Bungie (with Xbox Co-Founder Ed Fries)

Ben and David are joined by Former Microsoft VP and Co-Founder of Xbox, Ed Fries, to discuss the Bungie acquisition and the development of Halo. Highlights include: Ed’s call with Steve Jobs after the acquisition, and sharing the stage with Steve and Bungie Co-Founder Alex Seropian at the Macworld Keynote. Bungie today, and the unlikely path to get there led by Harold Ryan. How to find something that all parties want to get a deal done, the creation Peter Tamte’s spin-out Mac gaming studio, and orchestrating the division of current Bungie projects and assets with Take-Two, led by Ryan Brandt. Saving a project that’s off schedule and missing the mark, and how Jason Jones led the effort to make Halo 2 a hit at launch. Sponsors: Vanta: https://bit.ly/acquiredvantaServiceNow: https://bit.ly/acquiredservicenow26Legora: https://bit.ly/acquiredlegoraStatsig: https://bit.ly/acquiredstatsig26 More Acquired! Get email updates https://www.acquired.fm/email with hints on next episode and follow-ups from recent episodesJoin the Slack http://acquired.fm/slackSubscribe to ACQ2 https://pod.link/acquiredlpMerch Store https://www.acquired.fm/store! © Copyright 2015-2026 ACQ, LLC

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

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• 2:15Speaker 02

  Hello and welcome to episode four of Acquired, the podcast where we talk about startup acquisitions that actually went well. I'm Ben Gilbert.

• 2:23David Rosenthal?

  I'm David Rosenthal.

• 2:24Speaker 02

  And we're here today to talk about the Bungie acquisition by Microsoft.

• 2:29David Rosenthal?

  And most importantly, we have a very special surprise for everyone. This is our first episode with a special guest and we have a really incredible one for you guys. Joining us today is Ed Fries, who was at Microsoft during the acquisition and actually was the person at Microsoft whose group led the acquisition of Bungie. So we're very honored to have Ed with us today. He was, he was at Microsoft from 1986 to 2004, led the acquisition of, of Bungie and among many others.

• 3:07David Rosenthal?

  And today he's a prolific angel investor and startup advisor and board member in the game space and others in technology, which is how we got to know him and we're totally honored to have Ed with us today.

• 3:21Speaker 03

  Thanks. I didn't realize that was your first guest. That's exciting.

• 3:26Speaker 02

  Yeah, we try to keep that part secret.

• 3:29David Rosenthal?

  Now everybody knows our own pros.

• 3:34Speaker 02

  David, you want to do the, the acquisition history and facts?

• 3:36David Rosenthal?

  Yeah. So most people are probably familiar with Bungie, the creators of the video game franchise Halo. The company was founded in the early 90s by two undergrads at the University of Chicago, Alex Seropian and Jason Jones. And they made a few games, mostly for Mac, actually, during the, during the 90s, including hits such as Minotaur, The Labyrinth of Crete and others. And then they had their first breakout success with a game called Marathon at the end of 1994. And then had a couple of success, successful sequels and other projects that came out of that. Ben, you have a fun, personal history with.

• 4:22Speaker 02

  Yep, yep. Yeah, actually, my dad was a reviewer for the Mac users of Delaware of Marathon, kind of in the real early days before it came out and then as the trilogy unfolded. And we actually, he sent me some pictures last night. We actually have the collector's edition box set of the Marathon trilogy for Mac.

• 4:40David Rosenthal?

  Pretty cool. And so that was Bungie for most of the 90s. And then in the late 90s, in 1999, they unveiled to great fanfare their next project after Marathon, which was a game that they were calling Halo. And they actually unveiled it at a Macworld keynote in the summer of 99, and it was introduced by Steve Jobs himself. And they continued working on it for another year. And then in the summer of 2000, there was a twist, and Ed steps in. And Microsoft, in June of 2000, announced that they were acquiring

• 5:22David Rosenthal?

  Bungie and Halo, and that Halo would become an exclusive launch title for the forthcoming Xbox console, which was going to launch the next year. And everything changed at that moment. So, Ed, thanks again for joining us. Tell us, take us back to, you know, it was 15 years ago now. How did it all happen? How did it come together?

• 5:45Speaker 03

  Well, first, I was also a Bungie game player, even before I started running Microsoft's game business. I played a couple of games in their Myth series, which was their Real Time Strategy series. And so I was a big fan of these guys. I knew that they did really good work. We got final approval to make the Xbox at a meeting, we called it Valentine's Day Massacre, that happened in February 2000. And so, starting then, my life was really crazy because I knew that I needed a portfolio of games ready for launch in, you know, November 2001, which was less than two years away.

• 6:29Speaker 03

  Normally games take-

• 6:29David Rosenthal?

  And no developers even knew about the Xbox at this point, right?

• 6:33Speaker 03

  Yeah, I mean, you know, it was, it was just an idea before then. And, and so, um, so I was desperate for content. And, um, and what happened was, uh, one day my phone rang and it was a guy named Peter Campy who did, um, Fizdev for Bungie, who I'd gotten to know over the previous few years. And, uh, he told me that, uh, Bungie was in bad financial trouble.

• 7:03Speaker 03

  They were, uh, they were running out of money and they were likely going to be acquired. If, if nothing else happened, that they were going to be acquired by Take-Two. Take-Two already owned a third of, uh, a third of Bungie from an earlier transaction.

• 7:18Speaker 03

  And he wanted to see if I was interested.

• 7:22Speaker 03

  By the way, there's some debate about this point because also John Kimmick was also involved. So there's a, a guy named, uh, one of our product planners, John Kimmick, his, his job was to go out and talk to lots of game companies. And so he was also talking to them at the same time. So I don't know if I talked to him first or John talked to him first, but it doesn't matter.

• 7:41Speaker 03

  Peter called me, told me this stuff and, uh, and I said, yeah, I'm very interested. I mean, I, I really respect your work and, um, and I'd love to, I'd love to hear what you guys are up to.

• 7:56Speaker 03

  And, uh, that was the start of it.

• 8:00David Rosenthal?

  Wow. And, uh, I mean, I got to imagine there were other, maybe 15 or 20 or so launch titles for the Xbox when it came out. So, you know, you, you guys, uh, did do partnerships and, and, and with, with other game developers out there, you know, was there something special about Bungie kind of, or Halo in particular? Or, um, uh, just that you knew these guys were talented and the conversation started and went from there? Did you have other high-profile targets that you were looking at?

• 8:30Speaker 03

  You know, at that time, if any talented developer walked through my door, I was going to try to do a deal with them.

• 8:37Speaker 03

  Because I had, I had a big pile of money. That wasn't my problem. I had, I had less than two years and I needed to try to get this portfolio done. And so, um, so that was, I was definitely happy to, to talk to them and, and try to put something together.

• 8:55Speaker 02

  Did you try to do, uh, any other acquisitions at this, at this time? Was, were you thinking about doing like an all first party launch if you could, could get it with the, the pile of money?

• 9:03Speaker 03

  No, we, we were always gonna do a mix of first and third party. We knew we needed that. And at launch, it was about half and half. Uh, we, uh, you know, we, we had signed a deal with, um, Lorne Lanning and his group, Oddworld Inhabitants. Uh, that was

• 9:18Speaker 02

  Oh, yeah.

• 9:18Speaker 03

  The first big deal we did. And that was kind of the big deal because we pulled them away from Sony, who had published their previous game. So, um, in fact, there's a funny, uh, Penny Arcade comic from the time where, um, where Lorne Lanning's talking about how great it is to work with Microsoft and how he was really, really wants to work with us. Um, and then in the last panel, he says, plus they gave me this hat made of money. He's wearing this.

• 9:47Speaker 02

  Yeah. What, what were some of the kind of selling points for, for, uh, bringing those guys in-house? I mean, what, you've, you've got a lot of different tools at your disposal for, um, coming and, and joining and working directly with, you know, with and for the company that's developing the platform. What were your hooks for that?

• 10:03Speaker 03

  So, um, you know, we had done multiple acquisitions before we started the Xbox when, when I was running the PC business. Um, uh, probably the, the biggest one is, um, a company called FASA that did, um, MechWarrior and Shatterer, all those. Um, but, um, but we never went out with a goal of acquiring a company. Um, our goal was to find the best game developers in the world and support them with whatever way was best for them. Okay. I mean, in, in the-

• 10:35Speaker 02

  Whether it was publishing or, or, or acquisition or-

• 10:38Speaker 03

  Exactly. And so in this case, the developer was calling and saying, we're running out of money. Uh, Bungie at that time was a developer slash publisher. They did Boll. And that was, it was more common then, but pretty much all the little developer publishers were going out of business because doing distribution back then was becoming harder and harder for a little company to do. I mean, to try to knock on the door of a Walmart and that kind of thing. Um,

• 11:06David Rosenthal?

  Probably especially as the world was shifting to console, right?

• 11:09Speaker 03

  Yeah, exactly. So, um, so in their case, they were both a developer and a publisher and were finding that that just wasn't going to work out anymore. Um, and so

• 11:21Speaker 03

  that's what started the conversation. Uh, then I got a chance to see Halo, basically to see that trailer that they showed at, at Macworld. Um, and, um, and knew that this is something I really hoped I could get for us, you know, as part of our lineup.

• 11:39David Rosenthal?

  Did you, uh, did you or anybody else at Microsoft have, uh, have any qualms about acquiring a company that was mostly a Mac developer at that point? Or was it just all about the content?

• 11:50Speaker 03

  No, I didn't care about the Mac thing at all, honestly. I mean, they had done Myth versions of their games, or I'm sorry, uh, they did PC versions of their games, like, uh, PC versions of Myth, for example. Um, so I knew that they could do PC versions and the Xbox, especially in the early days, Xbox was thought of basically as a PC disguised as a console. So, um, I, I wasn't worried about them having the technical ability to do it.

• 12:16Speaker 02

  They were always working on, on Halo for Mac before. Did you have to like tear it all down, re-architected for PC and then do a PC port to Mac later? Or how did, um, how much of Halo was already done when you had acquired it?

• 12:29Speaker 03

  None, basically.

• 12:32David Rosenthal?

  Which is funny, because if you watched the Macworld trailer, you know, the, um, I think it was Jason who, who presented it on stage, you know? He makes a big deal about this is all running native on Mac and being rendered real time.

• 12:45Speaker 03

  Yeah, and it's got these wild animals running around and stuff.

• 12:48David Rosenthal?

  Yeah. And what I loved is, is, um, they don't actually show, uh, Master Chief or anyone else killing any Covenant, because I guess probably, I could imagine Apple didn't want any, any deaths on stage at, uh, at Macworld.

• 13:02Speaker 03

  Yeah, well, I mean, so, so we could, we can talk about the development of it. Let me talk a little more about the deal first, if you, if that's okay.

• 13:09David Rosenthal?

  Yeah.

• 13:10Speaker 03

  So, uh, the, the, the thing was, I wanted Halo, right? And, um, and I wanted the development team that was working on Halo. I want, basically wanted all the, all the developers in the company.

• 13:22Speaker 03

  And so I but Take-Two already owned part of the company. So I had to call up the head of Take-Two, which is a guy named Ryan Brandt. And we kind of had to work out between the two of us how to split the company into two pieces. And so Bungie was developing two titles at that time. They were Right, Oni, right? Yeah, Oni was the other game. Very good. So Bungie had two teams, one in Chicago and one down in California. And the California team was doing Oni and the Chicago team was doing Halo. And so basically, the deal I struck with Ryan was that he would get ownership of all the back catalogs. So all the all the intellectual property for all the Bungie titles that had been published so far.

• 14:04Speaker 03

  Plus, we would finish Oni for them and ship Oni. And then the Oni developers, once it was done, would move to Redmond and become part of our team. And the Chicago guys would come as well. So basically, all I got was the Halo IP, plus all the developers. And he got Oni and the back catalog. And that was and then between the two of us, we acquired the company, basically. And some people think I got the better part of that deal. I don't know.

• 14:35Speaker 02

  Honestly, at the time, though, you know, you make the best decisions that that you feel like are aligned with each of your incentives. And you do the most with what you walked away with.

• 14:42Speaker 03

  Yeah, and Ryan was great to work with. And he and I did deals after that. I don't think there were any hard feelings among any other parties involved in the deal, so.

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• 16:44Speaker 02

  You know, one thing that I just totally lit up when I was reading about this last night, you got a couple of pretty interesting phone calls after the deal was announced.

• 16:52Speaker 03

  Yeah, well, you know, when I did the deal, I didn't even think about it. But yeah, apparently Jobs was not happy. Steve Jobs was not happy. And so, I don't know, a few weeks later, once the deal was announced, I got mail from Steve Ballmer, or got a call from Ballmer or something. And it just said, Steve Jobs is mad that you acquired Bungie. Call him and try to calm him down, or something like that. I had this phone number. And I'm like, Steve Jobs' phone number.

• 17:30David Rosenthal?

  So it sounds like here's a noose, go hang yourself.

• 17:34Speaker 03

  I'm like, uh, okay, I can do this. Uh, so, uh, you know, so I dialed the number.

• 17:41David Rosenthal?

  How long does it take you to work up the nerve to dial those?

• 17:44Speaker 03

  Not very long, but I had an idea, which was good, which I'll explain in a minute. So, uh, so I didn't just call with no idea, I called with an idea. And, um, and here's the thing, um, you know, the irony of the whole thing was, the whole deal started when Peter Tamte, the biz dev guy from Bungie, called me. But when we acquired the company, we had room for everybody but him. We didn't, we didn't have a job for him. Um, and so I felt really bad that he, you know, he was like the one guy out of the acquisition who ended up without a job. But he had told me that he was, uh, he wanted to start a Mac porting company. And, uh, and anyway, so I had, so that was in my head.

• 18:29Speaker 03

  And so when I got this mail that, you know, I'm supposed to call Jobs, I kind of put two and two together. And so I, so I call Steve and, um, and I say, you know, hey, sorry, I'm the guy who bought Bungie. But, um, but we want to do a Mac version of Halo. And, um, actually I want to do a lot of other Mac, uh, games. So, you know, I don't have anything against the Mac. I worked on Mac Excel, I worked on Mac Word. Um, you know, uh, we have, uh, Age of Empires and all this other intellectual property, uh, from our PC gaming business. Um, and we would love to bring that to the Mac as well. Um, and I know just the guy to do it. There's this guy, Peter Tamte, ex-Bungie guy.

• 19:11Speaker 03

  He wants to start a company to take a bunch of PC games to the Macintosh.

• 19:17Speaker 03

  And Steve Jobs was really friendly on the phone. He said, "That sounds great. Here, let me give you a guy on my team." And he assigned me to somebody on his team to work out the deal. And it was a very short conversation and a friendly one. So it was good. So all of a sudden, I had, you know, had this deal for Peter Tamte. Apple agreed to fund the creation of his new company, which was really cool. So he had someone to fund his new company. And we were going to get to port a bunch of our games to the Mac. Maybe we'd make some money on that. So it felt like a real win. There was just one, there was just one requirement from Apple.

• 20:01Speaker 03

  And that was that Alex Seropian and I show up to the next Macworld and be onstage with Steve Jobs to announce this new partnership. So I mean, I was a little nervous about being a Microsoft guy going onstage in front of like 10,000 Mac people. Well, Bill Gates had done it before, so.

• 20:27Speaker 02

  In very dramatic fashion.

• 20:29Speaker 03

  But I'm like, yeah, you know, if that's what it takes to get the deal done, sure, I'll do it. So we agree and, you know, a few months go by and then it's time for Macworld. And so Alex and I get on a plane and we fly to New York. And driving in from the airport in a cab, and I remember the phone rings because we're going in, we had just landed. We were supposed to rehearse that afternoon. And then the event was the next morning. And phone rings and it's one of Steve Jobs' handlers. And they say, "Rehearsal's really not going well. Steve's really upset with how everything is. We really don't want you guys to come in. Go and check in your hotel and we'll call you after dinner." I'm like, "Okay."

• 21:13Speaker 03

  So Alex and I go, we check in. We're waiting. The phone rings, you know, maybe seven o'clock at night. And they say, "It's still really going badly. Jobs is really mad. Why don't you guys just come in in the morning?" And I'm like, "Well, the event is in the morning." And they say, yeah, yeah, just show up, you know, and, uh, and we'll just brief you right before you go on stage.

• 21:39Speaker 03

  Okay, so we get no rehearsal, we're gonna go stand in front of 10,000 people and we're gonna say something for, for a minute or so. Uh, it's okay. So, so we show up the next morning and, um, and just before it starts, Steve Jobs comes over, shakes our hand, says, hey, I'm gonna, I'm gonna say this at some point during my talk and then you guys just walk on stage, do your thing, talk for 30 seconds, talk for a minute, and then I'll shake your hands and then you're off the stage again. Um, you know, like, okay, we got this. So that's what we did.

• 22:12David Rosenthal?

  So you, you guys basically got to wing it on stage in Macworld.

• 22:18Speaker 03

  I, I, I, uh, I haven't seen the video, so I wonder how mad I was, but, um, but I tell you, I mean, so, so those were my only encounters ever in my life with Steve Jobs. So I, I mean, it was always, um, he was always very friendly to me, both, both times I talked to him in, you know, on the phone or in person. And, um, and he did an amazing job. I mean, sitting in the front row of the Macworld, watching him, you know, just take the audience and just hold their attention, you know, was, was incredible to see. It was, it was really fun to be part of.

• 22:50David Rosenthal?

  Which is a good, uh, it's a good segue. I mean, at that moment, you know, it sort of feels like everybody, you know, Steve Jobs is happy, Mac users are happy, Halo's still coming to the Mac, Take-Two gets ONI, you get a great launch title for the Xbox coming out the next year. And, uh, and then Halo launches and, uh, well, we, we should, you know, we'll, we'll dive into so many questions about that. But, um, for the probably two or three of our listeners out there who don't know what happened next, um, You know, Halo goes on to, uh, the first Halo, uh, has a, I believe, a 50% attach rate to all Xboxes sold

• 23:33David Rosenthal?

  within the first year of launch, uh, sells a million units in six months, six and a half million units over the lifetime of Halo, uh, which would be estimate, you know, there are no, no hard numbers out there, but kind of 200 to 300 million dollars in revenue just from the first Halo, but then it goes on and becomes this huge, uh, cultural phenomenon and a franchise, you know, I remember in 2004 when Halo 2 launched, um, I was a freshman in college and like people were organizing, organizing trips to the local, you know, GameStop to go buy Halo and Halo 2 at midnight. It was incredible.

• 24:16Speaker 02

  Yeah, yeah, I, I think I was up for 24 hours, I mean, just the sheer amount of Mountain Dew and Cheetos.

• 24:22David Rosenthal?

  And, uh, and so Halo 2 ends up, um, when it launches in 2004, doing 125 million dollars in sales on the first day, um, and becomes the fastest selling media product in US history, um, bigger than any movie, any album. Um, really, it was an incredible moment for video games and, and, and technology in general, um, and, uh, and then the, the kind of the rest of, well, I, I would say the rest of the story is history. We'd, we'd love to bring Ed back in and, uh, you know, the Bungie story takes a few interesting turns along the way, but, um, but first, Ed, I mean, when you were, you, you were desperate, you needed content for the launch,

• 25:04David Rosenthal?

  could you ever, you knew Halo was good, but did you think it was gonna be like this?

• 25:10Speaker 03

  I hoped it wa- it would be. I mean, I have to tell you that, you know, I, I wish the ride on the inside was as smooth as the one you paint on the outside.

• 25:21David Rosenthal?

  It was a straight line, right?

• 25:23Speaker 03

  I mean, I mean, the Bungie guys were always incredible to work with, super talented. It was, it was clear from as soon as we got them in that, that this was an amazing group of people. But a little quirky too. I mean, you know, like Microsoft,

• 25:40Speaker 03

  just quirky from a Microsoft point of view, like, like Microsoft, everybody has, you know, private offices with a door that can shut and that's like the selling point of going to Microsoft, or at least it was back in the day, you got your own private office. And so I proudly toured the Bungie guys around this new wing that we had just built out for them in one of the buildings and it was all, you know, brand new private offices from one end to the other. And they looked at me and they said, "We hate this." And I said, "What do you mean?" They're like, "We want all these walls torn out. We just want a big, open bay." And I'm like, "Like with cubicles?" You know, like, that was like the lowest status thing you could have at Microsoft.

• 26:19Speaker 03

  And they're like, "Yeah, yeah, we want cubicles with really low walls." And I'm like, "Oh, you're kidding me." I like, "I wish I knew this a few months ago." So the facilities literally had to tear the walls out of this place.

• 26:32David Rosenthal?

  So the acquisition price, never before disclosed of Bungie was, was whatever you paid for Bungie, plus all the two remodels you did to buildings in America.

• 26:43Speaker 03

  I mean, the great thing about, you know, working at a big company like Microsoft, when it came to acquisitions, the corp dev people were so incredible, the HR people were so incredible. You know, somebody like me who ran a business could just basically say, "Make this happen," and it would happen, you know, and they would deal with so many details and so many difficult, difficult things and facilities people as well. It's like, "Make these walls go away." The walls would go away like magic. But, um, so that was one thing. So we tore out all the walls and gave them the space that they wanted. And, but, you know, every Microsoft team has, has a test team that supports them and it's a really important, important part of Microsoft culture.

• 27:25Speaker 03

  And, uh, and they didn't want testing. They're like, "We don't want to, we don't need testing." And I'm like, "Yeah, you do. You really need, you really need a group of testers. This is the way we build software at Microsoft."

• 27:36Speaker 02

  Did all the engineers just test their own code? Or they trade testing responsibility around?

• 27:40Speaker 03

  You know, it's pretty typical in the game business, especially back then. You know, it's like they thought of testers as, you know, a bunch of high school kids, but, uh, but, you know, not professional testers like we had at Microsoft. And so, uh, oh, the other thing the Bungie guys wanted was they wanted secure access to their area. They wanted the only Bungie people, and I suppose me and a few other people could get into their area. So they had these doors that, you know, that were needed card key access to get into. And so, anyway, they didn't want the test team. I'm like, fine, I'm gonna, I'm gonna give you a test team and I'm gonna park them right outside your secure doors. Okay, so they're gonna sit right outside, outside your doors.

• 28:25Speaker 03

  And what happened was that test team was run by a guy named Harold Ryan. And, um, and the test team really proved themselves to Bungie over the period of that first Halo. They, they showed them what a group of professional testers can really do. And like, an example is they built a giant render farm out of a, a big pile of Xboxes. And the render farm brought the time to build, to make a new build of Halo down from, I don't know, eight hours to a half an hour or something like that. Um, so, you know, so the next, between Halo one and Halo two, they moved that wall, that secure wall to the side of the testers so that now the testers were part of the family, so.

• 29:06Speaker 02

  How's that, how's that for tangible success?

• 29:08David Rosenthal?

  And, and, and you'd still, even, even with the addition of testers though, I mean, one of the things that I think is, um, so incredible about Bungie is later on in Bungie's history, in, in 2007, it ends up getting respun out from Microsoft. And, uh, when that happened, there were only 120 people working there, I think, including the testers.

• 29:28Speaker 03

  Do you know who the president of Bungie is right now? Harold Ryan.

• 29:33David Rosenthal?

  Oh, really?

• 29:34Speaker 03

  About that.

• 29:36David Rosenthal?

  That's awesome. Embracing testing.

• 29:39Speaker 03

  So, anyway, so that's a story for you. When we first started showing Halo around to the game press, there was a lot of skepticism. They, you know, they were wary about Microsoft entering the console business to begin with. They thought we really didn't understand console games, which was true. And then we're really excited to show them a first-person shooter, which is a PC genre, you know, looks like a PC game. And they're like, you know, this isn't Mario, this isn't Sonic, you know, this is just proof you guys don't get it.

• 30:17Speaker 03

  So, we got a lot of pushback from the press, actually. E3 2001, we only had half-speed graphics cards in the machines that we had at that time. And so, it didn't show that well on the show floor. There was more kind of rumbling in the press. There's Penny Arcade comics from that time, where the Penny Arcade guys are really down on the game.

• 30:44Speaker 03

  I don't know if I can swear on your podcast, but one of them just says Halo is shit.

• 30:51Speaker 03

  And so, coming into launch, it was very unclear whether Halo was going to be our hit title. I mean, we, you know, we were all playing it, you know, after hours and saying, you know, is this game as good as we think it is? Because this seems amazing. But we're kind of all PC gamers, you know, and we're, well, maybe we're drinking our own Kool-Aid here. You know, maybe console gamers won't want this kind of a game.

• 31:16Speaker 02

  Did you have to, in preparing for the launch, establish what was going to be your flagship game for varying marketing channels? And the way that you're talking about the platform and what you're showing off? Or did that sort of organically fall out after your release?

• 31:29Speaker 03

  No, absolutely, we did. We, you know, because we had a certain marketing budget. And probably the biggest thing we had to decide was which titles were going to get TV. And the TV budgets, you know, we could afford to do TV for just a couple of titles.

• 31:45Speaker 03

  And so Oddworld and Halo ended up getting basically equal treatment at launch with big TV campaigns from us. And you know, Oddworld was kind of our, well, this is a developer's known to console world. You know, I should say the game, the game was called Munch's Odyssey. Oddworld's a company, but you know, so that and then Halo, and that's kind of the way we're, we're sort of not sure, you know, which of these games is gonna, it's gonna do best for us.

• 32:13Speaker 02

  Yeah, still not sure.

• 32:19Speaker 02

  In, in, in sort of that like early launch stage like that, how do you know and how fast do you know which of those two is gonna be?

• 32:25Speaker 03

  Well, once things start to sell and you know, reviewers get their hands on it, it becomes, it becomes clear really quickly. But especially back in, in those days, there were, there were a lot of things that had a lot of lag when it came to marketing. So, you know, anything that was in print, for example, you know, it was maybe a three month delay. If you wanted to be in, in mailers, or not, not mailers, but like, say like a Christmas catalog that gets inserted and insert into newspapers and stuff like that. Magazines, it was all like three months or four months. So we always had to commit to the marketing team three or four months in advance when a game was gonna ship.

• 33:09Speaker 03

  And then if we weren't there, if one of these circulars ran, but the product wasn't available in store, we could get fined, right?

• 33:19Speaker 03

  So that was always, that was always built into our development process. But it's not like today where information just goes boom out there right away and you can make changes right away. There was, I mean, there was actually stuff printed with ink, you know, and sat in white houses.

• 33:35Speaker 02

  Yeah. Hard to imagine.

• 33:38David Rosenthal?

  I'm curious, I really want to ask you, especially because the whole theme of our show is thinking about technology and while there's certainly a huge element of, you know, both Bungie and Halo and our very first episode we did Pixar, of just content and creativity, there also is a huge element of technology in Halo and Bungie and new technology. And I'm curious from your guys' perspective, you know, to me, the story that I write in my head is, you know, the, the single player experience of Halo is, is good. It's great. I'd buy the game. I'd play it. But what made Halo was multiplayer and, and networked multiplayer.

• 34:20Speaker 02

  Yeah, I, I remember buying a router specific, actually no, I didn't buy the router because I went through my dad's old bin and got one. But doing a router and stringing four Xboxes together in my friend's basement.

• 34:31David Rosenthal?

  Yeah.

• 34:32Speaker 02

  For Xbox Live. It's the only way to do that.

• 34:34David Rosenthal?

  I think every high school kid in America did that at the time.

• 34:37Speaker 03

  That's exactly right. I mean, it was one of the only games that you could do that or, you know, where, because Xbox Live didn't come out for a year later, right? And, and so people came up with all kinds of, I remember you could hook your Xbox to a PC and then people would do the, and then do these PC connections over the internet.

• 34:55David Rosenthal?

  Software on your PC.

• 34:56Speaker 03

  Uh, but it was all like, yeah, handmade and.

• 35:02David Rosenthal?

  How much did you guys either A, well, both A, think about that beforehand in terms of this incredible experience of playing with your friends, but then B, how much, how much did that shape the eventual launch of Xbox Live? And, and Halo Two, you know, being the, to my mind, that first real AAA style, fully realized experience of what playing with other people and your friends anytime you wanted could be.

• 35:29Speaker 03

  So, I mean, a few things. It's, it's amazing how much that team accomplished in less than two years. I mean, that is not very much time in the game business. And, you know, not only did they have the single player, but they had, they had multiplayer, but they also had split screen and split screen multiplayer. They had networked multiplayer. They also had split screen co-op play, which you, you don't even have split screen co-op play in Halo Five. It just slipped the ship.

• 35:54David Rosenthal?

  Yeah, controversially.

• 35:56Speaker 03

  I mean, it was amazing what was in that first game, but yeah. After they shipped Halo 1, then working with the Xbox Live team, helping them develop Halo, or helping them develop Xbox Live, and develop how games would work on Xbox Live. That was a big thing for the Halo team. They worked really closely with Xbox Live. Tons of Halo fans on the Xbox Live side, so they really wanted to work with the Bungie guys. And, you know, it was a very mutual, respectful experience there. You know, the problem is Halo wasn't due for, you know, a few more years. Halo 2 wasn't due for a few more years,

• 36:40Speaker 03

  and I can talk a little about that, what happened there. So, somebody reminded me the other day that actually the first Xbox Live title that we launched with our first party group was actually that FASAD team that I mentioned earlier. And it was Mech Commander was the first one. But anyway, meanwhile, the Bungie guys go off after shipping Halo 1, and a couple of things happened. Jason Jones, who's, you know, just the creative genius behind everything Bungie, decides he's gonna leave the Halo team and start a new project. And so he and a small group go off on the side and they start to work on this new project.

• 37:21Speaker 03

  Meanwhile, the Halo guys, the main Halo team, starts working on Halo 2. And they get a couple of years into it, and it's kind of going off the rails without Jason running it. So Jason comes back and he looks at it, and this is about a year before we're supposed to ship, and... He's very unhappy with it and the team has a lot of problems. They tried to do too many things technically. They tried to do this new lighting model that really didn't work. I mean, I love, you guys tell this story like it's so nice and smooth and Halo 1 came out and Halo 2. You know, for me, it was like this nightmare. It's like Halo 2, it's all screwed up, you know?

• 38:07Speaker 03

  And then Jason comes back and he's like, I can fix this. And he goes through and just like, you know, re-does a whole big part of Halo 2. But in order to do it, he needs a whole nother year. So it's gonna, instead of being out in 2003, it's gonna be out in 2004. And so I have to go to Robbie, my boss, and tell him he's not gonna have Halo 2 until 2004 and blah, blah, blah. Anyway, it's not my favorite memories, but I'm glad, I'm glad you liked the game when it came out. So, uh, so yeah, anyway, that was, uh, you know, Jason got it back on track and, uh, and they were able to bring out a game that was really special.

• 38:48Speaker 02

  It's so, so interesting. David and I were talking before this about a parallel to a previous episode. Actually, our first one is Disney acquiring Pixar. And in, you know, so many parallels because it's a, um, you know, a creative hit space business where, you know, you're, you're doing the, the creative studio work in-house and putting this thing out and hoping it really resonates with people. And one of the things that makes that process work is the ability to have that honest conversation internally and the mechanisms by which you fix things when you're off the rails. And there's this incredible parallel here to, you know, the, the story of Toy Story as it was being developed.

• 39:26Speaker 03

  Right, yeah.

• 39:27Speaker 02

  Where that went totally off the rails.

• 39:29David Rosenthal?

  Toy Story 2.

• 39:30Speaker 02

  Uh, no, Toy Story 1, the original. Uh, I'm pretty sure.

• 39:34Speaker 03

  Yeah, I think I've read this too, yeah.

• 39:36Speaker 02

  Where Woody was me.

• 39:38Speaker 03

  Yeah.

• 39:38Speaker 02

  And they were, they were screening the, the, um, you know, as far as they had gotten. And it wasn't fully rendered and fully realized, but the story, they had to change the story and replicate it on market storyboards. And, and I think delay a year because it was just like, you were watching the movie and it, it didn't feel nice and it didn't feel right and it wasn't the experience they were trying to create.

• 39:57Speaker 03

  And they were getting a bunch of feedback, I think, from Katzenberg or something and it was, yeah, all screwed up. I know, I know. You don't really wanna see how this stuff is made on the inside. It's just like, oh, this game is awesome.

• 40:09Speaker 02

  It's all magic in one day.

• 40:11David Rosenthal?

  Same thing in regular startups too.

• 40:13Speaker 03

  Exactly.

• 40:15David Rosenthal?

  What, uh, I don't want to dwell on this for too long because it's not a super core part of the story and you had left Microsoft by this point, but, um, you know, I was Halo 2, despite the sausage making being a nightmare for you, goes on to become the, you know, the most successful, I think, video game of all time at that point when it was launched. And then Halo 3 even eclipsed that and helped launch Xbox 360. But then after Halo 3, Bungie spins out of Microsoft. Um, and you were gone, so you may not know, but to the extent you do, how and why did that happen? Um, Microsoft ended up retaining a stake in Bungie, but, um, and Bungie kept working on Halo through Reach and ODST. Um, but,

• 40:59David Rosenthal?

  but how did that happen?

• 41:02Speaker 03

  Okay, so I'm gonna, I'm gonna tell you what I understand about the story and, you know, everything up till now, I've talked about stuff I was directly involved with. Now it's, it's more like things I've heard. So I apologize in advance to anyone if I get something not quite right here, but, um, after Halo 2 shipped, there was a disagreement about royalties. There was some kind of royalty agreement between the person who followed me and the guys at Bungie. And, um, after Halo 2 shipped, uh, the Bungie guys felt like that deal was not followed, uh, the way they thought it should be. Um,

• 41:44Speaker 03

  and they decided they would be better off separate, uh, as a separate company again than part of Microsoft. And they went into negotiations, uh, with Microsoft to figure out how they could split out and do that. And my understanding is Microsoft agreed to let them go, go out and become an independent company under the conditions that they do a certain number of titles. Um, and they, and once those titles were made for Microsoft, they were free to go, basically. Um, and so they entered into an agreement to do that. And I think those titles were Halo 3, Halo ODST, and Halo Reach. And so after they

• 42:28Speaker 03

  finished Halo Reach, they went on to do their new game, Destiny.

• 42:32David Rosenthal?

  Destiny.

• 42:34Ben Gilbert?

  All right, listeners. Now is a great time to talk about a new partner of ours here on Acquired, Logora, the agentic operating system that is redefining how the world's best legal teams work.

• 42:47David Rosenthal?

  Yep. It's sort of obvious that AI is going to completely change the legal industry. I bet most of you listening have dropped a contract into some sort of AI chatbot out there. Logora took that insight and asked the question, what if you really built something with that power from the ground up for the legal industry?

• 43:03Ben Gilbert?

  So the founders did exactly what great founders do, operate with obsessive customer focus. They embedded inside a massive law firm for months. They sat with the lawyers just watching how the work really gets done.

• 43:18David Rosenthal?

  And that's how you get features that customers love, like tabular review, where you drop in a folder of hundreds of contracts and it pulls every key term into a grid a lawyer can actually work with. Logora's bet here is interesting. Since it lets each lawyer handle more complexity, any given person can increase the quality of their work and do higher value work. And this means that the pie can grow even as each individual task takes less time.

• 43:42Ben Gilbert?

  And they recently launched Logora Agent, offering greater intelligence and performance. The agent lets lawyers set an objective, then it can handle the planning and the execution and delivery of the final product. Legal teams get to maintain full control and transparency since they're still involved where judgment is required.

• 44:01David Rosenthal?

  And Logora works where you already work. You can use it within Microsoft Word while redlining or drafting. The early Logora numbers essentially speak for themselves. When they have a head-to-head pilot with their top competitor, they win 70% of the time. Logora now has over 100,000 lawyers on the platform from 1,200 legal teams in 50 countries. And crazily, they went from 1 million to 100 million in ARR in about 18 months.

• 44:31Ben Gilbert?

  Truly insane numbers. And that is the real test. Plenty of things demo well, but the question is whether a busy associate actually reaches for it during crunch time, or whether a partner trusts it before going into a conversation with a major client. If your legal team wants to check it out, whether you're a law firm or you're in-house at a company, you can learn more at logora.com/acquired and just tell them that Ben and David sent you.

• 44:56Speaker 02

  So Ed, one of the things that we like to talk about a lot are trying to figure out and pattern match the things from an acquisition that made it successful, that made that experience where, you know, the value of the small company plus whatever it was that the big company brought to the deal, the combination of those three things is a gigantic multiple of the two parts and they're separate, kind of a one plus one equals three thing.

• 45:23Speaker 03

  Yeah.

• 45:24Speaker 02

  What characteristics, you know, what actions and what things transpired that made this so successful?

• 45:32Speaker 03

  Well, I think, you know, most game developers pretty much feel the same, which is like, I just want to make an incredible game, you know, I want to have the resources to make the game that I have in my head, you know, and, and then I want, want to see it have an honest chance to reach its, its market, right, to reach as many people as possible. So, you know, if you think about trying to do that as a little struggling independent company like Bungie was versus trying to do it under the umbrella of Microsoft that's about to launch a brand new console and has a $300 million marketing budget and it's going to, you know, make a lot of noise about this new platform. I mean, that's, that's a big

• 46:16Speaker 03

  opportunity for someone to have their, their ideas and their, you know, their creativity ride along with that, with that big push. So that's, that's, I think, what's in it for a game developer to want to, to want to team up and be part of, part of this bigger thing. I, I think the challenge along the way is, you know, and this is something we always, you know, I worried a lot about and we, we worked hard on is, how do you, I mean, one of the things that makes these teams special is they have their own unique culture. Like, you know, that's what you should hear when I'm, when I'm saying Bungie wanted to

• 46:55Speaker 03

  rip out the walls because they worked super collaboratively as a team. They wanted the programmers and the artists to be able to just shout to each other across this room, you know. And, and by the way, if you go to visit Bungie's office now, it's in this giant, well, it used to be a movie theater and it's a giant bay. It's still completely open because that's part of their culture, you know. So how do you integrate? Something creative into a bigger company like Microsoft and still protect it so that it can have its own unique culture. I think that's really the challenge of management that's running something like that.

• 47:33Speaker 02

  Yeah, and there's obviously a tension you have to manage there between efficiencies of the larger business and respecting the culture of the smaller. Did you struggle at all with the decision to move them to Red?

• 47:43Speaker 03

  I didn't, but in retrospect, I probably wouldn't have done it later. We went through multiple other acquisitions over time. And I think the more you can do to preserve the culture of the company, the better, because I think that's really what makes them unique. And that uniqueness, at least in the entertainment world, is really important. It expresses itself in the product itself. So I like to talk about how I had these two really great teams who worked for me. One was called Ensemble Studios, and they did the Age of Empire series

• 48:23Speaker 03

  down in Texas. And another, the Bungie team. And if you looked at the cultures of those two companies, they were almost diametrically opposed. Like, if you wrote their values down, there would be like opposite lists. Like, Bungie would be like, "We're hardcore." And Ensemble would be, "We're a family." I don't know, stuff like that. It would just be really different. And that kind of taught me that it's not, that there isn't like a culture that works. It's like, having a culture

• 49:04Speaker 03

  is what matters. It's not which culture you have that matters. Having a strong culture that attracts specific people that fit within that culture and really enforcing it and really making it, that culture ends up just expressing itself in the product. I don't know how else to say it.

• 49:21David Rosenthal?

  Yeah. It's so cool to hear you say that because... That's such a, uh, been a core theme of, of our whole show and, and part of the reason we decided to do this.

• 49:32Speaker 03

  Oh, good. I haven't heard any other episodes, so.

• 49:34David Rosenthal?

  Yeah, well, you know, we, we, we talked about, we talked about Pixar, we, we've done, uh, Instagram and we've done Twitch and all of those are, were companies that when they were acquired had a very, very strong culture that's, um, so far at least with all of them, um, been allowed to remain independent and they've all thrived hugely and, and, you know, for us, I think a big takeaway has been, um, the importance of doing that. When you, you know, when you have a great culture, that's when great things get created.

• 50:01Speaker 03

  Yeah, I mean, I think one of the things was we were able to bring, um, those two bungee teams together though. You know, the Chicago team and the California team together in one spot. And, um, we needed that, I think, to get the Halo work done. So maybe, maybe in that case it was the right thing to do. But in general, it, it's not, it's not always the right thing to do. And then the challenge you have in a bigger organization is what if, how do you integrate with the other parts of the company that need to work with you? Um, I, I had gone through a process of integrating marketing into my game teams when I was doing PC gaming business. And I, and even though the marketing guys didn't technically report

• 50:45Speaker 03

  to me, they were integrated and sitting with my teams all through the, all through the organization. And then after Xbox came along, um, there was all of a sudden this kind of bigger Xbox organization and, uh, and the head of Xbox marketing wanted to have all his marketing people under him, sitting in his building. So they all got pulled out and I think it was a really bad decision because, you know, they, they, they really got separated from the, from the teams and, um, all of a sudden it was sort of an us and them kind of thing, rather than that we're all working together. We do different functions, but we're all trying to do the same thing. I mean, an example of that would be the first, the first TV ads came back, uh, from the agency for Halo and we showed

• 51:30Speaker 03

  them to the bungee guys and they hated them. They really, really hated them. There's a guy running around with a gun and he's shooting stuff. And they're, you know, and you might think, oh, that's what Halo is about. You know, to the bungee guys, that is not what Halo is about at all. You know, for them, Halo is like the quiet before the storm. It's that epic, long vista that you see and realize you're going to be heading there later. You know, it's that.

• 51:55Speaker 02

  It's the original theme music.

• 51:56Speaker 03

  Yeah, it's the music, it's all that. So we had to like way back and try to, try to fix this, you know, TV commercial. But that's the kind of stuff that happened when, you know, when there isn't this integrated team working together all the way through so that they really understand the vision for the product.

• 52:13Speaker 02

  Yeah, it's, it's so interesting thinking about, um, just, just from my time at Microsoft, when we kind of had the, the one Microsoft reorg and went, went functional from divisional. And where's the appropriate place in the hierarchy to, to separate, um, into divisions versus functions? So with functions being, you have all the marketing people together for all the business groups and all the tech people together for all the, all the business groups versus, you know, having these sort of family units of these separate divisions where everyone's totally integrated.

• 52:42Speaker 03

  Right.

• 52:42Speaker 02

  And it, it sounds like, um, you know, at least in this kind of creative endeavor space, the, the divisional kind of works better and, and all the different functions need to be super tightly integrated with each other.

• 52:52Speaker 03

  You know, I was at Microsoft 18 times, 18 years. I mean, so I don't know how many times I saw that organization, that reorg happen back one way and then back the other and back one way and back the other. You know, it's like the grass is always greener, you know? It's like, uh, one, one, one way has a certain set of problems and then the other way has a different set of problems. And so it seems like they just toggle back and forth between the two. I, I don't really understand it, but.

• 53:21David Rosenthal?

  Well, one of the things we do on our show, uh, that, that we really enjoy doing is, um, three segments in particular that we can run through quickly. And Ted, we'd love, uh, we'd love you to participate too. Um, uh, the first is that Ben and I each assign a category to the acquisition. And the kind of five we've identified, we could find more that break out of the box, but the five we've identified are people, technology, product, business line, or I guess fourth, the fifth is, is other wildcard. But yeah, you know, for for me, it's interesting. I really pegged Halo and Bungie as a product acquisition for Microsoft. But it's interesting, you know, hearing you talk

• 54:04David Rosenthal?

  it, it's really, I think you've given a lot of data to support people as well. Ultimately, I think I'm going to stick with product, simply because more than anything, you know, because of the spin out that ended up happening later on in Bungie going on to to leave Microsoft and that DNA to leave Microsoft and and Halo sticking behind as as a product for for Xbox. What would you say, Ben?

• 54:32Speaker 02

  I'm not going to disagree. I think it's absolutely that. Like you said, there's there's definitely a learning from the folks at Bungie about their culture and about how to produce that sort of game and bring it to a platform that nobody thought was going to have a first person shooter like the PC and things like that. But yeah, I think my vote would be product. Ed, what do you think?

• 54:56Speaker 03

  I'm sticking with the people for sure.

• 55:01Speaker 03

  I mean, you know, it's one thing to create a franchise and it's another to to continue it is one thing I'd say, you know, and these are the people that that created Halo, you know, out of out of nothing. And so, you know, it's true, there's a different team that's that's moving Halo forward now and and they've added a lot of interesting new things to the to the franchise. But Bungie created it.

• 55:27Speaker 03

  And then they created Destiny, which I also think is very good. So I don't know, I just always fall on the side of the people are what really matter in these companies.

• 55:39David Rosenthal?

  Well, one of the one of the pieces of feedback we've gotten is we need more disagreement on this show. So this is great. We're going to bring people in like you had to disagree with us. You're welcome back anytime.

• 55:49Speaker 02

  If David and I keep agreeing, we'll just bring in third third parties that can gang up on us.

• 55:54David Rosenthal?

  Okay, uh, second to last, uh, second to last segment. This is my favorite. We talk about, um, because this is about technology acquisitions as a whole, this show. We talk about, is there an underlying kind of generalizable and broader theme in technology? That this acquisition embodies or represents? For me, and this is why I thought Destiny was a great seg. You know, for me, the Bungie acquisition represents the power of whenever there's a platform shift in technology, and that happens very discreetly in the gaming industry where,

• 56:36David Rosenthal?

  you know, first it was, it was early PC gaming and early consoles, and then consoles really became dominant with, with the, the age of, of Xbox and PlayStation two. And, uh, and, and, and Halo and Bungie rode that success. And, and then, um, you know, in recent times, there's, has been the age of free to play. The two, the simultaneous age of free to play and mobile. And, um, it's interesting to see, you know, Halo is still a huge part of the cultural landscape, but at least in, um, you know, the, the media landscape in the US. But, um, the gaming industry, you know, has been, has moved on in a lot of ways. And, and what's, what's big now are companies enabled by this next wave.

• 57:20David Rosenthal?

  And, and that's where, um, Bungie's gone with Destiny. So for me, the, you know, this, uh, this power of whenever there's a platform shift in gaming or other parts of technology, the ability to not totally wipe away the, the companies and the winners from before, but create new winners and bigger winners. Um, I think Halo and Bungie represent that really well.

• 57:41Speaker 03

  Yeah, I'm, I'm gonna, I mean, I see it maybe a little differently, but kinda I'll pick, I'll pick the same milestones as you, you know. For me, it was the time when, you know, the Bungie acquisition happened at a time when the publishers were getting bigger and there was consolidation among the publishers. So it was getting, there was this economy of scale of being big at that time, you know, and Activision's and Electronic Arts and Take-Two's and Microsoft's had an advantage. And the little kind of mom and pop developer publisher was going away. Bungie's an example. Another acquisition we did was a company called Access Software that did our golf and

• 58:24Speaker 03

  tennis and other games. And so there's, you know, these things start small and then they, you know, they get somewhat bigger and then at some point, you know, economy of scale really matters. Scale really matters. And then you start to see a lot of acquisitions. And so that was what was happening kind of in, you know, around 2000 when this Bungie acquisition happened. It's also what's happening now in free-to-play. So to follow on your example, you know, I mean, you know, I was on the board of Z2. Z2 was, you know, really early free-to-play company, had a bunch of hits, Trade Nations

• 59:08Speaker 03

  and Battle Nations. Battle Nations. You know, and, you know, at some point, you know, scale started to really matter in free-to-play. You know, if you're going to compete with, you know, Clash of Clans or Candy Crush or something, you know, with just these massive audiences and you really want to drive traffic to your game, it really matters that if you have this big audience out there. And so it was getting harder and harder for Z2 to compete. And, you know, just like Microsoft bought Bungie, it made a lot of sense for King to buy Z2. So I think, you know, there's kind of cycles to this stuff and we see it, you know, over and over again.

• 59:53Speaker 03

  It's, you know, maybe it's not just one platform shift, maybe it's, you know, just a natural evolution of each market, right? As some new market comes, you have a lot of little guys at the beginning, a lot of experimenters and then, and then change over time.

• 1:00:08Speaker 02

  And with that, I'll kind of take us into our last section where we render a conclusion. Grades A through F, you get pluses and minuses. And I'll kick it off by asking you a question, Ed. Do you think that the Xbox would be the success that it is today if the Bungie team and your team didn't pull off this acquisition?

• 1:00:30Speaker 03

  I really don't. I think Halo was hugely important to the success of Xbox. I don't know if there would have been an Xbox 360 if there was no Halo with Xbox. So I think it was incredibly important.

• 1:00:45Speaker 02

  Famously, Microsoft criticized for years and years and years of not making money on Xbox and it not being something the company was serious about. And then, you know, where we see where it's gone today and kind of being part of the same platform as Windows and doing so much more than gaming. And the company really taking the whole thing seriously and combined with the HoloLens and a lot of other future bets they're making.

• 1:01:08David Rosenthal?

  Minecraft, future episode.

• 1:01:10Speaker 02

  Yep, yep. Really paving the way for the future of the company. So it's pretty amazing to hear how important it was to the creation of the platform.

• 1:01:18Speaker 03

  When I went to work on games in the mid-'90s, I was leaving a successful career in Office. I'd been there in 10 years. And I was told a couple of things. I was told that I was committing career suicide. And I was told, "Why would you leave Office, one of the most important parts of the company, to go work on something no one cares about?" That was a great motivator for me to go make games be an important part of Microsoft.

• 1:01:46David Rosenthal?

  I think you could argue a lot more people care about, maybe not a lot, at least as many people who care about Office care about games today.

• 1:01:55Speaker 03

  Yeah, I think it's an important part of the company. I'm proud of that.

• 1:01:59Speaker 02

  It's funny, this is like the part of the show where I always bring in Christiansen, but like, boy, does that sound like low end disruption. Even in your career, right? You're leaving to go and play with the thing that nobody can take seriously, and it's a total toy, and how could it ever get big? And this is the thing that matters, and it's the Titan that's been trucking along forever. It's just so reminiscent of every startup that comes out of nowhere, and then suddenly, nobody can understand how everyone's taking it seriously, and it's such a gigantic market.

• 1:02:27Speaker 03

  Well, you know, I'll just say it's fun to be part of that, you know?

• 1:02:31Speaker 02

  Yeah. Yeah. All right, well, A+. I think I showed my card.

• 1:02:41Speaker 02

  Talk me off the ledge, David.

• 1:02:42David Rosenthal?

  This is, uh, so we'll let Ed go last here. You know, I've been struggling with this one, and not just for creating disagreement for the sake of the show, but this acquisition, really, any perspective you look at it, you know, and that one that Ben, you and Ed were just talking about is such a powerful one. Look at it financially, I mean, over the lifetime of the Halo franchise, and there's no way anybody could have foreseen this at the time, but it's made over $5 billion in revenue just from game sales alone. That's before merchandise, that's before movies, that's before machinima, which was a whole nother category that Halo really helped to launch,

• 1:03:26David Rosenthal?

  although Microsoft didn't monetize by it. So, really, any dimension you look at it, it's an incredible acquisition. The thing that I just, you know, I struggle with a little bit, I come back to this spinoff, and I think about what both Halo and Xbox and Bungie, what all three of them could have been if that creative team had really continued being a central part of Xbox and gaming going forward. And for many years, you know, while mobile was rising and while free-to-play was rising, Halo wasn't part of it. And I don't know, I think about what it could have been.

• 1:04:11David Rosenthal?

  Obviously, it's really great acquisition. I think I removed the plus because of that, so it's an A for me.

• 1:04:16Speaker 02

  So wait, your argument is that?

• 1:04:19David Rosenthal?

  I argue that there's some unrealized potential here. Nothing against you, Ed, but...

• 1:04:23Speaker 02

  Yeah, do you think it's...

• 1:04:25Speaker 03

  Because it spun out. You're saying because they lost it again, that they...

• 1:04:29David Rosenthal?

  Yeah, in 2007, which ended up being, was the very top of the console market, or at least close to it before the next wave was coming, and right then, Microsoft lost Bungie.

• 1:04:44Speaker 02

  So are you blaming the Microsoft missing mobile?

• 1:04:49David Rosenthal?

  Windows Phone is a direct result of the Bungie spinout then.

• 1:04:53Speaker 02

  Well, even mobile gaming, right? Like, Microsoft never, never had a, you know, they had this incredible presence in console gaming. And like, when I'm sitting there screwing around on my phone, playing Clash of Clans or whatever, like, it's not a Microsoft property. Do you think that there's like unrealized potential if that team had stuck there and that they...

• 1:05:12David Rosenthal?

  I don't know. I don't know. Maybe not, and maybe, maybe, maybe even Destiny never would have happened within Microsoft, so, I don't know. But I look at Halo today and I think, and maybe it's just the natural course of things, but I, it's not as culturally relevant as it once was, and not as relevant to video gaming as a whole as it once was.

• 1:05:33Speaker 03

  Okay, well, a few things. Microsoft had a right of refusal on Destiny, so they could have, they could have published it if they wanted to, so.

• 1:05:44Speaker 03

  Whether they made the right choice on that or not, I guess time will tell, but that's just one thing to think about.

• 1:05:52Speaker 03

  I was probably involved in a dozen or so acquisitions, big and small, at Microsoft, and definitely the one that went the best was acquiring Bungie, so.

• 1:06:05Speaker 03

  I'm not gonna give myself an A+, but I'll give myself...

• 1:06:09David Rosenthal?

  Yeah, you're grading yourself here.

• 1:06:11Speaker 03

  I'll go with A because this was the number one one that I was involved with.

• 1:06:16Speaker 02

  Sounds good to me. And you know, it's kind of funny, like we throw these arbitrary grades around, but it's sort of just a framework for us to get to, to dig in a little bit and think about what could have been or what was unrealized.

• 1:06:27David Rosenthal?

  Sure. Yeah.

• 1:06:30David Rosenthal?

  Thank you, Ed. We really appreciate all the time. Super special treat both for us and our listeners. And like I said, you're welcome back anytime to disagree with us.

• 1:06:42David Rosenthal?

  Thanks a lot. It was really fun to be part of this.

• 1:06:45Speaker 02

  Yeah, we appreciate it. And for listeners, we are Acquired FM on Twitter. Yeah, sorry this one went so long, but I just got real into it.

• 1:06:53David Rosenthal?

  So many great moments. Thanks again, Ed. Take it easy, guys.

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