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

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?

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.

On 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?

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