Fates of Microsoft, Activision Tied to Bungie

Bungie Halo: ReachBungie Studios celebrated its 20th birthday Sunday. Most people likely don’t recognize the name, but odds are good they’ve heard of Halo, the science fiction video game series that made Bungie the much-sought-after talent pool they are today. Bungie is more than just the house behind Halo. The studio now is a crucial component in the potential future success of two giants in the video game industry — namely Microsoft (NASDAQ:MSFT) and Activision Blizzard (NASDAQ:ATVI). 2011 will be the first year since 2007 that Bungie hasn’t released a new game. Why is Bungie so crucial to gaming’s biggest game machine maker and its biggest publisher?

First, a little history: Halo 3 for the Xbox 360 was Bungie’s crowning business achievement — a game that sold nearly 2.5 million copies in its first 24 hours on shelves in 2007. It was, at the time, the most profitable media debut in history, including film. Subsequent releases in the series have broken that record, like last September’s Halo: Reach, which sold 3.3 million copies in its first day. Reach, however, represented the last game in the series that Bungie itself would make, and the last game it would make as a subsidiary of Microsoft itself. Between Halo 3 and Halo: Reach, another series became the best-selling game of all time. Activision’s Call of Duty series trounced Halo‘s records, first in 2009 with the release of Call of Duty: Modern Warfare 2 and again in 2010 with Call of Duty: Black Ops, the game that holds the current first-day sales record of 5.6 million copies.

It was just before the release of Reach and Black Ops that Bungie’s role in this tug-of-war for blockbuster supremacy changed. Shortly after gaining its independence from Microsoft, Bungie announced it had signed a 10-year contract with Activision to produce a new series exclusively for the publisher. This new game, rumored to be a massively-multiplayer shooting game that would capture the gun-obsessed fans of Call of Duty, as well as the online community players obsessed with Activision’s other hit World of Warcraft, was expected to debut this year, but Bungie remains mum on the subject.

What does Bungie mean for both companies going forward? For Microsoft, a loss of exclusive access to Bungie might mean the end of the company’s place of prominence amongst diehard game enthusiasts. This fall will see the release of a 10th anniversary remake of the original Halo, and fall 2012 will see the release of Halo 4, the first entry of a proposed new trilogy. Without Bungie creating these games, however, Microsoft risks alienating a core fan base or diluting the quality of its biggest mainstream franchise. The franchise already has ceded mindshare to Call of Duty, and without Bungie as its stewards, it might continue to yield diminishing returns.

For Activision, Bungie’s new game is crucial to its continued success. The company is not careful with its properties, and the Call of Duty series might be reaching a saturation point with consumers. If those games cease selling in the millions at retail, Activision will be relying on Bungie’s new game to pick up the extra slack. With no sign of it on the horizon, though, Activision might face lean times before it can make the transition to a new successful IP. That’s assuming consumers respond to the Bungie game in the way they responded to Halo and Call of Duty.

As of this writing, Anthony John Agnello did not own a position in any of the stocks named here. Follow him on Twitter at @ajohnagnello and become a fan of InvestorPlace on Facebook.

Article printed from InvestorPlace Media, https://investorplace.com/2011/08/microsoft-activision-blizzard-bungie/.

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