Firms battle over Call of Duty: Modern Warfare 2

The game puts the player in the role of present-day combat troops

Two months after Call of Duty: Modern Warfare 2 launched to a huge media fanfare, its publisher Activision announced that it had taken more than $1bn in sales.

The sales put the video game in an elite club alongside other entertainment franchises such as James Cameron's Avatar and Michael Jackson's Thriller.

In fact it beat both to become the most successful entertainment launch of all time, in terms of its first 24 hours on sale.

Its success should have allowed its creators to reap the rewards and become the leading lights of the video games industry.

Instead they were ignominiously sacked and their studio now teeters on the brink of collapse.

Call of Lawyers

Infinity Ward is a Californian video games developer of just under 100 employees. They created the first Call of Duty game in 2003 and saw the series gradually increase in popularity until the breakthrough hit Call of Duty 4: Modern Warfare switched the setting from World War II to the present day.

Until recently the studio was lead by Jason West and Vince Zampella. Then in March they were suddenly dismissed by owner Activision for unspecified "breaches of contract and insubordination".

The first Call of Duty game appeared in 2003

There had been rumours of a rift between Infinity Ward and Activision but the move still astonished the games industry.

"I was surprised at how public and ugly it got very quickly," says Matt Martin, editor of website GamesIndustry.biz.

"I'd imagine a lot of ego and pride has been bruised, when Activision would rather let studio heads go than give them the creative control they thought they were entitled to."

"It's also difficult to argue it's all about creativity when you're slinging mud at your old employer and demanding millions of dollars from them," adds Martin.

Almost immediately after being sacked the pair launched a $36 million lawsuit against their former employer.

They accused Activision of operating in an "Orwellian fashion" and concocting false allegations in order to fire them - thereby gaining the company full creative control of the Call of Duty franchise and avoiding paying agreed bonuses.

The lawsuit accused Activision of "astonishing arrogance and unbridled greed" and complained that Activision forced the pair "to sue for their pay - in the hopes of either getting away with not having to pay them anything, or maximising its leverage to reduce that pay".

The suit even quotes Activision CEO Bobby Kotick's famous statement about fostering a company culture instilled with "scepticism and pessimism and fear".

Activision then countersued, making it clear that they were aware West and Zampella had secretly held talks with Activision's arch rival Electronic Arts. Activision also claimed that the pair had tried to "steal" Infinity Ward and "hijack Activision's assets for their own personal gain".

Although Infinity Ward does not have control over the Call of Duty name as a whole, the situation with the Modern Warfare sub-brand is less clear and Activision has warned fans that West and Zampella's legal efforts may seriously delay any new sequel.

And that was before the exodus at Infinity Ward began.

Two by two

At time of writing over 30 employees have left Infinity Ward including all the lead designers of Modern Warfare 2. Midway through the migration, West and Zampella unveiled their new company Respawn Entertainment.

Activision has just signed a deal with Bungie, makers of Halo

Just as Activision had predicted, this turned out to be a new studio created with help from Electronic Arts. It has quickly begun to announce the hiring of many of the errant Infinity Ward veterans.

To complicate the picture further, 38 current and already exited staff have filed a separate lawsuit against Activision for breach of contract and unpaid bonuses, royalties and profit shares.

The "Infinity Ward Employee Group" alleged that Activision had withheld the money "in order to force them to keep working for Activision so that Activision could receive delivery of Modern Warfare 3".

As it had done before, Activision dismissed the lawsuit as "meritless".

"It would seem that the studio shock from massive employee defections has likely destroyed any remaining creative culture within Infinity Ward," said analyst Mike Hickey of research firm Janco Partners.

"We expect the Infinity Ward studio will be essentially closed after their next Map Pack release."

Mr Hickey expects the development of Modern Warfare 3 to be spread between two Activision studios not historically tied to the franchise.

"Delaying Modern Warfare 3 wouldn't necessarily harm the Call of Duty brand so long as new titles in the franchise continue to be released," suggests Mr Martin.

"It might do the series good for a 2011 Call of Duty title to be something new entirely and give Modern Warfare 3 time to come together out of the limelight.

"Activision has big teams able to work on demand - as it has in the past with various Guitar Hero spin-offs for example - it can afford to scale up and down as and when it needs to, " says Mr Martin.

Bungie jump

As the predictions of Infinity Ward's demise, and the implied negative effect this would have on the Call of Duty franchise, reached their crescendo Activision played their trump card.

Activision also co-owns the World of Warcraft online game

They announced a 10-year exclusive contract with developer Bungie, creators of Halo - one of the few video game series that can compete with Call of Duty on an equal footing.

The deal immediately papered over any holes in Activision's portfolio that a collapse at Infinity Ward might have produced.

"We understand that Bungie has been working on its new multiformat game for some time and from that we assume that this game could come out in 2011 - that would help to offset any fall in performance or delay with Modern Warfare 3," said Mr Hickey.

The situation is especially ironic given that Bungie was previously a wholly owned subsidiary of Microsoft. Unlike the relationship between Activision and Infinity Ward, the lead creatives at Bungie tugged themselves free from the software firm after they made it clear they wanted more creative freedom.

Activision though seems to be banking that games players really don't care, and in the majority of circumstances are completely unaware, of who exactly makes their games, said Mr Martin.

"It's a sign of the immaturity of the industry", he says.

"Creatives in Hollywood prove themselves in multiple genres or different disciplines. The majority of game makers make the same game over and over for different systems, or make variations on a theme."

"West and Zampella have made some great first person shoot 'em-ups and two great franchises, but it's only one theme that's evolved over time," he adds.

"It might hurt egos, but I don't think the average consumer cares or recognises who makes the games, only whether they are good or bad."