Activision scores big win with Bungie deal

Video game giant Activision scored a major coup Thursday with the signing of a deal to publish the next franchise from Halo developer Bungie.

The partnership is intended to last 10 years and means that Activision, which is owned by Activision Blizzard, will be in a position to publish several iterations of Bungie's next franchise. Given the tremendous success of the various Halo games--all told, they have generated more than $1.5 billion in sales--an exclusive deal to publish Bungie's next series of games is a very big win for Activision, and a blow to its rival, Electronic Arts.

It's also, of course, a loss for Microsoft. That's because Bungie, which until 2007 was a Microsoft-owned studio, has had its games published by Microsoft Game Studios and has developed solely for the Xbox 360 platform and Windows computers. But now, Bungie's new deal--the financial terms of which were not revealed Thursday--will be cross-platform, meaning that the developer will likely be working on games for Sony's PlayStation 3 and possibly Nintendo's Wii.

Bungie will still finish work on the latest Halo title, Halo: Reach, which is scheduled for a fall 2010 release.

In a statement Thursday, Sony applauded the news of the deal. "The partnership between Bungie and Activision is a big win for gamers worldwide," Sony said. "Combining Bungie's creativity with the incredible power of PlayStation 3 will add serious muscle to action gaming. We look forward to extending Bungie's 'next big action game universe' with PS3 users."

Bungie "probably didn't want to be locked into one platform," Colin Sebastian, an analyst with Lazard Capital Markets, told CNET. "That's probably a big part of (the deal). The new deal is multiplatform."

From Bungie's perspective, being able to move beyond the Xbox is a big step, said Harold Ryan, the president of Bungie, in an interview. "It's a big step, and a great step for us, and one we've been planning for for a long time," said Ryan. "For us, it's about getting our story out so people can interact with our universe, wherever they are and on whatever platform [they use]."

Sebastian also said that while he didn't have any knowledge of Electronic Arts or any other publisher negotiating with Bungie, he would think that the studio would have looked at all its options before signing with Activision.

"I think there were probably multiple publishers looking at the deal," Sebastian said, "and there was obviously a financial commitment, [so Bungie went with the] publisher Bungie felt they could work best with."

Ryan confirmed that, adding that since Bungie became independent in 2007, the studio has attracted interest from a wide variety of publishers. "We've been talking to everybody you would put on a list [of potential partners]," Ryan said, "and a few people you might not, in gaming and entertainment, over the last few years."

Under the deal, Bungie will continue to own the intellectual property of its games, but Activision will have a 10-year exclusive right to publish them on a variety of platforms and devices. This is the first non-Microsoft partnership for Bungie since splitting from the Xbox maker in 2007. That means, according to Activision, that Bungie will now have a much broader scope for getting its games into players' hands.

In a report on Thursday morning, Sebastian wrote that he sees the deal as positive for Activision "We believe that the new publishing agreement with Bungie provides additional long-term visibility for Activision Publishing, which currently is largely dependent on the Call of Duty franchise for the bulk of its operating profits."

Sebastian also told CNET that while he didn't have any knowledge of the terms of the deal, he is certain that Activision was able to see what Bungie is working on and that, based on that analysis, the publisher was likely able to determine that it was to its benefit to make the deal and set its duration at 10 years.

And because, Sebastian pointed out, Bungie has a very well established track record and that the developer seems to have established that it knows the formulas for making commercially-viable games, he's optimistic that Activision was able to sense that it has several future hits on its hands.

"Bungie has been working on their new intellectual property for awhile," Activision COO Thomas Tippl told CNET, "and has a very clear vision and plan on what their new universe is going to be about, the stories that they're going to tell and the business model they're going to [pursue]. We support that vision. Bungie has a [track] record of delivering on their vision, and on time...We're very comfortable that this is going to be the next big thing in video games."

And Tippl added Activision had decided to sign on for 10 years "because this is a very strategic partnership...The vision for Bungie's next intellectual property is great, and the way this makes sense for us as a publisher is not by doing a one-off distribution deal...If we believe in the project, a 10-year horizon is appropriate for it."

Sebastian clearly buys that argument.

"I think from Activision's perspective, if they're not going to own the intellectual property," Sebastian said, "they want some visibility that they can still publish games based on the IP. [And] that's one point in Activision's favor. It seems like they will be able to publish three or four versions of whatever it is."

Updated at 12:52 p.m. PDT: with direct comments from both Activision and Bungie.

Updated at 12:24 p.m. PDT: to include comment from Sony.