No one was returning calls. There was no next plan. So when Japan's Konami did call, asking them to make a karaoke game for the U.S. market, Rigopulos and Egozy sucked it up and said, "It's a gig." Karaoke Revolution was Harmonix's simplest product yet -- and its most popular. It allowed players to score points by singing pop songs into a headset or microphone. Harmonix was getting better at not spending every cent of its advances. In 2004, the company's 10th year, Harmonix made its first dollar. "We were eking out like a 2 percent profit," Egozy says.
So here's where the vision had led. The founders had sold the bulk of their company to outsiders and after 10 years were making a minuscule profit with games that had essentially nothing to do with their original vision. How much did they need to wander from the mission to succeed? They rationalized: At least karaoke was music. What to do, though, when Sony called again in 2003, looking for a game for its new interactive camera -- and explicitly said, No music at all. They took the gig. EyeToy: AntiGrav involved riding on a virtual hoverboard. It got lousy reviews. And, as 2005 began, it became Harmonix's best-selling product ever.
The success was a punch in the gut. "We were like, God, are we just idiots?" Rigopulos says. "Are we a game company? Are we a music company?" "We were thinking, Is our entire company mission statement basically a complete flaw?" says Egozy.
They struggled. Perhaps Harmonix was not a music company after all, just a company filled with musicians who created games that were...quirky. Mission statement? Things change. Maybe Harmonix Music Systems should become Harmonix Game Studios.
"It was really at our sort of darkest moment in terms of self-doubt that the third chapter in our history began," Egozy says, "when we were contacted by RedOctane about making a guitar game."
For brothers Charles and Kai Huang, helping non-musicians experience the bliss of musical performance meant nothing in particular. The Huangs were in Silicon Valley, watching friends and classmates get rich from dot-com companies, and they weren't tied to a vision any more complicated than wanting a piece of their own. It turned out they were the exact spark Harmonix needed to ignite.
The Huangs had the start-up bug in their blood. Their father had started a tools business in Taiwan, and in Sunnyvale, California, he began a company importing auto wheel covers. Charles Huang went into the family business after graduating from the University of California at Berkeley in 1992 and learned about manufacturing in China. Kai graduated from Berkeley in 1994 and went to Accenture as a supply-chain consultant. In 1998, the brothers started a company selling corporate firewall systems, and it flopped in a year. In 1999, they started RedOctane as an online video game rental service. It never really took off.
Finally, they zigzagged into something profitable: making dance pads. There was a new game called Dance Dance Revolution, in which players scored points by following dance-step instructions on the screen. The home version required players to buy a pad to stomp on in front of their TV sets. The Huangs started manufacturing the mats in China and selling them. Margins were great. By 2001, RedOctane was turning a profit. By 2004, it reached $9 million in sales. But the Huangs knew they wouldn't conquer America with Japanese pop dance mats. They had been fans of Harmonix's games and the way they used rock music to connect with American players. "And if you were going to do a rock-based game and make a peripheral for it, you had to start with the guitar," says Kai Huang. "It was sort of a no-brainer."
A guitar? A little electric guitar that attaches to a video game so you can shred to Black Sabbath's "Iron Man" and have it seem real? Are you kidding? Can it have a whammy bar? the Harmonix guys asked.
"Why? What would a whammy bar do?" the Huangs responded.
We don't know yet, but it has to have a whammy bar, the Harmonix guys said. Because whammy bars are cool.
There was almost no reason to think Guitar Hero was going to solve either Harmonix's identity crisis or its economic trouble. Music games were a niche market -- not one had ever sold really well. RedOctane was "this tiny company that had no money and no publishing expertise," Rigopulos recalls. A normal game was $39 or $49; with a plastic guitar, this would have to be at least $69. The box would be gigantic, requiring shelf space a retailer could otherwise use for 20 or 30 games. A guitar video game wasn't even original -- there had been a guitar game in Japan a few years before.
But not with American rock. Rigopulos and Egozy looked around their office. Musicians were everywhere. Something in the mix of desire, desperation, and lack of parental supervision said go, go, go.
They set a stingy $1 million budget and a tight nine-month schedule to get Guitar Hero into stores for the 2005 holidays. Harmonix's 60-odd employees would create the game. RedOctane would make the guitars and fund the project as publisher. The Huangs went looking for money and couldn't get a dime. One investor who turned them down later told Charles Huang he thought, "That's a great game. Too bad these guys are going to go out of business trying to sell it." And that summer, RedOctane ran out of cash.
"I remember talking to my wife and saying, 'Honey, I want to take out a second mortgage on the house to fund Guitar Hero,' " Charles Huang says. "She asked me, 'Where will our kids live if the game doesn't sell?' I said, 'I think it'll sell.' " Maxing out credit lines, the Huangs scraped together $1.5 million to fund and market the game.
