(Corrects first and second paragraphs of story that ran Nov. 10 to show Harmonix investors received payments.)

Nov. 10 (Bloomberg) -- Viacom Inc., controlled by Sumner Redstone, will pay investors in Harmonix, creator of the ``Rock Band'' video game, more than $300 million as part of the 2006 acquisition of their company.

Harmonix, founded by Alex Rigopulos, 38, and Eran Egozy, 37, received $150 million last quarter for exceeding performance targets, New York-based Viacom said in a Nov. 3 regulatory filing. A final payment in 2009 will exceed $150 million, the company said.

The payments squeeze the 3 percent operating margin generated by ``Rock Band,'' a game in which players use toy instruments to pretend they're rock 'n' rollers. The title has sold 7 million copies in 13 countries and 26 million music downloads, Viacom Chief Executive Philippe Dauman said on a conference call last week.

``We may not have anticipated the payment would be that high, but it's based on what they have achieved,'' Viacom spokeswoman Kelly McAndrew said. ``If they are making more money for us and we have to give a little back, that's OK.''

``Rock Band'' sells for $190 on Amazon.com, or for $60 without instruments. The game produced retail sales of $142.6 million in the third quarter, according to NPD Group Inc., the Port Washington, New York-based market researcher.

Viacom said a new version released in September, ``Rock Band 2'' for Microsoft Corp.'s Xbox 360 console, vaulted the company to fifth place in U.S. video-game sales.

2006 Acquisition

Viacom acquired Cambridge, Massachusetts-based Harmonix, also the creator of Activision Blizzard Inc.'s ``Guitar Hero,'' for $175 million in September 2006.

Rigopulos and Egozy, friends who met at the Massachusetts Institute of Technology, founded the company 10 years earlier.

The acquisition has given Viacom entry into an industry that PricewaterhouseCoopers forecasts will grow at a 10 percent annual rate globally through 2012 to $68.3 billion in revenue.

Margins on ``Rock Band'' could widen to 10 percent by the end of 2009, Anthony DiClemente, an analyst at Barclays Capital in New York, wrote in a Nov. 4 report. He doesn't recommend buying the shares and doesn't own any.

Last month, Apple Corps Ltd., publisher of the Beatles catalogue, said it's working with Viacom to create a video game based on the band's music. In September Viacom acquired Seattle- based Screenlife, maker of the ``Scene It?'' video games.

``We have a tiger by the tail with `Rock Band' and our growing games business,'' Dauman said on the conference call.

Viacom, owner of the MTV cable network and Paramount film studio, advanced 43 cents, or 2.3 percent, to $18.87 at 4:15 p.m. in New York Stock Exchange composite trading. The Class B shares have declined 57 percent this year.

To contact the reporter on this story: Andy Fixmer in Los Angeles at afixmer@bloomberg.net

Last Updated: November 12, 2008 14:41 EST