NEWS - Sunday, May 27, 2012

New Bungie details leaked in Activision lawsuit

Details of video game publisherActivision Blizzard Inc.’s high-profile deal in 2010 with Bungie Inc. to make an original game series has been made public for the first time as part of a separate lawsuit involving the Call of Duty game franchise.

The deal with Bungie, considered one of the hottest studios in the industry, at the time helped Activision save face in the midst of an ugly legal fight with former Call of Duty developers Jason West and Vincent Zampella, whom Activision had fired a month earlier in March 2010. But at what cost?

Activision’s contract with Bungie, recently unsealed as part of Activision’s lawsuit against West and Zampella, outlines exactly what those costs are.

The 27-page agreement calls for Bungie to develop four "sci-fantasy, action shooter games," code-named "Destiny," released every other year, beginning in the fall of 2013. Bungie also agreed to put out four downloadable expansion packs code-named "Comet," every other year beginning in the fall of 2014. Activision has never disclosed release plans for Bungie’s titles.

The first Destiny game will initially only be available on Microsoft’s Xbox 360 consoles, as well as its potential successor, which the contract refers to as the "Xbox 720." Later games would be made for Xbox consoles as well as Sony Corp.’s expected successor to the PlayStation 3, and on personal computers.

Bungie would be entitled to royalties ranging from 20% to 35% of "operating income," the amount left over after Activision deducts its costs, including development, production and marketing expenses.

Under the contract, which may have been amended since it went into effect on April 16, 2010, Activision would also pay Bungie $2.5 million a year in bonuses between 2010 and 2013 if the Bellevue, Wash., studio meets certain quality and budget milestones. Bungie gets another $2.5 million if the first Destiny game achieves a score of 90 or better out of 100 on, a site that summarizes reviews by game critics.

The contract also reveals for the first time that Bungie is working on a potential successor to its Marathon game, which became a cult hit after it was published in 1994 for the Apple Mac. The document refers to Bungie’s right to devote no more than 5% of its staff to develop an action-shooter prototype dubbed Marathon while Bungie remains under contract with Activision.

What does this have to do with the Call of Duty case?

Plenty, argued West and Zampella’s attorney, Robert M. Schwartz. In a brief filed May 1, Schwartz wrote  that his clients took a smaller royalty, relative to similar contracts with top talent such as Bungie, in exchange for having more creative control over the Call of Duty franchise. West and Zampella, Schwartz argued, are entitled to compensation for the value of that creative authority, which could be worth hundreds of millions of dollars depending on how the royalties are calculated. Activision and Schwartz’s clients each are alleging total damages of as much as $1 billion.

Of course, the two highly complex contracts are apples and oranges. Among the many differences is that West and Zampella were employees of Activision, while Bungie is an independent developer operating under a publishing deal with Activision. In addition, Bungie owns the intellectual property for the Destiny and Comet games, whereas Activision owns the Call of Duty franchise.

Should the case go to trial as planned May 29, it will ultimately be up to a jury to go through the contracts and decide who will end up having to pay out.

An Activision spokeswoman did not immediately reply to a request for comment. Harold Ryan, the president of Bungie, did not respond to an email asking for comment.

Interested in reading the full contract?  Of course you are:



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