Analysts expressed concern today over a major conflict at the Infinity Ward studio – developer of Activision Blizzard’s biggest video game success to date – Call of Duty: Modern Warfare 2.
Gamer sites have reported that the two studio heads have left, a day after Activision reported it was concluding an inquiry into “breaches of contract and insubordination by two senior employees.” Activision did not immediately respond to our questions about whether the two incidents were related.
In an SEC 10-K filing on Monday, Activision said the inquiry was expected to lead to the departure of key personnel and litigation.
“At present, the company does not expect this matter to have a material impact,” it said.
Analysts at Broadpoint.Amtech said in a note on Tuesday that disruptions at Infinity Ward could affect the quality and timing of downloadable content for Modern Warfare 2, which they estimated could contribute three or four cents per share in 2010 earnings.
They pointed to rumours “regarding possible M&A interest about Infinity Ward from private equity firms and others. The disruptions described in the 10-K may be related, although we cannot confirm that.”
Activision has alternated development of its Call of Duty titles between Infinity Ward and its Treyarch studio in Los Angeles, meaning there is no disruption likely to the successor to Modern Warfare 2.
Broadpoint expects Modern Warfare 2 to drive up to 17 per cent of sales and 27 per cent of profits for Activision this year. Activision said last month it had generated more than $1bn in worldwide sales since its launch in November.
Gamer blogs at G4 and Kotaku reported that Infinity Ward’s studio heads Vince Zampella and Jason West met Activision executives on Monday and later posted on social networking sites that they were no longer employed at the studio.
Broadpoint analysts comment: “We expect the very vocal gaming press to put the story front and centre. The headlines will likely be ugly. In the end, what will matter for investors is if the core Infinity Ward studio holds together or if the departure of key executives will lead to further turmoil within the studio. It is too early to know how it will play out.”
