Call of Duty DLC Might Be Affected by Infinity Ward Turmoil, says Analyst

Although the details are still not 100% clear regarding the supposed "insubordination" and "breach of contract" at Activision's Infinity Ward studio, analysts are starting to weigh in on the impact that this disruption could have on the highly lucrative Call of Duty franchise. In a note to investors, Broadpoint AmTech analyst Ben Schachter said that the conflict may have stemmed from possible M&A activity.

"...our ATVI note last week mentioned recent chatter 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," Schachter speculated.

Luckily for Activision, the 2010 Call of Duty release should not be affected since it's being handled by Treyarch. "Disruptions at Infinity Ward could, however, affect quality/timing of the downloadable content (DLC) for Modern Warfare 2 (which we estimate could contribute $0.03 -$0.04 in 2010 EPS). However, it is unclear at this point what the extent of the impact, if any, on the DLC will be," Schachter said.

He continued, "We expect the very vocal gaming press to put the story front and center. 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. ... Troubles at Infinity Ward are concerning, but if only a few folks leave, we do not see much of a disruption. We believe ATVI owns all the Call of Duty IP, and while Infinity Ward has done a phenomenal job with the quality of the games, we think that the brand will continue to flourish even if significant changes occur at the studio."