Call of Duty court case settlement could be 'tens of millions' says analyst

The high-profile case between Activision and Infinity Ward founders Jason West and Vince Zampella ended in May in an undisclosed settlement paid to the developers. No mention was made of the terms of that deal at the time, but Cowen & Company analyst Doug Creutz says today that the settlement could be worth tens of millions.

Activision will report earnings this week, and Creutz believes investors will ignore whatever impact the settlement has on the publisher's bottom line when addressing the health of the company.

In March 2010, Activision fired ex-Infinity Ward heads Jason West and Vince Zampella for insubordination, claiming the pair were secretly planning to start their new studio with the help of Electronic Arts.

West and Zampella filed a lawsuit against Activision for this move, alleging the real reason they were fired was so Activision wouldn't have to pay them millions of dollars in royalties associated with the November 2009 title Modern Warfare 2. Beyond the performance-based payout and any other court-awarded monetary damages, West and Zampella sought to gain co-ownership of the Modern Warfare brand.

Also in Creutz's note today were updated sales and release date expectations for popular Activision Blizzard games, including StarCraft II: Heart of the Swarm and Diablo III. The industry watcher noted Blizzard often puts its games into beta for 3-6 months before release, meaning with just five months left in the year and no beta announced yet, Heart of the Swarm is now likely to ship in 2013.

As for Diablo III, Creutz said he expects the dungeon-crawler to record first-year worldwide sales of 8 million units, up significantly from the 5 million forecasted earlier. That game went on sale in May and has already moved more than 6 million units.

Switching to expectations for Electronic Arts and its stable of titles, Creutz said fiscal year 2013 results for the publisher have been "meaningfully" reduced due to diminished sales forecasts for Medal of Honor: Warfighter. Creutz now expects the game to sell 1.44 million units in the United States in the holiday quarter, down sharply from the 2.33 million forecasted prior.

This reduction is based on what Creutz called a "very soft performance" since the 2011 Electronic Entertainment Expo in Amazon's top-selling game rankings, compared to other new games. Creutz chalks this up to the "poor quality" of 2010's original Medal of Honor reboot.

Additionally, Creutz was not so hot on Star Wars: The Old Republic. The industry analyst has downgraded previous subscriber base expectations from 1 million to 500,000, due to "continued poor server density trends." At EA's last count in May, Star Wars: The Old Republic boasted 1.3 million paying subscribers, a decline from the 1.7 million from February.

EA will report earnings tomorrow afternoon, with Activision Blizzard to follow on Thursday, August 2.