In the latest episode of the Infinity Ward/Activision debacle, 38 of the studio's workers (including a mix of former and current employees) have filed suit in California against Activision for unpaid royalties and bonuses in the amount of $58 million, and are alleging punitive damages of up to $500 million. The punitive damages come in light of allegations from the plaintiffs (fittingly calling themselves the "Infinity Ward Employee Group," or IWEG) that Activision not only failed to pay royalities and bonuses, but deliberately withheld payment in order to force the employees to stay and work on the next title in the Modern Warfare franchise, Call of Duty: Modern Warfare 3
. According to G4 writer Patrick Klepeck, who originally obtained the filing
, the suit also claims that Activision violated the California penal code in regards to labor laws.
"Activision owes my clients approximately $75 million to $125 million dollars. Activision has withheld most of the money to force many of my people to stay, some against their will, so that they would finish the delivery of Modern Warfare 3," stated Bruce Isaacs, council for the plaintiffs. "That is not what they wanted to do. Many of them. My clients' entitled to their money. Activision has no right to withhold their money -- our money."
Of note is the fact that former Infinity Ward bosses Vince Zampella and Jason West were excluded from the law suit, although the pair already filed suit
for $36 million in early March alleging much of the same mistreatment as this lawsuit. If even a portion of the allegations are true, Activision could be in for a serious drop in net worth sooner or later. Activision is putting on a stoic face given the circumstances, claiming that they have always been well within their legal rights as to the treatment of Infinity Ward and its employees.
"Activision believes the action is without merit," an Activison spokesperson told G4. "Activision retains the discretion to determine the amount and the schedule of bonus payments for MW2 and has acted consistent with its rights and the law at all times. We look forward to getting judicial confirmation that our position is right." How much of this is posturing and how much of this is Activision believing they are right is certainly debatable. Although it is certainly premature to assume that the company and the plaintiffs are in talks, legal cases such as these often end with out-of-court settlements and non-disclosure agreements.
The IWEG certainly seems confident that Activision is guilty of the alleged crimes: "In short, Activision withheld the property of the IWEG in an attempt to keep the employees hostage so that Activision could reap the benefit of the completion of Modern Warfare 3."
Even if Activision is right, the zenith of their losses has yet to appear: the number of employees that have officially left Infinity Ward has risen to 28 as of late April. It is, of course, foolish to assume that Infinity Ward will collapse or that the losses will continue at the rate they are (as the data points are insufficient for meaningful predictions), but the assertion that Infinity Ward will recover from the ongoing scandal is equally dubious. The situation is starting to look grim for the veteran game studio. Even if Activision is fine, Infinity Ward's fate may be different.
The potential consequences for Activision are not only in the immediate. If the company does not do something soon (besides responding with canned statements to all the law suits being filed against them), bad press could potentially drive investors to lose faith and sell, causing long term damage to Activision's portfolio. It seems strange, certainly, that a company that retains so much creative control (if the allegations pan out as true) is apparently not worried about losing its biggest assets, the creative driving force behind its products. Brain drain can and will not only lead to inferior products, but also loss of faith by stockholders and consumers alike. It seems even more strange, then, that Activision is unworried about the long term effect that recent events will have on its reputation.
For now, though, Activision should not be worried about immediate financial distress - the company's sales remain strong even in a time of financial uncertainty, and Blizzard is expected to release their AAA blockbuster title Starcraft 2
later this year. It is important to remember that Infinity Ward is only one small part of Activision's portfolio, no matter how much publicity the publisher-studio relationship is getting as of late. The only thing that is absolutely clear at this junction is this: the war being waged between the factions is not going to be over any time soon.