Sunday, March 7, 2010

Infinity Ward and Activision: Deja Vu All Over Again Edition




Ten years ago I sat in an outdoor booth overlooking the garden of the Bel Air Hotel eating breakfast with Charles Cornwall. Charles grew up in South Africa and our Eidos conversation reminded him of a story he often heard as a child. Parents would bring home a baby lion cub and give it to their child as a pet. The lion would act as part of the family and play with the children purring like a kitten. Then, inevitably, one day the lion would lash out and rip the child's arm off. The action would send the family into shock. The lion, on the other hand, would just look at them and say "What do you want from me? I’m a fucking lion?"

Since every gamer writer, blogger and twiterererer on and off the web - not to mention the forums - are covering every portion of it, I didn't think there was much reason to wake from my four month blog hibernation to write about Infinity Ward and Activision. But then I got a call from an analyst who started asking questions and having been on both the publisher and the developer side, I could answer them two ways. Without knowing any of the relevant facts I gave him both.

"If Activision made a billion dollars on the franchise, and all these guys want is 36 million, why don't they just pay?"

Developer - Because they don’t have to honor the agreement.
Publisher - Because we have no reason to pay people who breach their agreement before royalties are due.

"Would Activision really give these guys creative input or control over the franchise?"

Developer - Yes. see question 1.
Publisher - Yes. We want to incentivize creators to stay with their work.

"Would someone really start talking to publishers and investors about a new deal while they are still employed?"

Developer - Yes. See questions one and two.
Publisher - Yes. See what we have to put up with?

"Wouldn't this make it so no developers want to work with Activision again?"

You’ll have to wait to the end for that one.


I quickly realized the real world just doesn't get us. The gaming press is able to immediately understand, dissect and surmise the real story because they are reporting from the penumbra, not the facts themselves. Kind of like the Vestimentiferan Worms that thrive in superheated, inhospitable deep sea vents where scientists never believed life could exist, game developers adapted to a world of grossly, exponentially, unfathomably disproportionate bargaining power and publishers adapted to running public companies while developers of major revenue streams held the corporate testicles in their coding-calloused hands. We see and understand this scenario all the time and the only uncertainty is whether this is the time David will finally slay Goliath.

This is not the first time this sort of thing has happened in the industry and it is not even the first time it happened with this publisher, developer, or title. Unlike the other postings, I try to not get too excited about the litigation filings. West and Zampella’s attorneys did a fantastic job of using the protections afforded complaints to write a powerful and quote worthy document for the court. Kudos for entertainment value and the drafting skill, and if it is true, the two should get everything requested and a pony. But when assessing the merits of the case, the press must understand, the documents are written to be persuasive so if it was done right, you believe it. Activision will soon answer with an equally persuasive, only probably not as colorful, answer the complaint and likely cross claims. If the answer does its job half as well as the complaint, the whole thing will be played out with public opinion moving like a ping pong ball with the filings. If so many peoples' livelihoods weren't involved it would be funny.

We needn't wait for it to play out and instead want to push the fast forward, we can just look back in history. Like Yogi Berra said, “It is déjà vu all over again.” Use the Google, it's all there. Over on Gamasutra we can see a contract entered into in 2002 between Spark and Activision. In the interest of full disclosure, I should take this time to note I have been representing Spark Unlimited since late 2004 and many of the guys over there, including CEO, Craig Allen, are personal friends. I was not involved in their lawsuit with Activision and the information in this post comes from the same websites you probably read if you are reading this post. I know, I know, it's a different company you say, but the contract covered Spark's development of a Call of Duty console game. At the time, Infinity Ward was developing only the PC version and their name was mentioned in Spark's contract. The biggest difference between these two contracts to work on the same title was the company ownership. While IW sold Activision a 30% stake in their company for 1.5 million USD and provided an option over the other 70% of the company, Spark secured, startup funding a right of first refusal over sequels to the product and a commitment to financially support the company in between titles. Most people reading this may say Spark got the better deal and may even wonder why IW did what they did, they never met Diego Angel. In every deal we did, Diego used to warn me "watch out kiddo, we don’t want to get too good a deal."

Spark released its first title under the agreement in November of 2004 - later than either party had planned and about a year after IW released the PC version. In late 2003 and early 2004, Activision and IW started working on a sequel to the first Call of Duty title despite Spark's rights of first refusal over the Sequel. When it came time to submit the proposal for the sequel, Activision not only rejected it, but rejected its obligation to support Spark in between titles. Of course there are two sides to every story. Those on the Activision side may say Spark just didn't submit a strong sequel proposal and the original title was delivered late (even though the sequel was already in development), and those on the Spark side will point to incentives created by the lack of royalty obligations on a title built by the wholly owned IW. Differing perspectives like these are the parents of lawsuits.

Claiming that Activision failed to pay any royalties on the game that went on to sell over 3.5 million units, Spark filed an action, for among other things, unpaid royalties and the right to stay involved with the franchise. Eerily similar to the claim filed by West and Zampella. While rumors are only starting to fly about the IW/Activision relationship, the facts underlying the Spark suit came out. Driven by a leaked internal post mortem memo written by Spark for Activision - not unlike the leaked memo about West and Zampella discussed below - the action started out being characterized as atypical story of a disgruntled, troubled developer against a publisher. As more facts came out, it quickly turned into Grisham-like story of over reaching by Activision, or in the words of West and Zampella in their lawsuit "an act of astonishing arrogance and unbridled greed."

West and Zampella's complaint tells a story of Activision's searching for reasons to avoid paying royalties owing under the agreement. They allege that after being interrogated in a windowless room for an extended period of time, Activision came up
with a bunch of false reasons leading to termination for insubordination. The termination, if valid, relieves Activision of its obligation to pay royalties. A similar end was allegedly reached through different tactics with Spark. Spark's lawsuit uncovered an internal email among Activision executives which read:

[Spark] will not be seeing a royalty check from me. I think this means that we’ve essentially replicated the ‘scorched earth’ scenario… royalty reductions [are] locked in, as [is Activision’s] ability to make them recoup against every expense known to man.


According to Spark's complaint, the email describes Activision's revisions to their agreement provided by Spark in consideration of Activision's commitment to a larger marketing campaign and a sequel commitment - better than a right of first refusal - for Spark. Similarly, West and Zampella allege in their complaint that Activision convinced them to make Modern Warfare 2 in consideration of more control over the studio, the franchise and a piece of the revenue stream. Just as in the case of Spark, none of the allegations of evils arose from Activision until after the game was released and before royalties were owing.

Like any good episode of 48 Hours, when everything looks like it favors the plaintiff, we learn about the defendant's case. G4Tv started a rumor that West and Zempella were talking to other publishers. The reporter wrote "I've since reviewed an Activision internal legal memo from a source close to the company that details what documents Activision is searching for related to the current litigation with Zampella and West." The documents include those covering future plans for Modern Warfare, possible spin out of IW, communications with employees about a new studios and documents relating to any ongoing conversations with publishers. The blogosphere picked up on this immediately and lit up with news that the two were already shopping a deal, or had a deal in place. The forums then lit up about how stupid these guys must be to put things in writing. Planting the seed was not hard. It would not be difficult to believe West and Zampella are a couple lions too. The news is playing into a developer stereo type. I mean after all, these are the guys who walked out on 2015 and EA to start Infinity Ward. EA accused them of stealing code and secrets on the way out the door to Activision. Activision defended them in that suit. Who is to say they would not do it again. Right? Maybe, but we don't know yet. If you read the report from G4, it is obvious the assumption is misplaced.

According to the report, Activision's memo outlines documents they are looking for. Not documents in hand. I am about to perform the same speculation as the other blogs, but I'll limit myself to the words on the page. The memo sounds an awful lot like a draft discovery demand. It's the part of the lawsuit where each side asks the other for all the information they need to proceed with the lawsuit - or as we see on tv, the search for the "smoking gun." The document requests usually ask for every document, email, voicemail, etc., etc., relating to anything you have ever done in your life and everything your mother has ever done. Then they go to specifics like requests for the type of information outlined. The G4 post mentions Activision's search for the document, it does not say they found them. I am taking one step further on the limb here, but if someone was willing to leak this document to the press, don't you think they would leak one of the documents listed if they had it?

Before we go all developer friendly here, let’s reel it in for a moment. The majority of posts, dialogue and commentary are siding on the developer side and talking about the injustice befalling West and Zampella. If these guys actually did the things they are accused of, they would not deserve the royalties. Coffee is for closers and royalties are for people who continue to be employed by the company when the royalties are due. If Activision was not honoring its agreement, the proper action of an employee is to pursue an action on the agreement, or leave and do the same. Disparaging the company or setting up a new company while still collecting a paycheck are not options. Employees who choose to do so, do it at their own risk. When I practiced law teams would come in all the time to talk about plans to spin out and feathering a nest to create a soft landing place. My answer was always the same. Leave the company and then come talk to me. Until then, get out of my office.

The reality is both sides started down this path a long time ago. Like unhappy parents staying together for the kids, they stayed together to get Modern Warfare 2 out. Along the way, they forgot the COD titles released were a collaboration between Activision and IW. Neither could have done it on their own. A great title is the result of a collaboration of publisher and developer and a bad titles is the result of a collaboration of a publisher and developer. Neither does it alone. Activision invested a significant amount of time, money and resource into IW and the marketing and support of the franchise. IW and the other developers on the franchise pored their hearts and souls into making the best game they could. The results of the collaboration were tremendous. Looking solely at the allegations, if West and Zampella did the things they are accused of, they deserve to be fired and lose royalties. If they did not and their assessment of their agreement is right, Activision deserves to lose the franchise and pay the money as promised. The point is, no one really knows what happened, and sadly, the decision of the court or ultimate settlement will likely have nothing to do with what actually went down. While it is a lot of fund to create salacious scenarios of overbearing oppressive publishers and evil, lying developers, everyone should really hold off until all the facts come out and both parties decide to explain their position openly, and not through leaks. Until then, it is not really any of our business and the reports are really no more than gossip.

My only certainty is the answer to the analyst's last question. "Wouldn't this make it so no developers want to work with Activision again?"
Unfortunately, no. There will be no impact. Publisher leverage is simply too great and alternative options too few. Sure I know of one developer who refuses to deal with Activision, but any other would heed the call if it came in.

"Hi, it's Activision."
"hi"
"I just want to let you know, I posted naked pictures of your wife on line.”
“What are you talking about”
“We got them from the cameras we put up in your house."
"The what?"
"Oh yeah, and sorry about the puppies. We had to put them down after we stepped on them. The cameras had to be placed pretty high and . . . "
"you killed my puppies?"
"Yeah, we may do it again if you get new ones. But that’s not what we are calling about. We need a game built and want you to do it."
"Cool, where do I sign?"





3 comments:

stiill said...

Sure, let's continue to predict the future from the past. How did Spark v. Activision eventually play out?

Allan said...

Keith,

Great post - balanced, thoughtful and well informed, with a great historical analogy. Hope all is well. Let me know if you come to the Bay Area.

Allan Thygesen

Clinton Keith said...

Great article. It's been too long. I love hearing any Diego story too.