Mad Catz continues to suffer from its bad bet on Harmonix’s Rock Band resurgence. The company has suffered an $11.6 million loss in the fiscal year closed March 31, 2016. This is a change from a net profit of $4.7 million in the previous year.

Operating losses mounted by 470 percent, with the shortfall in the most recently closed year reaching $9.3 million. This is despite sales increasing 55 percent to $134 million.

The company has also detailed that because of termination of its arrangement with Harmonix, the company has 120 days to move $8.3 million worth of Rock Band inventory. Mad Catz CEO Karen McGinnis said that focus on Rock Band delayed other of the company’s products. Mad Catz wrote down $4 million of inventory, $1 million of materials it could not cancel, and $1.8 million in price reductions.

McGinnis also says that Harmonix requested that Mad Catz retool the Rock Band hardware. The peripheral company declined, suggesting it was not prepared to invest further in the partnership. PDP has signed on to create a new wave of plastic instruments. Harmonix had hoped to release a PC version of Rock Band, but failed to raise the money via crowdfunding.

The company bet huge on Rock Band, taking out additional loans after falling out of compliance with prior lending. The results have cost the company 86 jobs (or 40 percent of worldwide workforce, slightly more than originally projected).

Note: We have corrected an error regarding the write-down of Rock Band hardware.

Our Take

Mad Catz is in the process of restructuring, but it has a long road ahead. The Rock Band mistake is reminiscent of the uDraw decision that killed THQ. Harmonix cut itself a good deal, putting the risk onto its hardware partner. The result was layoffs and an executive exodus that has left Mad Catz in dire straits.

On the earnings call this afternoon, Mad Catz also says it has signed a deal with Cloud Imperium Games for Star Citizen-branded gear. At least if that game fails to launch, the flight sticks will work with other titles.