Activision Blizzard formed a new division to run its Call of Duty game franchise following the exit of two studio co-founders who pioneered what has become the biggest revenue generator in the video game industry.

The Santa Monica, Calif.-based parent company named Philip Earl to lead the Call of Duty unit and confirmed the news that Vince Zampella and Jason West, the Infinity Ward studio executives responsible for the smash hit Call of Duty Modern Warfare 2, had left the company.

Earl previously ran Activision Publishing’s Asia Pacific region and will expand the game franchise in new directions, including new geographic markets and new digital business models, the company said. Activision Blizzard confirmed in an SEC filing yesterday that it was in a dispute with the Infinity Ward executives, who were accused of insubordination and breach of contract. Zampella and West have stayed mum. They follow Grant Collier, another co-founder who left Infinity Ward last year.

As I noted before, it seems like a time-worn dispute in games. A small developer creates a smash hit. They get acquired by a publisher. They grow that franchise to enormous heights, and then the disputes start about who gets more compensation, bonuses, credit, and whether the team that started the franchise is still the right team to carry it on past its ultra-creative pioneering phase. It’s not unusual for game company founders to want to move on to a brand new idea for a game, and it’s typical for game publishers to want them to work on the same franchise for the foreseeable future.

Modern Warfare 2 was the biggest-selling video game in history and generated more than $1 billion in revenue from 15 million copies sold since November. That helped Activision Blizzard weather a storm in the game industry that afflicted other rivals such as Take-Two Interactive and Electronic Arts. An Activision spokesman didn’t respond to a request for comment.

Activision bought Infinity Ward in 2003 and rotates the Call of Duty franchise between Treyarch, which handles the World at War version of Call of Duty, and Infinity Ward, which creates the Modern Warfare games.

The company expects to release a new Call of Duty game from Treyarch this fall. In addition, Infinity Ward is in development on the first two downloadable map packs for Modern Warfare 2 multiplayer combat, for release in 2010. Activision Blizzard is in discussions with partners in Asia who could bring the franchise to online games in that region.

Activision Blizzard is announcing that a new game in the Call of Duty series is expected to be released in 2011 and that Sledgehammer Games, a newly formed, wholly owned studio, is in development on a Call of Duty game that will extend the franchise into the action-adventure genre. Sledgehammer is headed by industry veterans Glen A. Schofield and Michael Condrey. Schofield and Condrey previously created the DeadSpace shooting game for Electronic Arts.


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