of these failures, I found myself questioning -- Do we actually have something in common with the rest of humanity? This was like our life's work, and we were just facing defeat at every turn."
A few months back from Japan in 1999, they laid off 10 of their 25 employees.
The floor above the Walgreens in Cambridge's Central Square used to be a Harvard University Japanese studies library. Now it's filled with rockers, the employees of Harmonix. Fake and real instruments lie everywhere. Many of the former library rooms are soundproofed. Meeting rooms are named after defunct Boston rock clubs like The Rat and The Channel.
Dozens of the 250 or so employees are musicians, many active in Boston-area bands. Daniel Sussman, who produced Guitar Hero and oversees the four factories in China that are making the components for Rock Band 2, plays guitar and sings for the Acro-brats. Dan Teasdale, lead designer for Rock Band 2, plays bass for Speck. Harmonix was a music company from its start and always hired musicians.
In 2000, it became a game company.
A game has a goal. The players keep score; they can compete. If they are teenagers and young adults, as are most people who buy video games, they can become obsessive. What Rigopulos and Egozy had been trying to sell for five years was a kind of interactive art. Now they were ready to get behind something else: fun.
There wasn't a U.S. market for music video games in 2000, but games at least had a revenue model. The video game business is like the book business. Publishers pay an advance for creation of a game and cover the costs of packaging, marketing, and distributing it. A game developer like Harmonix gets the advance -- often $2 million or more per game -- and pockets as profit whatever isn't spent to create the game, then hopes it sells well enough to produce royalties.
In Japan, Rigopulos and Egozy had noticed video games in which players tapped out musical beats. They thought these new rhythm-action games were dumb, actually. Harmonix had crafted algorithms to crack music's code, and here, in games such as Beatmania, kids were mindlessly smacking buttons with their palms. But the kids were having fun. After four years of failure, Rigopulos and Egozy swallowed hard.
But they still hadn't learned. The first game they prototyped, called Frequency, was a complex, thinking person's button-masher. You would race down a tunnel whose walls represented instruments -- guitar, drums, bass, synthesizer -- and press buttons to activate layers of sound. Frequency intimidated people. Of eight publishers Harmonix contacted, all said no except Sony (NYSE:SNE), which agreed to publish Frequency for its PlayStation 2 in 2001. "We were finally able to sell something other than stock," Egozy says.
The game sold poorly, and a 2003 sequel, Amplitude, did about the same. In a focus group, when Sony gave testers advance information about Amplitude, only 2 percent said they were interested -- the lowest score Sony had ever recorded, Rigopulos was told. After playing the game, 69 percent said they were interested -- the highest score ever. Rigopulos called Sony excitedly when he heard the results. No, he was told. You don't get it. The expensive part is getting people to try it. Egozy recalls dryly, "Sony said to us, 'We love you, but we're not going to give you another couple million bucks to make a music game that no one wants to buy.' "
