Microsoft, Bungie Untie the Knot

Microsoft confirmed Friday that Bungie Studios, the developer behind the “Halo” franchise, will begin a transition to become an independent company, verifying rumors that had been circulating for a week. Microsoft will retain its rights to all things “Halo” and will continue to publish any games from Bungie.

“Our collaboration with Bungie has resulted in ‘Halo’ becoming an enduring mainstream hit,” said Shane Kim, corporate vice president of Microsoft Game Studios. “While we are supporting Bungie’s desire to return to its independent roots, we will continue to invest in our ‘Halo’ entertainment property with Bungie and other partners, such as Peter Jackson, on a new interactive series set in the ‘Halo’ universe.”

The revelation of the two companies’ restructured relationship follows the record breaking launch of the latest installment in the “Halo” series, “Halo 3.” According to Microsoft, the title brought in some US$300 million dollars during its first seven days on store shelves, making it the fastest-selling video game ever and one of the most successful entertainment releases in history.

Microsoft’s acknowledgment came after four days of swirling speculation about a coming split and the software heavy’s steadfast refusal to quell the rumors by issuing something other than a “no comment” in response.

Pragmatism and Business

The apparently amicable separation is notable for many reasons, Rob Enderle, principal analyst at Enderle Group, told TechNewsworld.

“This is pretty big,” he stated.

Purely a business move on the part of both Microsoft and Bungie, it will serve to increase the value of the asset to Microsoft, which will retain a minority equity interest, Enderle explained. For Bungie, it will provide a much better level of compensation for executives and employees than they would typically receive under Microsoft.

“You do a game like ‘Halo [3]’ that does $300 million, then if you’re an independent studio your stock would be going through the roof right now,” he said. “Every single person there would be rich. That didn’t move the Microsoft stock, as far as I can tell, at all.

“If your compensation, as it is for most people [in game development], is both equity- and salary-based, it is going to be really hard to hold on to people because they realize, ‘If I did this kind of job for an independent, I’d be rich,'” he continued.

“Working with Microsoft was great for us; it allowed us to grow as a team and make the ambitious, blockbuster games we all wanted to work on,” said Jason Jones, Bungie founder and partner. “And they will continue to be a great partner. But Bungie is like a shark. We have to keep moving to survive. We have to continually test ourselves, or we might as well be dolphins. Or manatees.”

Who Gets What

Microsoft will retain ownership of any and all properties related to “Halo,” including the upcoming interactive series set in the “Halo” universe being developed with “Lord of the Rings” director, Peter Jackson.

Bungie will continue as the lead developer for “Halo” and will also work with the software giant on new properties. In the short-term, Bungie will continue to develop titles solely for the Xbox and Xbox 360, but Enderle expects the company will reach out to other console makers in the long run.

“Microsoft keeps control of ‘Halo,’ but Bungie takes everything and controls all of the titles,” Enderle pointed out.

Cash Cow

The original title in the series, “Halo: Combat Evolved,” had gamers rushing to buy up some 1 million units in the first four months following its November 2001 release. The game is widely thought to have been the catalyst that gave the then-newly released Xbox a toehold in a market dominated by Sony’s PlayStation console. The game has brought in estimated revenues of some $170 million.

“Halo 2,” launched three years later, attained mega-hit status before it made it to store shelves. The title racked up more than 1.5 million pre-orders and went on to break records in the entertainment industry in its first 24 hours when in the U.S. and Canada sales climbed to some 2.4 million units bringing in $125 million.

That put “Halo 2” among the top five best-selling games for first-day sales in video game history. During the ensuing three years after its debut, before the release of “Halo 3”, it consistently ranked as the most-played game on Microsoft’s Xbox Live online gaming network with about 1 billion hours of online gameplay logged in by fans as of last May.

“Halo 3,” has been another blockbuster, eclipsing the high-profile premiers of movies like “Spider-Man 3” and even the latest Harry Potter book, Harry Potter and the Deathly Hallows, with one-day sales totaling $170 million, according to Microsoft. The game, available in 37 countries and 17 languages, sold more than 1.7 million units in pre-orders alone.

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