Halo Reach sales start in less than two weeks, and investors and video game junkies alike are watching closely. That’s because this Microsoft (NASDAQ: MSFT) Xbox title is one of the most popular franchises in history and video game sales for Halo Reach could be off the chart again. That would be a bright spot in an otherwise dark outlook for video game sales in 2010.

The franchise has come a long way since it debuted in 2001. Halo sales across all titles now top 34 million copies worldwide, and all Halo merchandise has grossed more than $1.7 billion.  And in a way, the success of this title also could be considered a big reason Microsoft and its Xbox are still around.

The world balked when Microsoft announced their intention to enter the home video game console market in 1999. American companies had failed to challenge with Japanese competitors like Nintendo (PINK: NTDOY) and then-ascendant Sony (NYSE: SNE) since the early 1980s when Atari nearly disintegrated the North American video game market. It was even more baffling when they announced that the Xbox’s flagship title would be Halo: Combat Evolved, a first-person shooting game created by Microsoft acquisition Bungie Studios that began life as a strategy game for Apple Inc. (NASDAQ: APPL) Mac computers. But the game was a hit, and Microsoft and its Xbox team has never looked back thanks largely to Halo‘s unexpected popularity.

While the Halo franchise is by no means gaming’s best selling, but it is a bit of a kingmaker – beyond just its influence over the Xbox. Halo 3 and its predecessor Halo 2 both set the record for the highest grossing entertainment release — including film and music releases — in history when they came out in 2004 and 2007. That’s partially because a $60 video game counts for a handful of CDs or movie tickets, but the dollar amounts are staggering. First-day sales of Halo 3 reached $170 million and the total for the first week was about $300 million. That’s about the GDP of Denmark, for those of you keeping score.

The success of Halo 2 and Halo 3 sales were also responsible for establishing Microsoft’s online subscription service on the Xbox and Xbox 360, Xbox Live, which remains the only widely successful paid subscription service on home consoles. Halo 2 is also largely responsible for establishing the downloadable content market as a viable revenue stream for console video game developers. DLC, both paid and free, had been a common component of the PC video game market since the mid-’90s, but it was Halo 2‘s map packs that made DLC an essential part of Electronic Arts (NASDAQ: ERTS), Activision Blizzard (NASDAQ: ATVI), Take-Two Interactive (NASDAQ: TTWO), and every other game publishers’ business plans.

Last September’s prequel, Halo: ODST, was also a major success, selling 2.5 million copies in its first two weeks on sale, but it was overshadowed completely by Activision title Call of Duty: Modern Warfare 2 which sold 4.7 million copies within its first 24 hours on the market and has gone on to sell over 20 million copies worldwide. The Halo franchise, by comparison, has sold roughly 30 million copies total across all its titles combined. While Halo is responsible for creating the market that ATVI now controls with an iron fist, it’s Modern Warfare 2 that is blazing the trail for the future of the video games as both a retail product and an online service.

After reporting disappointing earnings during its second quarter in 2010, ATVI has intimated that future Call of Duty games and other franchises may require subscriptions independent of services like Xbox Live and Sony’s Playstation Network. If those games continue to be as successful as Modern Warfare, ATVI will stand to change the online gaming business in the same way that Halo 2 did in 2004.

It’s appropriate then that it may be Halo‘s creator Bungie that will help ATVI make those changes. Bungie became independent of Microsoft just one week after the release of Halo 3 in 2007. They announced at the time that they were actively developing a new intellectual property. While Microsoft retained ownership of the Halo and were guaranteed rights to future games in the series from Bungie, it was a mystery as to who Bungie would partner with to bring out their new IP. It was this past April that Bungie announced their 10-year agreement with ATVI to publish their new franchise.

Now, two weeks before they release their final Halo game, Bungie faces the challenge of creating not just the “Next Halo” but the next “Modern Warfare” as well.  Those are both high hurdles to cross.

But whatever happens, you can bet the short-term interest will remain on the latest Halo release as a gauge of what Microsoft and other video game stocks can expect to squeeze from this gloomy video game market.

As of this writing, Anthony Agnello did not own a position in any of the stocks named here.

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