Gamasutra: The Art & Business of Making Gamesspacer
View All     RSS
October 23, 2014
arrowPress Releases
October 23, 2014
PR Newswire
View All





If you enjoy reading this site, you might also want to check out these UBM Tech sites:


Analyst: 'Well Along' Bungie Title Won't Devalue  Call Of Duty  Brand
Analyst: 'Well Along' Bungie Title Won't Devalue Call Of Duty Brand Exclusive
April 29, 2010 | By Leigh Alexander

April 29, 2010 | By Leigh Alexander
Comments
    14 comments
More: Console/PC, Exclusive



Bungie's next project is "well along in its development," but Activision's new deal with the developer isn't intended to supplant Call of Duty, says Wedbush analyst Michael Pachter.

The analyst says that Activision's ten-year exclusive deal with Bungie around the Halo creator's newest property resembles Activision's past deals with id Software, where the publisher is "funding some or all of the development and getting first dollar payback and a healthy revenue share in exchange."

The analyst says he discussed the deal with Bungie and Activision, and while details beyond the initial announcement are scant, "itís clear that this is a publishing partnership and not a distribution arrangement."

"That means that instead of normal distribution margins of around 10 percent, the deal probably allows Activision to participate in profit upside, suggesting that their margins could end up between 15 Ė 20 percent if a future Bungie game sells a crazy number of units," Pachter suggests.

The analyst says Bungie has indicated plans to make its games multi-platform "where that makes sense", and confirmed that the first installment under the partnership is "well along in its development." Mentions of an "action game universe" suggest aims for a Halo-sized property with multiple sequels and offshoots.

Pachter suggests that any future Bungie game will sell "at least 10 million units, as they will appear on multiple platforms for the first time," he says. Typical Halo games sold around 10 million worldwide units on just Xbox platforms, so assuming future installments are as popular, they could sell as many as 15 units on both Xbox 360 and PlayStation 3, the analyst estimates.

Assuming a 15 percent profit from 10 million units sold, Activision could make about $65 million in profits from a successful Bungie game, the analyst models.

"Bungie is a relatively productive studio, and it is likely that we will see a game from them every two years, beginning next year," he says. "Therefore, I think itís safe to assume that Activision will generate around 5 cents per share on average every other year from this deal."

However, the positive news is unlikely to be able to completely dismiss the cloud currently overhanging Activision -- and its shares.

"Iím not sure that this will fully offset the negative investor reaction to the ongoing Infinity Ward soap opera," says Pachter, "but at least it shows that Activision can deal with world class developers, and I actually thought that the Bungie guys sounded quite happy with their deal and with their relationship."

As for the key Call of Duty brand, it's unlikely to lose priority for Activision as a result of this deal, and will continue to be healthy, the analyst adds.

"The majority of the 20 million people who bought Call of Duty have no idea who Infinity Ward is," says Pachter. Without the involvement of the pedigreed studio, the next installment "probably wonít sell 20 million copies, but it will sell at least half that."


Related Jobs

Nexon America, Inc.
Nexon America, Inc. — El Segundo, California, United States
[10.22.14]

Localization Coordinator
Petroglyph Games
Petroglyph Games — Las Vegas, Nevada, United States
[10.22.14]

Producer
University of Texas at Dallas
University of Texas at Dallas — Richardson, Texas, United States
[10.22.14]

Assistant/Associate Prof of Game Studies
Wargaming.net
Wargaming.net — Hunt Valley, Maryland, United States
[10.22.14]

Lead UI Engineer










Comments


R G
profile image
I cannot believe that Bungie would pull something like this. Have they not seen the IW news that's been going around?



Respect to my ex-co workers. I've got friends there, and I wish the best of luck to you all.

Joe McNeely
profile image
I feel like Activision is becoming evil. Starcraft 2 Beta crashes my computer (which i'm in spec to play) and they try to screw over IW, and now they pull in the makers of Halo for a new franchise. Jeez

ken sato
profile image
Business is business. Partnership deals are not one size fits all. Finally, personality issues aside--I still have no idea why the partnership failed apart from what each side claims as the practices seem either inflated or ill conceived on both sides.



Finally I have to point out that Activision is the largest 3rd party publisher in the market place at the moment, and the only one that seems to be profitable and stable. (From a business point of view. Think of it as a critical path problem: how stable is your product pipeline if you fail to profitable titles? How does this affect your market performance?)



So in all, I am not surprised by this and can only hope for its success. And no, not JUST in profitability, but also in performance and delivery as well as studio relations. The industry went through a big contraction over the last few years, a correction that was particularly painful in the amount of layoffs and titles in development. I for one can only wish the industry well because I'm in it.

Carlo Delallana
profile image
Joe, if you read the article it says that Bungie has ownership of the IP. Acti has nothing to do with it outside of publishing exclusivity. I'm sure they have first right of refusal after 10 years should the exclusivity period expire and Bungie shops around the IPs developed during this time to other publishers. I don't think this is anything like the CoD fiasco as Acti owns that IP outright and can do with it whatever they please.

Carlo Delallana
profile image
Tim chimes in with his hollywood process. While I understand your passion for this I still don't think its the silver bullet solution to the woes of the industry. But if we take Hollywood as an example, there's an industry that REALLY cares about IP ownership. So do other forms of entertainment media. Who cares about IP ownership...everyone does.



Bungie are following in the footsteps of other well established/original content studios. They are building content equity around their Studio Brand and their creative talent. This isn't too far from Blizzard who, after merging with Activision, still has control over the IP they developed.

Terry Matthes
profile image
Pachter suggests that any future Bungie game will sell "at least 10 million units, as they will appear on multiple platforms for the first time,"



That is a large assumption.

Carlo Delallana
profile image
The Halo franchise has sold over 27 million units to date on Microsoft platforms alone. As a franchise it's clocking it at 9 years of age. So lets take a 10 year exclusivity with the largest publisher of 3rd party games out there on multiple platforms, "at least 10 million" is just about right.

ken sato
profile image
An extension of 'cold reading'. Based on prior history and company recognition, that's a good guess but guess none the less and can be rapidly skewed as Activision tends to cover a lot of SKUs, either through out-sourcing and/or partnerships.

Carlo Delallana
profile image
Reading through the interviews around the announcement it seems the opposite is true with Bungie and that ownership to them = creative control. It seems to be what drives the studio rather than what saps their creative energy.

ken sato
profile image
Clearly so and it's proven to be productive in the past.

Henrick Stankenheim
profile image
@ Tim: tell Lucas that IP ownership doesn't matter. You pimp a Hollywood model that you clearly don't understand.

Carlo Delallana
profile image
To be fair the Hollywood model can be mined for best practices...just as long as we don't copy what makes it such a soulless and vapid industry :D (i keed i keed)

Michael Smith
profile image
I'd hoped for more of a Valve/EA Partner type distribution deal.

gus one
profile image
The reality is Modern Warfare's life cycle has peaked and can only revert to the corporate mean now. MW3 was probably going to be the last of that type of game - and it would have been a great trilogy. In order to keep growing ATVI has to extend its franchises or acquire news ones or do both. They did the latter. Sledgehammer is working on a brand new format of CoD they can leverage off, Treyarch thankfully has pulled itself out of WW2 and a brand new franchise in the form of Bungie guarantees growth for the next 10 years. All this compensates for an inevitable decline of MW. Ironically if West/Zampella had stayed and just banged out another MW3, ATVI would have been more agreeable to listen about new IW IP and creating a new IW franchise. Pity for IW but ATVI will go from strength to strength. It does what Vivendi says and Vivendi says keep growing, keep paying us dividends or you're in the sh!t because none of our other investments are. I am so excited about the Bungie deal. Sorry guys... I know you all want ATVI to fail.


none
 
Comment: