The team behind the "Halo" series, one of the all-time top video game franchises, said Friday that it was splitting from parent Microsoft Corp. and eventually might develop titles for consoles that compete with Microsoft's Xbox.
Though both sides described the spinoff as amicable, it shows the difficulty faced by the 32-year-old software behemoth in fostering the creative environment necessary to keep innovative game designers and engineers in other hot areas happy.
Its Xbox venture has forced Microsoft to try to create an entertainment-company mentality inside the world's largest software maker.
"Any time you lose talented developers who are working exclusively for you, that's a negative," UBS Securities analyst Ben Schachter said. "The developers within the company wanted some more freedom and wanted to have their fortunes tied to something other than Microsoft."
Analysts said the more than 100 people from Bungie Studios, which Microsoft acquired in 2000 for an estimated $20 million to $40 million, were leaving because they wanted more creative freedom and the potentially far larger financial rewards of striking out on their own.
The announcement comes on the heels of the blockbuster release of "Halo 3," which Microsoft said racked up a record $300 million in first-week sales. The series has played a key role in establishing Xbox as a contender in the home gaming market despite Microsoft's late entrance with the Xbox in 2000.
Analysts said as many as 1 in 4 Xbox buyers chose the console so they could play "Halo," a first-person shooter game in which Master Chief tries to save the world from destruction by aliens.
Yet because Microsoft is so large and has other, more profitable divisions, the success of "Halo" hasn't necessarily translated into more valuable stock options for its creators.
Analysts said the separation wasn't a dramatic setback for Microsoft because it would keep an equity stake in Bungie, and Bungie would continue to make Xbox games. Financial terms were not disclosed.
Analysts said they believed Microsoft would get the right to bid on new titles before rivals Sony Corp. and Nintendo Co.
"The intent of both parties is to continue to work together, hopefully forever," said Microsoft Vice President Shane Kim, who heads its game studios.
Though "Halo 3" is the last in a trilogy, Kim said Microsoft would work with Bungie and "Lord of the Rings" director Peter Jackson on a game that "takes place in the 'Halo' universe."
