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October 5, 2007

Microsoft and Bungie agree to amicable divorce

Posted by David Hunter at 3:24 PM ET.

All week long blogger Jacob Metcalf has been reporting a rumor that Microsoft subsidiary Bungie Studios ( the creators of the wildly successful Halo Xbox game family) were about to split from Microsoft. He suffered a bit from doubters of his scoop, but today Mr. Metcalf has the last laugh as Microsoft announced a plan to “evolve” their relationship with Bungie.

The net is that Microsoft retains an equity interest in Bungie and owns the Halo intellectual property, but now Bungie is an independent game development company, albeit one that has a long-term publishing agreement with Microsoft Game Studios and will concentrate on Microsoft platform games including Halo sequels.  Here’s how the Bungie Weekly What’s Update! describes the new relationship:

Bungie has long been built on creativity, originality and the freedom to pursue ideas. Microsoft agreed, and rather than stifle our imagination, they decided it was in both our best interests to unleash it. We’ll continue to make Xbox 360 games, and we’ll continue to make amazing games for MGS. In that regard, nothing has changed. All that has changed is that now Bungie Studios is once again, the property of the folks of Bungie Studios. Microsoft is and will continue to be, a brilliant, inventive and creatively collaborative publishing partner. Practically speaking, nothing has changed and you guys won’t see much, if any difference, for a while unless you come to work for us, that is – we’re hiring at

Congratulations to the folks at Bungie. I’m sure there are a fair number of developers in the rest of Microsoft that are very envious and wondering how they could cut the same sort of deal. As for Microsoft as a company, it was likely better to let the Bungie team go amicably as a group rather than lose them individually to competitors.

Related: Microsoft reported that Halo 3 had $300 million in sales in its first week since it was launched. I presume that is retail sales which would mean about $150 million in revenue for Microsoft. Since I figure Microsoft has about a $200 million hole to fill last quarter things look pretty good for the Entertainment and Devices Division to actually show a quarterly profit. However, Halo 3 also produced a temporary tripling in Xbox 360 sales which paradoxically may push the needle the other way depending on the efficacy of Microsoft’s hardware cost reduction efforts.

Filed under Employee Retention, General Business, Microsoft, Xbox

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