What is Bungie's Destiny?

Now that Activision Blizzard and Bungie have parted ways, Bungie took all the rights (and responsibilities) to Destiny. Is that a good thing or a bad thing, for Destiny fans, for Activision Blizzard, for Bungie? There have been numerous opinion pieces on the subject lately, but I think many of them are missing the mark.

Let's start with what we do know from the outside. Activision Blizzard and Bungie had a $500 million contract spanning ten years for Destiny, which initially called for regular releases every couple of years supported by healthy infusions of downloadable content (DLC) that would keep the revenue flowing in-between major releases. Well, it didn't quite work out that way. The initial release sold $325 million worth in its first five days, but then things slowed down. Destiny 2 ended up at about half that level for its initial release. For whatever reason (and fans had many gripes about the game), the game never really caught fire.

Who's to blame for Destiny's below-expectations performance? Some point to game design decisions, which should be squarely in Bungie's lap; others note strong pressure from Activision Blizzard to get new material out there and to generate more revenue, which may have led to decisions about conent that had less-than-optimal results. It's impossible to know for sure where the truth lies, particularly from the outside.

Regardless, we do know that Destiny did not perform at the level that Activision Blizzard desired. One clear inference we can make from the early end to the Destiny publishing agreement is that ultimately Activision Blizzard did not feel that Destiny's prospects were strong enough to warrant fighting over the franchise. So now it's Bungie's property, for better or for worse.

Now, keeping Destiny at its current level is not inexpensive -- and either adding more content, or creating a new game (Destiny 3?) is not going to be cheap. There's a big marketing challenge, too, in convincing people who already made up their minds about Destiny to give the game another try. Putting the Destiny ship into a new, more profitable trajectory is going to be neither easy nor inexpensive. The process will take time, too.

Succeeding in revitalizing Destiny will require a clear-eyed evaluation of what the game's problems have been, and smart decisions about how to fix them. It may be that the game's audience has reached a plateau, given the widespread competition, and changes that could be made with reasonable time and expense might not generate enough additional revenue to make them profitable. It's possible that Bungie might conclude that beyond a certain maintenance level, Destiny is not worth a major upgrade project.

Conversely, Bungie may analyze the situation and determine that some game design changes along with a steady flow of new content and good marketing may put Destiny firmly in the black. I don't know which case is true (though the decision is rarely so clear-cut). I wish Bungie well in making that decision. Whatever Bungie decides, the next decision will be what to tell the Destiny fan base -- and when.

Whatever changes Bungie makes (or doesn't make), you can be sure there will be a number of people who don't like those changes. The company needs to manage expectations and keep the fan base as happy as possible, either for new Destiny content or for a new Bungie franchise.

Meanwhile, Activision Blizzard now has to figure out how to replace the revenue hole Destiny's departure leaves. Spin up a new franchise? That takes a lot of time and money with no guarantee of success. Acquire a profitable game company? Possible, but expensive -- and that can take a long time to negotiate, and maybe even longer to show a profit.

I wish Bungie all the best in their quest. There's a tremendous amount of work that's been put into Destiny, and I hope that they can find a way to continue that world for many years to come.

Unity Makes Improbable's SpatialOS Impossible

The news came seemingly out of nowhere: Improbable, the well-funded UK startup producing the SpatialOS system for running massively multiplayer online games across multiple servers, announced that game development engine company Unity yanked their license to run Unity-based games. An unknown number of developers have been busy creating games for SpatialOS, and it's not clear how many of them were using Unity. What an unpleasant surprise to wake up to!

The news wasn't over for the day, though. At first, Improbable was pleading on their blog to get the whole issue squared away with Unity; apparently the two had been in negotiations over the issue for some time. Unity wasn't having any of it, though, issuing a statement that the whole thing shouldn't have been a surprise to Improbable -- Unity said they told them in person over a year ago that SpatialOS was in violation of Unity's terms of service, and notified them in writing six months ago, and has been negotiating over the issue for months.

That raises the question of why Improbable hadn't mentioned the issue to developers -- well, you can understand why (they wouldn't want to scare people off), but given the outcome some warning would have been nice, don't you think? At least Unity clarified later in the day that SpatialOS projects that were live and in production would still be supported.

Now at the end of the day comes news that Epic Games has stepped in to help Improbable create a $25 million fund to help developers "move to more open engines." Gee, I wonder what engine they could be referring to? This offer is... Unreal, so to speak.

I know there's more to the story that what we've been reading here -- I suspect there's money at the root of it, and Unity wanted some part of Improbable's revenue stream in some way. I hope all parties can resolve this issue without leaving developers feeling whipsawed. Imagine having to try and rework your late-in-development game to an entire new engine... a nightmare scenario.

I think Improbable has a bright future ahead, as there are many interesting game designs I can think of that would benefit from a fast, cloud-based OS like this one that can enable some things we haven't seen before in games. Let's hope they can find a way to play nicely with Unity as well as Unreal.

Activision Blizzard Shakes Up Management

Management has been changing over the last few months at Activision Blizzard. Netflix poached Activision Blizzard's CFO, and then Blizzard's CFO announced she was leaving to become CFO at Square. This follows after longtime Blizzard president Mike Morhaime stepped down last year, as did Activision Blizzard president Eric Hirshberg. Now Activision Blizzard announced that Call of Duty Exec Rob Kostich is the new President for Activision Blizzard; Humam Sakhnini was named president of King Digital; and Dennis Durkin will continue as Activision Blizzard CFO as well as heading up emerging businesses.

Why all the changes? Well, some are no doubt due to a desire to try something different (or just to retire), but one can't help but connect all this management movement with the fact that the stock has dropped 30% in recent months, and that the Q3 results showed a drop of 12% in overall sales. Some of the marquee titles like Destiny and Overwatch seem stagnant. Call of Duty still hasn't regained the sales it reached several years ago, though it's still selling tremendously well.

Perhaps some of this is due to Fortnite taking some of the oxygen away. The market for hardcore players is only so big, after all, and it's hard to expand your audience when you're already one of the market leaders. Investors are wondering where the growth will come from in the future. Esports? Perhaps, though it's not clear exactly how that segment will evolve over time. Mobile? Activision Blizzard's King is doing quite well with Candy Crush, but it seems to have trouble coming up with a new hit of that size.

Of course, Activision Blizzard is not alone in its doldrums. Electronic Arts is facing similar questions about where future growth is coming from. Market leadership makes it difficult to rack up strong growth numbers year after year. Just ask Apple.

What should these giants do? Perhaps look at some acquisitions; picking up a company with proven properties in key market segments should be good for growth, if you can make the right picks. (King Digital has certainly performed well for Activision Blizzard.) Mining the back catalog to bring back the hits of the past could be lucrative as well, if you carry it off properly. (Command & Conquer? Tony Hawk?) Both of these companies have many great hits in their past, some of which might be dusted off and brought back to great acclaim.

It will be interesting to see what happens over the course of 2019.

Update: The first big news has already dropped, as Bungie splits away from Activision Blizzard to put Destiny completely under Bungie's control. The game hasn't been performing as well as Activision Blizzard had hoped, clearly, and Bungie will see if they can do better. However, Activision Blizzard is now down two key franchises (Destiny and Skylanders) which had been major contributors to revenue in the past few years. What will replace them? It's not clear what, and certainly creating a franchise that can perform on the scale Activision Blizzard would like (hundreds of millions in revenue per year; ideally a billion or more) is an expensive, time-consuming gamble. Unless you buy one that's already doing well... I expect this will put even more pressure on Activision Blizzard to find something like that.

What this also says, pretty clearly, is that Activision Blizzard has lost faith in the ability of Destiny to grow to the size they need. The game could still be a good performer for Bungie, which doesn't necessarily need such huge numbers. Still, I wouldn't be too surprised to see Destiny go free-to-play at some point in an attempt to grow the user base significantly. That's easy to say, but remarkably difficult to pull off -- you need to have a game design that works well with monetization and can retain customers for the long haul, and it's not clear Destiny has that.

Buckle up, this may be a bumpy ride.