Bungie Studios, the game development studio behind the lucrative Halo series of games for the Xbox, is regaining its independence after seven years as a wholly owned Microsoft subsidiary. The change will have little effect on Microsoft's Xbox business: Microsoft will retain all intellectual property rights for the Halo series. Bungie will continue to use Microsoft as its publisher and will build games primarily for the Xbox 360. Microsoft is also retaining an undisclosed equity stake in Bungie.

Studio Produced Record-Breakers

Bungie was founded in 1991 and had a successful series of games for the PC and Macintosh platforms, including Marathon and Myth. In 1999, the company began to demonstrate Halo, a first-person shooting game it was planning to release for PC and Mac, and excitement quickly built around the game. In June 2000, three months after announcing the first Xbox, Microsoft acquired the privately held company for an undisclosed sum (rumored to be approximately US$50 million) and folded Bungie into a new game development and publishing unit, Microsoft Game Studios.

Halo was released as an exclusive for the Xbox when that console first launched on Nov 15, 2001, and it became the top-selling Xbox title. Its sequel, Halo 2, was released in Nov. 2004 and earned US$125 million on its first day—a record for any entertainment property—garnering Microsoft's Home and Entertainment business segment its first (and so far, only) profitable quarter. Halo 2 has to date sold more than 9 million units, making it the top-selling game for the Xbox franchise. Another sequel, Halo 3, was released as an Xbox 360 console exclusive in Sept. 2007 and earned more than US$300 million in its first week.

Microsoft Keeps Halo Franchise

The split will not affect Halo. Microsoft will keep all rights to the series, including the right to commission sequels and license the name and images for commercial purposes. Bungie, which currently has about 120 developers, will continue to develop two more Halo titles exclusively for the Xbox 360: a "casual" downloadable game and a console game developed with Peter Jackson, the director of the Lord of the Rings movies. According to studio manager Harold Ryan, for the "foreseeable future," Bungie will continue using Microsoft Game Studios as its publisher and will continue developing games primarily for the Xbox 360. However, the company is free to make games for other platforms.

According to Bungie managers, the company sought the split from Microsoft not over any particular creative or financial dispute but because it wanted to expand in order to build a wider variety of titles and thought it could grow more effectively as an independent entity.