Revealed: The huge promises and secret stipulations of the Bungie Activision deal

Revealed: The huge promises and secret stipulations of the Bungie Activision deal

By Rob Crossley

May 23rd 2012 at 6:40PM

Develop uncovers the facts and figures

Activision was engulfed in a public relations nightmare on the day the company had drafted a final ten-year contract with Bungie.

The political context is important in understanding the finer details of the deal, which Develop has published key details of below.

Just four days before Bungie and Activision signed the document, on April 16th, EA had proudly revealed it had signed a publishing deal with Infinity Ward founders Jason West and Vince Zampella.

Six weeks prior, the pair were dismissed from Infinity Ward, sparking a developer relations scandal lined with anger, bravado and mouthy lawsuits.

The furor and anxiety that swept through Activision during those brutal fifty days serves as a kind of prologue to the contract it drafted for Bungie; an emotional foretoken to a deal that is both stupefyingly generous and laced with paranoia.

Here are the key terms, promises, stipulations and numbers of the contract, as agreed on in April 2010 (some terms may have changed).


THE ESSENTIALS

The key elements of the ten year deal...

DESTINY
The codename for an online-centric action game series currently in development at Bungie for Activision.

COMET
The codename for an unknown standalone expansion to the Destiny series.

EIGHT GAMES, ONE PER YEAR

The first Destiny game will launch 2013, with the next three games projected to arrive 2015, 2017 and 2019. The four Comet expansions are scheduled to launch in Fall of 2014, 2016, 2018 and 2020.

CONTRACT LENGTH
The partnership is expected to naturally conclude 2020, but only if Bungie develops four Destiny games and four Comet expansions. The studio will need to support the game online for three years after the development deal ends.

XBOX 360 AND 720

The first Destiny game, as well as its first Comet expansion game, was cited to be in development for both Xbox 360 and Xbox 720, though this policy may have changed since. It is suggested Microsoft has a ‘Fall 2013’ exclusivity launch window.

PS3
A PS3 version of the project may be in production. Bungie’s contract stipulated that the studio conclude a PS3 feasibility analysis before January 31, 2011.

NEXT GEN TRILOGY
Destiny 2, 3 and 4 – as well as Comet 2, 3 and 4 – will be released on PS4, PC and Xbox 720, as part of a new trilogy of main games for next generation systems.


THE GIVE AND TAKE

What Activision has promised Bungie, what it wants in return...

OWNERSHIP
Though there are a significant number of stipulations which discuss unlikely (and near inconsequential) incidents, Bungie has been granted the exclusive rights and ownership of the Destiny IP.

THE $7,500,000 ON-TIME BONUS

The total bonus pay Bungie receives if the first Destiny project remains on budget and on target for its 2013 release.

(Of the Total Bonus Pay, the maximum possible that can be distributed to staff is 20 per cent, or $1,500,000).

THE $2,500,000 METACRITIC BONUS

The total windfall Bungie receives if the first Destiny project receives a Gamerankings.com score above 90.

THE $25,000,000 SALES KING BONUS

The extra twenty-five million Bungie is granted if Activision makes $750 million in associated operating income during a twelve-month period.

THE $25,000,000 SALES MASTER BONUS

An extra $25m is added to the previous figure if Activision’s associated operating income hits $1 billion.

OPENING ROYALTY RATE

Royalties are on revenues after costs, not net receipts. Bungie is due 20 per cent of Activision’s annual operating income related to the Destiny and Comet business, if Activision’s said income is anything up to $100,000,000.

WINNING ROYALTY RATE
Bungie takes 35 per cent of said annual operating income if it climbs above $400,000,000. The smallest single royalty at this end of the scale is $140 million.

TOTAL MAXIMUM BUDGET FOR DESTINY 1

Though advances are not discussed in the contract, Activision said it agrees to go up to a maximum budget of $140,000,000 for the first Destiny game on Xbox 360.

However, this includes marketing costs, and because it is the maximum amount before royalty penalties are issued to Bungie, it should not be considered as an accurate guide to production costs.

2022
The first year Bungie will have rights to publish Destiny projects for itself, or with a publisher other than Activision (assuming previous deadlines and terms are met). However, Activision has first negotiating rights to publish future Destiny games.

2021
Bungie is generally banned from developing action shooters other than Destiny until 2018 (after the release of Comet 3), regardless of other stipulations. After then it would have to wait another three years to be able to publish such a game, but in any event must give Activision first rights to negotiate a publishing deal.

MARATHON COMEBACK
A maximum of about five per cent of key staff and five per cent of all other employees are free to prototype and self-fund a project called Marathon, which appears to be a reimagining of a previous Bungie game of the same name.

MARATHON FOR $375,000,000
Once $375,000,000 in operating income is made through the Destiny business, Marathon will be free to be published, and at this stage about 10 per cent of staff can work on the project.

FREEDOM FOR $750,000,000
As much as 25 per cent of the studio, and 25 per cent of its key members, are free to work on non-Activision games after $750,000,000 is made through the Destiny business.

THIRD PARTIES
Activision's in-house studios can develop conversions of the projects providing Bungie agrees with the terms.


GAME CHANGERS

Deal breakers and key protocols that protect the agreement...


BUNGIE BUYOUT PENALTY

If, before 2016, a company merged with Bungie, or bought it outright, Bungie would need to pay Activision 19.9% of the acquisition transaction fee.

BUNGIE BUYOUT GETOUT
Bungie is free to reduce the penalty fee to 14.9 per cent, or even 9.9 per cent, if such an event were to happen. However, in order to do this it would need to achieve the two $25m sales bonuses - mentioned above – but not accept them.

NO ZAMPELLA WEST INCIDENTS
Key staff had to sign a new, long-term employment contracts with Bungie that Activision had approved the terms of. It stipulates that ‘key members’ will lose their equity in the studio if they leave before Destiny project number two, due for release Fall 2015 on PC, PS4 and Xbox 720.

(There is only one loophole that allows staff to get their equity back, and the Destiny project will need to make $1 billion in operating income for such a loophole to possibly come into effect).

NO INFINTY WARD INCIDENTS

The Destiny project will legally have entered ‘critical risk’ if 33 per cent of the Bungie staff leave the studio within any twelve month period prior to the master copy of Comet number four (due 2020).

In this phase, Activision has, in certain circumstances, the authority to assume control of the game’s IP, as well as a licence to use the proprietary ‘Destiny Game Engine’.

NO COMPETE

A small section of Bungie staff (identified as ‘key-key members’) have signed a no-compete clause, meaning they are prohibited from joining rival companies during the spell of the contract.

CRITIAL RISK

Activision CFO Thomas Tippl has the final authority to decide whether the Bungie project has entered a ‘critical risk’ period, which is determined as the project not meeting certain completion or quality milestones. In this event Activision has the right to resume control of the Destiny series without Bungie’s approval until 2020. (Bungie must still be paid royalties for games already produced).

ACTIVISION’S RIGHT TO TERMINATE

The publisher can pull away from the deal under the following conditions:

1) If Destiny 1 sales do not reach 5 million units after six months.

2) After the release of Comet 2 for any reason (2016)

3) If Halo Reach didn’t score more than 80% on Metacritic

4) If Halo Reach didn’t sell six million copies in its first six months

If Activision terminates, the IP goes to Bungie and Activision can only publish previous releases for another two years.


THE ODDITIES

Primadonna moments, cake icing, eyebrow raisers...

VALVE, EPIC, GEARBOX
All three studios are banned from developing any Destiny or Comet conversions or adaptations.

EASTER EGGS
Before commercial release of all games in the contract, Bungie must provide Activision with a list of Easter eggs it has spliced into the game. Activision, following the certification process, must provide Bungie with the same list.

2
Each Bungie employee will receive two Activision games per year as a gift.

1000
Bungie will receive one thousand copies of Destiny games after their release, to keep, play, share and promote the game.

TEEN/PEGI-16
Bungie has agreed to build a game it believes will fit within the parameters of a ‘Teen’ or ‘PEGI 16’ rated game. Failure is not breach of contract.

BUGS
Bungie must patch ‘critical’ bugs within thirty days of them being discovered after the commercial release of a game. If such a bug is found twelve months after the release of a game, Activision will not pay for repairs.