Bungie Jumps Microsoft’s Ship

After being rumored all week, Microsoft and its Bungie Studios subsidiary announced Friday that the legendary games house has, effective immediately, gone back to being a privately held company, independent of the software giant.

The split was amicable, according to a joint statement by the companies. Microsoft will continue to hold an investment interest in Bungie. More importantly short-term, Microsoft kept its share of the intellectual property (IP) related to the best-selling Halo and the loot it brings in. And it’s a lot of loot.

Microsoft announced Wednesday that Halo 3, which launched on September 25, grossed $300 million worldwide in its first week of sales alone. The wildly popular game series have sold more than 18 million copies globally, the statement said. The Halo games are published by Microsoft Game Studios.

“They continue to own the IP for the Halo project — period,” Frank O’Connor, writing lead for Kirkland, Wash.-based Bungie Studios, told InternetNews.com

A Microsoft spokesperson confirmed the company will “retain all Halo-related intellectual property.”

But what about new games?

“Microsoft will retain an equity interest in Bungie, at the same time continuing its long-standing publishing agreement between Microsoft Game Studios and Bungie for the Microsoft-owned Halo intellectual property as well as other future properties developed by Bungie,” the spokesperson added.

Bungie’s O’Connor was more succinct.

“We have a publishing agreement [with Microsoft] but any new IP we create is our own,” O’Connor added.

The rumors began flying Monday when Jake Metcalf, a blogger for the Seattle Post-Intelligencer broke the story on his blog.

“Apparently MS just wants Bungie to make Halo for the rest of their natural days, and Bungie doesn’t like how MS is constantly trying to ‘handle’ everything they do; the way they market their games, the way they interact with their fans, and how stingy they are with the profits,” Metcalf’s post said, quoting from an e-mail he received, tipping him off.

Bungie was founded in 1991 and acquired by Microsoft in 2000. The joint statement says that Halo 3 is “one of the most successful entertainment properties in history.”

The split can’t help but hurt Microsoft’s wallet in the long-term, according to one game industry analyst.

“Certainly, Microsoft would have preferred to keep Bungie in the fold but that apparently wasn’t going to happen,” Van Baker, research vice president for the media industry at researcher Gartner, told InternetNews.com. Instead, Bungie developers apparently chafed under the Microsoft corporate yoke.

“They [Microsoft] could keep the company and have all the developers jump ship or they could compromise,” Baker added. “[A split] is probably a reasonable compromise for everybody involved.”

Indeed, Bungie officials say they still love their relationship with Microsoft Game Studios and see cutting the corporate cord as good for all parties.

“They saw that with more freedom, as we grow and make better games for the Xbox 360, it’s good for them as well,” O’Connor said.

Still, it’s a dramatic move.

“I was a little surprised because Bungie has been so huge for Microsoft,” Baker added, noting the Halo revenue stream will peter out if or when the Halo franchise wanes.

Longer term, the split also means that Bungie can create versions of its own games that run on competing game platforms, and that may turn out to be good for Microsoft, given its equity investment in Bungie, noted Baker.

“All the people on the management team are Bungie people and not Microsoft people,” said O’Connor.

Because Bungie is now a privately held company, none of the financial details, including Microsoft’s investment, are being made public.

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