Activision Talks About Why It Broke Up With Bungie And The Destiny Series

"[Destiny] was not meeting our financial expectations."

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Now Playing: Activision Blizzard Talks Layoffs, Destiny Split, And Call Of Duty - GS News Update

As part of Activision Blizzard's earnings report today, the company discussed its decision to split off from Bungie on the development of the Destiny franchise. President and Chief Operating Officer Coddy Johnson started off by saying Activision Blizzard is "confident" that it was the right decision for both Activision Blizzard and Bungie to go separate ways. Describing the breakup as a "mutual, amicable" agreement, Johnson said the deal is the "right path forward" for each entity.

"Bungie gets to focus on the [Destiny IP] that they have created and we get to focus on our biggest opportunities on our biggest franchises with our best resources," Johnson said. "Our decision was reached with mutual agreement with Bungie to sell back the commercial rights. And for us at least, it was rooted in really our strategy overall."

When Activision Blizzard and Bungie originally signed their 10-year publishing deal for Destiny back in 2010, one key component of the agreement was that Bungie would get to retain ownership of the Destiny IP. By comparison, Activision Blizzard owns the IP for its other major franchises such as Call of Duty and World of Warcraft. There are a number of benefits to owning an IP, Johnson said.

"We did not own the underlying Destiny IP, and we do for all of our other major franchises, which we think is not just a differentiator for us in the industry," he said. "But also controlling the underlying IP gives us the chance to move in with new experiences and new engagement models which also come with new revenue streams and, structurally, higher economics when you own the IP."

Also during the call, Johnson said Activision Blizzard wanted to break up with Bungie because the Destiny franchise was failing to meet its commercial projections. "Destiny is highly critically acclaimed, high quality content, but it was not meeting our financial expectations," he said.

Specifically, Activision Blizzard said previously that Destiny 2: Forsaken failed to sell up to the company's expectations, though Bungie asserted that it wasn't disappointed with the game.

When Activision Blizzard management conducted a financial review for 2019, the company saw signs that indicated Destiny would not be a "material contributor" to the company's profit. Not only that, but Activision Blizzard assigned some of its own studios, including High Moon Studios and Vicarious Visions, to assist Bungie in developing Destiny content faster.

"[Bungie was] tying up one of our scarcest resources--developer talent," Johnson said.

While High Moon and Vicarious Visions will continue to work with Bungie on Destiny content for a "transition period," they will be freed up after this to work on other Activision projects. Earlier today, Activision Blizzard said it plans to increase the number of developers working on games like Call of Duty, Candy Crush, Overwatch, Warcraft, Hearthstone, and Diablo by about 20 percent in aggregate over the course of 2019. It could be that High Moon and Vicarious Visions shift some of their efforts to these projects, but that hasn't been confirmed at this stage.

Finally, Johnson offered a brief timeline of events that led up to Activision Blizzard parting ways with Bungie and the Destiny series. He said that Activision Blizzard learned in November, after its earnings report, that Bungie wanted to get out of the publishing deal. This deal was done in late-December, Johnson said, before it was ultimately announced in early January.

The bigger Activision Blizzard news today is that the company is cutting around eight percent of its workforce in a layoff round that could affect 800 people or more.

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