Five reasons why the Bungie-Microsoft split is a smart move for Microsoft

Five reasons why the Bungie-Microsoft split is a smart move for Microsoft

Summary: On October 5, Microsoft officially announced its plans for Bungie: It is spinning out the company it acquired in 2000. Contrary to what some might believe, this is a good move on Microsoft's part. Why?

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TOPICS: Mobility, Microsoft
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When rumors first surfaced a week ago that the Bungie team that designed Halo was going to split from Microsoft, there was a lot of negative backlash. This was the proof Microsoft was not really committed to the gaming market, some said. Halo was a flop (not a justifiable contention, with $300 million in sales in the first week), but still an opinion seen/heard around the Web.

Five reasons why the Bungie-Microsoft split is a smart move for MicrosoftOn October 5, Microsoft officially announced what is really happening: Microsoft is spinning out the company it acquired in 2000, but is retaining an equity interest in it. Microsoft's Game Studio keeps the Halo intellectual property and will have the right to forge publishing agreements for "other future properties developed by Bungie." (But Bungie owns the IP on any new games, according to the announcement.)

I think this is a good move on Microsoft's part. Why? My ZDNet blogging colleague Larry Dignan and I immediately brainstormed these five reasons:

1. Microsoft wins some good karma among the gaming community for letting the Bungie crew do their thing. Happy Bungie employees will develop better games than stifled ones. 2. The Bungie brainpower stays affiliated with Microsoft instead of quitting and going to rival gaming vendors. 3. Microsoft might bank some dough if/when Bungie is aquired by another company (given that Microsoft is retaining an equity stake in Bungie). 4. Microsoft is spread thin enough already. Microsoft is definitely committed to building its gaming franchise, but more so on the console/service side than on the gaming side. Spinning out Bungie removes yet more more area where Microsoft has to spend money (shooter games) that's in an area outside its core. 5. Quasi-independent subsidiaries come up with more interesting ideas. As it has done with Xbox and Zune, Microsoft no longer believes innovation only happens when a unit is physically and psychically locked inside the Redmond headquarters.

What do you think? Is the Bungie spinoff good or bad for Microsoft?

Topics: Mobility, Microsoft

About

Mary Jo has covered the tech industry for 30 years for a variety of publications and Web sites, and is a frequent guest on radio, TV and podcasts, speaking about all things Microsoft-related. She is the author of Microsoft 2.0: How Microsoft plans to stay relevant in the post-Gates era (John Wiley & Sons, 2008).

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38 comments
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  • Good for

    Bungie.
    It is a wash for MS.
    PghNative
  • Was Microsoft paid...

    ... for the part of Bungie it does not continue to own? Given the company's track record and close connection to Microsoft, the equity Microsoft no longer holds had value. And that value turns to cash whenever the current private owners sell.
    If Microsoft received nothing in return, that would be one of the larger bonuses.

    As to why Microsoft would agree, any argument about gaming not being a core Microsoft concern isn't credible. Aside from XBox, the gaming on Windows assists sales of the operating system.

    The most likely reason is also the most obvious: those working for Bungie wanted to make money and also did not want to feel like a small part of a big company, with the possibility of internal political battles. And this was a good time to make demands, after the success of Halo 3.

    Money and power are usually good reasons. There's a third good reason, but I can't think of how to apply it here.
    Anton Philidor
    • Maybe

      bungie felt that it would be a better creative enviroment to be free from MS.
      Less corporate management to deal with.
      PghNative
    • Motivation

      [i]The most likely reason is also the most obvious: those working for Bungie wanted to make money and also did not want to feel like a small part of a big company, with the possibility of internal political battles. And this was a good time to make demands, after the success of Halo 3.[/i]

      Anton, I know this is heresy to you, but maybe money isn't their prime motivator. Maybe they wanted to make games, and MS management was getting in the way of making the games they wanted to make.
      Yagotta B. Kidding
      • They didn't ask administrative independence only...

        ... so I think making money is involved. I think we can agree that's not a criticism.

        Also, as you quoted, I observed that Bungie employees "did not want to feel like a small part of a big company, with the possibility of internal political battles."

        Isn't that close enough to your: "Maybe they wanted to make games, and MS management was getting in the way of making the games they wanted to make."?
        Anton Philidor
    • Bang on.

      "Bungie is like a shark. We have to keep moving to survive. We have to continually test ourselves, or we might as well be dolphins. Or manatees,? said Jason Jones, Bungie founder and partner.

      http://www.bungie.net/News/content.aspx?type=news&cid=12835
      odubtaig
  • RE: Five reasons why the Bungie-Microsoft split is a smart move for Microsoft

    OMG THIS IS THE BEST THING EVER. OH EM GEE OH EM GEE

    I LOVE BUNGIE AND MICROSOFT APPLE SUCKS MICROSOFT ROCKS THEY ARE GETTING MAD BROWNIE POINTS FOR THIS.

    HALO 3 KICKS ASS BUNGIE KICKS ASS

    I BET STEVE JOBS IS THINKING OF LETTING ITUES BRANCH OFF AND BE INDEPENDENT SO HE CAN BE AS COOL AS THAT STEVE BALLMER DUDE.


    DOES ANYONE ELSE THING BALLMER NEEDS RITALIN?????

    OH EM GEE I AM SO HAPPY
    OHEMGEE
    • I think you need ritalin, and a refresher on the caps lock key. (nt)

      .
      rtk
    • You're not Mike Cox, 0.0 (NT)

      NT
      odubtaig
  • What is Bungee?

    Answer: a handful of people.

    Last I looked, the USSC still hasn't reinterpreted the 13th Amendment into the same oblivion inhabited by the 10th, so MS has limited control over them. Just guessing, but I wouldn't be surprised to find that the exclusive contracts with the key Bungee staff expired a while ago, and this time around the gang have what is known in the trade as "go to Hell money."

    Bottom line: if the key Bungee troops felt like leaving, MS doesn't have an effective way to stop them. This may well be the best deal that MS could make.
    Yagotta B. Kidding
    • Could be that things like this happen everyday

      As the complaint made by maney is that MS's problems are they are getting away from their core products, so when they spin off this using that reasoning, the same people claim theythat "their backs were to the wall".

      Sometimes it's more costly to manage a handful of people then it is to let them do it themselves with a bit of oversight while collecting some revenue. Companies spin off divisions everyday when it caculates to a cost savings.

      Microsoft has an equity stake and the cash, so Bottom line: if the key Bungee troops felt like leaving, MS does have an effective way to stop them if they felt it was worth their time and effort.
      John Zern
  • Personally

    Considering that Bungie started as a Mac only developer and was seemingly pushed into MS' arms through Apple's gameless philosophy, I suspect that Bungie was never a good fit into the MS corporate culture.

    The agreement worked obviously considering the Halo series, but if their goals were being dictated and they wanted to branch out, I could see them pushing for a split. Probably, they gave MS the first rights to their console games. MS can benefit from their creativity and not have to focus on deciding which games to develop. Let them do what they do best and profit from it.
    mtgarden
    • Pushed by Apple

      Please. Bungie was making great games for the Mac and they were selling great for the Mac and being bundled with new Mac systems.

      Bungie was grabbed by MS because MS has the cash and Bungie was a hot, popular game maker.

      Bungie probably learned the lesson that the guy with the money may not always be the guy you want to hang out with.
      frgough
      • Agreed - Excellent comment

        I would also add that this would have looked good for judges like Judge KK and Judge Jackson and the EU antitrust judges if not for the significant ownership Microsoft intends to keep. Judge Jackson was looking for divestiture not split up of Microsoft. But the divestiture has to create an arms length decision process. You can not have interlocking boards, the same investors, ownership by Microsoft and get that arms length, free market, consumer oriented, American, Sarb-Ox form of decision making. With the current proposal we get more same old Monarchy/Monopoly King/Robber Barron back room decision making like the kind that required our founding fathers to declare independence.
        mighetto
        • Wow. You really do work hard at

          making unrelated events into another "MS is bad" rant.
          John Zern
      • It is probally more accurate

        That Microsoft achieved what it needed to with Bungie, and spinning it off with an equity stake is an all win situation for Microsoft:

        They took a good, yet little known maker of video games and elevated them to top status with Halo, helping build sales of the XBox.

        Being the "hot commodity", others will want them to design games for them, and Microsoft now can make money off of sale of games for Wii an PS.
        If they didn't like working for MS, why would the founder make the statement:

        [i]Working with Microsoft was great for us, it allowed us to grow as a team and make the ambitious, blockbuster games we all wanted to work on," said Jason Jones, Bungie founder and partner[i]

        It sounds as though Bungie may want to make things that Microsoft may not want to be a part of, so this make sense. I'm sure Bungie would have loved to continue to "hang with the guy with the most money" but in the end, it's the guy footing the bill that has the most to lose, so they have final say.
        John Zern
        • Oops.

          The last paragraph was not a quote. (must have forgotten a tag)
          John Zern
  • Here's the choice

    Bungie developed 3 awesome games for the Halo franchise...MS made LOTS of $$$ off this franchise. Now "many" Bungie employees offered MS a "deal." We either leave to form our own development studio or you retain an equity share in the company and let us spin-off...it's "your choice" MS!!!

    MS actually made out very well from the initial rights purchase to HALO and has made another good decision about letting Bungie do its own thing.

    Some people have said that Bungie was "part" of a very large company, but anyone that knows anything about Bungie is informed enough to know that Bungie had its own building, which was heavily guarded and even high-level MS executives wouldn't even be granted access. Bungie essentially controlled everything, even BillG didn't have any say with regard to when either H2 or H3 would be completed.

    My only hope is that Bungie doesn't fall off the map after they split from MS, which is entirely possible given the success of H3 and the previously stated F-you $$$ many of the employees have.

    Best of luck to Bungie...HALO MMO????
    THEE WOLF
  • I say it's about time.

    Was never a natural fit

    MS bought Halo because they saw the development of Halo and like everyone else knew it would be kick-ass! That was very smart of them knowing that XBox would need a good exclusive game to compete with the PlayStation. Halo single-handedly carried the XBox in its early years and looks like it will continue to do so with Halo3. Without Halo, the XBox would not be were it is today. The fact that they are letting Bungie 'FREE' around the time Halo3 sales are breaking records should show how dissatisfied Bungie must have been working in such a closed, controlled culture. It never seemed like a fit to begging with coming from a Mac only game company.
    dave95.
  • "gaming on Windows assists sales of the operating system."

    Maybe until Vista came along. Vista is currently a Lame Duck when it comes to gaming.
    BitTwiddler