Bungie could lose independence if it misses earnings targets

As per the $3.7 billion acquisition contract, Sony can take over Bungie and dissolve its internal board of directors if certain earnings targets aren't met.

3

New investigative reports from IGN's Rebekah Valentine shed more light on the current situation at Bungie. Sources tell IGN that the studio's independence hangs in the balance of ROI targets mandated by Sony. The $3.6 billion acquisition has squeezed Sony Interactive Entertainment's margins--the company has delivered low operating profit margins for the last three consecutive quarters as the games division pays for Bungie's buyout cost.

Bungie remained an independent subsidiary after the acquisition, complete with its game publishing branch. Two Sony executives--Head of Worldwide Studios Hermen Hulst and Sony SVP Eric Lempel--would get seats at Bungie's board of directors, sitting alongside three other Bungie execs. Part of the acquisition contract also included terms that allowed Sony to dissolve Bungie's board and take full control over Bungie's operations should the developer not hit specific earnings requirements.

Rising costs have affected the entire interactive entertainment industry, disrupting profits and triggering "cost-saving measures". The $185 billion+ interactive sector has shed thousands of workers to help stabilize profits, with major billion-dollar publishers and indie developers alike becoming more "lean" and "agile."

Bungie wasn't immune to the industry shockwave, leading to a string of layoffs that saw Bungie losing many high-profile and well-liked people.

Valentine's report goes on to highlight the morale issues and challenges the developer must face. Bungie is shooting to deliver Destiny 2's Final Shape expansion by June 2024, and the pressure is on for the studio. It's possible the fate of Bungie as it is known today will rest on the expansion's performance.

3

Sony's games division has also felt the pressure from the buyout. Gaming has the potentiality to be Sony's most profitable sector in instances of market volatility, as shown in the Q1'2020 operating profit spike to $1.152 billion. In the last three quarters, PlayStation gaming has delivered $294 million, $359 million, and $339 million in Q4'22, Q1'23 and Q2'23, respectively.