Video game maker Activision Blizzard Inc. may have lost key talent at its prized Infinity Ward studio, but it scored major points Thursday by signing a deal to publish the next game series from Bungie Studios, developer of the blockbuster Halo video games.
The surprise announcement gives Santa Monica-based Activision a boost at a time when the future of its multibillion-dollar military video game series Call of Duty is in question. The two heads of Infinity Ward, developer of the immensely popular Call of Duty games, were fired last month and are now enmeshed in a legal fight with the publisher. This week 38 present and former Infinity Ward employees, 21 of whom recently resigned, sued Activision over alleged unpaid royalties.
FOR THE RECORD:
Activision deal: An article in Business on Friday about video game maker Activision Blizzard Inc. signing a deal with Bungie Studios identified a BMO Capital Markets analyst as Evan Williams. His name is Edward Williams. —
The new 10-year deal gives Activision exclusive rights to distribute Bungie's upcoming game and its sequels. They are expected, like Halo, to be action-heavy and feature a significant online component.
"We believe this agreement alleviates some of the concern surrounding Activision's publishing business and its increasing dependence on Call of Duty by adding another potentially strong [property] to the portfolio," BMO Capital Markets analyst Evan Williams said.
Bungie's games won't provide as big a boost to Activision's bottom line as successful Call of Duty sequels, however. In a rare move for Activision, which has been adamant about controlling intellectual property, Bungie will own the rights to its new games.
Activision will finance the games' development and receive a percentage of revenue. Chief Operating Officer Thomas Tippl said the deal would add to his company's publishing business and that the Bungie games, which don't yet have a release date, would not replace others in the works.
"What we love about this partnership is that there are no trade-offs we are making," Tippl said.
Previous Halo games have sold more than 24 million copies and generated more than $1.5 billion in sales.
According to people familiar with the situation, the basic terms of the Bungie deal — including intellectual property ownership and creative control — are similar to the ones that former Infinity Ward heads Jason West and Vincent Zampella were seeking before talks broke down and they were fired for alleged breach of contract in attempting to form their own company. They have since signed a deal with Activision's chief rival, Electronic Arts Inc.
Activision claims that the new deal proves its attractiveness as a creative partner. "If you look at the big picture, it's undisputable that we're the best destination for top talent in the industry," Tippl said.
Redmond, Wash.-based Bungie has been talking with game publishers and media conglomerates since early 2009, studio President Harold Ryan said. It signed a binding term-sheet with Activision, essentially sealing their partnership, in March, the same month that West and Zampella were fired.
"As far as Activision as a partner goes, aside from the fan impact, the Infinity Ward situation doesn't really come into play," Ryan said. "Ultimately Activision is a great partner with amazing global reach."
Microsoft Corp. purchased Bungie in 2000 for an estimated $20 million to $40 million, but the two parted ways in 2007 in an amicable divorce that left control of Halo with Microsoft.