Bungie Studios has spawned another development house. A trio of veterans from the house that built “Halo” have split off to form Moonshot Games. Michel Bastien (producer on "Halo PC" and "Halo 2" and lead producer on "Halo 3"), Damián Isla (AI and gameplay engineering lead) and Rob Stokes (designer on the first two “Halo” games and design lead on the game’s third installment) will run the studio.

Moonshot plans to focus on downloadable games, but hopes to offer titles that have the same polish and quality of most AAA games. The success of this year’s “Shadow Complex” on the Xbox 360 and “Flower” on the PS3 show that there’s a definite market for those sorts of games. 

And, as an added bonus, they’re a lot cheaper to create than a typical AAA-game - something Moonshot's counting on.

The company is still in the formulative stages and, not too surprisingly, isn’t ready to talk about its first game. Active prototyping is underway, though, and it’s already talking with potential partners.

Moonshot’s not the first company formed of Bungie vets (Bungie founder Alex Seropian left to start a new company right before the launch of “Halo 2”). With a team that has such significant experience on one of the industry’s biggest franchises, though, it’s definitely one worth watching. 

One good thing that came out of all the fussing and feuding between Microsoft and Bungie during E3: the Xbox 360 maker had the biggest news to announce at Tokyo Game Show by far.

"Halo 3: Recon" (info here; trailer here) is, of course, the game that Bungie was going to announce at E3 back in July. But Microsoft didn't like that Bungie planned to handle press for its franchise and not only did it force Bungie to cancel the announcement, but it left out all mentions of "Halo" from its press conferene, including the Ensemble-developed "Halo Wars," which was on display at the show. (relive the fun here)

How did that work in terms of press strategy? For Microsoft, pretty well. It had plenty of significant news at E3, from the Xbox Live re-design to "Final Fantasy XIII" coming to Xbox 360 to the Netflix partnership to "Lips." Now at Tokyo Game Show, it easily overshadowed competition by having a new "Halo" game to announce, along with "Tekken 6" coming to 360 and some other RPG stuff. Sure Japan is the market least interested in "Halo," but still, news is news.

Bungie, however, lost out on the opportunity to establish its new independent identity since splitting from Microsoft last year by making its own announcement, or even "co-announcing" by coming out on stage with its "partner" Microsoft for the news. Even though Microsoft owns the "Halo" franchise, it's not all that unreasonable for Bungie to stake a claim to the news, since the deal to produce  "Recon" was struck well after the divestment, a Bungie rep confirmed to me. Despite their previous relationship, these are now two separate and significant companies working together. But the way the announcement played out (and I'm not in Tokyo, so I'm speaking broadly) didn't seem much different than how it would have gone if Microsoft still owned Bungie.

Of course, the big news will come when Bungie is finally ready to talk about the original IP it's developing that's still on the DL. Even if Microsoft's publishing it (which is likely, but not definite), I'd bet Bungie wants to play a big role in how that news comes out.

All that being said, my favorite news from Tokyo Game Show is that there's already a sequel coming to one of my favorite games of the year. I'm not sure about the name "Desperate Struggle," but a new "No More Heroes?" Hellz yea.

Here's the second in our series of interviews conducted for Variety's videogames impact report. As promised, I'm providing transcripts here on The Cut Scene of some of the most interesting interviews we did for that special issue. First was Leigh Alexander's talk with "Metal Gear Solid" creator Hideo Kojima. Now here's an excerpt from my chat with Bungie CEO Harold Ryan. Note that this interview was conducted before E3, so there's no mention of the non-announcement controversy.

Has Bungie been working on "Halo" games non-stop for pretty much the past decade until the release of "Halo 3" last fall? Was there ever a chance to even take a break and work on other projects in that time?

We were always in pre-production and concepting future titles while developing current ones. With a small break, the studio was always moving onto one or two new games when shipping another.

We had several internal game pitches that went to playable game prototypes that were non-"Halo" games and non-first person shooters. They either weren’t compelling enough or the monster that was "Halo" needed all the resources, so they were set aside.

Was there always pressure from Microsoft to do another "Halo?" Did you guys at Bungie always want to do those sequels?

From Microsoft's point of view, Bungie was succeeding at "Halo," so having us continue it made sense.

From Bungie's point of view, "Halo" was the baby of the studio. We raised it, cared for it, and nurtured it. We built it because we loved it. Closing out the story with "Halo 3" and finishing the trilogy was important to us. But when we shipped "Halo 1," it certainly wasn’t our goal to make two more versions.

There were open questions we wanted to answer ourselves that drove us to "Halo 2" and then we had some stuff farther along just sitting on paper that was the beginning of "Halo 3." We did pretty much know  we were doing "Halo 3" when "Halo 2" shipped.

Unlike some other big videogame franchises, you guys did get a few years between "Halo" games. Did Microsoft ever pressure you to put them out even faster?

[Microsoft] look[s] at Halo as money and more Halo equals more money. If I could come up with a "Halo" game every year, they’d be happy to take it. I think that would be a mistake.

We always pride ourselves in pushing our games to the point where a lot of people still playing for at least a couple of years thanks to the DLC and the community.

Even now we're sustaining the game, managing the community, making multi-player maps. We’ve got a good 30-40 people working on it for a full year after we ship the game.

A Bungie game to us is high quality, fun to play, and we maintain and support it. All Bungie games have community features built in and around them. Sustaining it is part of what makes the game a Bungie game.

Do you get any financial benefit from that? Do you get any cut of Xbox Live subscription revenue for how many people are playing "Halo 3?"

From a business point of view, we don’t get anything directly out of people being on Xbox Live. We make most of our money from sales directly. For us, it’s about keeping the Bungie fan community happy.

Let's talk about the divestiture from Microsoft. When did that process first start, if only as an idea? And why did you want to do it?

The discussion goes back three or four years. The reasons for it are a mix. For one thing, any time you’re owned by someone you have less at least perceived control of what you do. It's harder to maintain your identity. One thing important for the Bungie ... is needing to have that sense of team where you look around the room and say "I'm part of Bungie."

Microsoft did allow a fair amount of freedom to maintain that culture while inside. But it got harder and harder over time. We had to figure out how to build and retain bungie as a place where top creatives would want to come and work and be part of the team.

Another reason was the pressure to stick with Halo. We can still make "Halo" games and we still are working on "Halo" games. But there is more latitude for us to put our focus on other IP, other universes, other things.

We wanted to get that push back where we could feel we’re going to really lay it on the line and push to come up with the next best thing in entertainment. It feels better to do that as an indie.

It certainly seems like the trend in the industry is the opposite -- that successful developers get acquired by publishers and stay there. It seems like it's the only financially viable option, in fact. So what's different for Bungie than so many other big name developers?

The three studios I know the acquisition of well are Lionhead, Bungie and Bioware. In all those cases, it came down to the fact that the core competency of the studio was making great games. It got to the point where the leads of the studios were creative leads and just weren’t interested in running HR anymore or accounting and finance. The other issue is to make sure you come up with a foundation to sustain your burn rate. If you ship a game every three years, the intervening years can be a long time to cover costs.

But there are a couple of things about Bungie that make us somewhat unique. One is that Bungie has a strong sense of team. Nobody is taking a few bucks off every unit because of a special deal.

Another is that we have a strong finance group in from day one. I didn’t go into the divestiture deal untilwe  had a financial plan that could keep us going.

So in the past year do you see a difference at Bungie?

Having seen Bungie internal and external to Microsoft, as it's structured now I think the creative energy is much more enhanced by being external.

Of course, if we mess it up for the next 10 years, I'm sure we’ll have to find alternate funding.

It was really easy when we working on "Halo" one, two and three to put other projects away. Every studio that starts out with one hit game has the same growing pains. You borrow one guy and another and the next thing you know the original concept doesn't have enough resources and you kill it.

We're making that process better. Now we have a full concept team running throughout the production ofthe  other two games we're running right now internally. We're not making a bet on any one game keeping us afloat.

Was negotiating the divestiture deal distracting for you or Bungie as a whole while working on "Halo 3?"

My point of view and honest belief was that it was the best way to ensure the highest quality of "Halo 3" that we would achieve. It was the best way to attract new talent and retain it in studio. But managing that was a second job for me. It was another 40 hours a week for two-and-a-half years

So when you were hiring or retaining people in the past few years, they knew Bungie would be leaving Microsoft?

Yes.

Do you see Bungie's decision to leave Microsoft as part of a broader issue about developers getting more independence and respect as creative talent?

... The fact is there’s so much to compete with in a development studio owned by a publisher when you're trying to get innovative mindshare. The big corporate game publishers that own lots of studios are more driven by their fiscal year and other things like that than the the crazy guy or team sitting there going, "Give me three more months and this’ll be perfect.” To do that, they're going to have to get back to where Bungie is now.

Some of the publishers that figure out how to actually tell their board to wait three months or stay out of it will find it's just as profitable. If you want to get creative people doing their best work... Well, the thing attracted me is that people aren’t here for the paycheck. They're here to make something awesome. They're here to see their best creative work partnered with that of their peers and turned into a great game. That requires an independent identity.

And you're confident that will result not only in great games, but a successful business?

We’ll see. I do believe it’s about having the right people. Bungie has collected all the right people so we can ship high quality software on a reasonable schedule. Hitting that cycle and hitting the software quality bar doesn’t matter until you have a core game that’s awesome. On the other hand, you need to have all sides working together so it's not an amazing game idea that crashes all the time. Getting all that together so your games are reliably a positive experience for consumers as well as an innovative and amazing experience is a tough feat.

[Ryan's answers were only edited for space and grammar. However I did alter some of my questions to help this excerpt flow better.]

Today, as promised, I got more details on Bungie's fight with Microsoft that led to the Xbox 360 maker completely omitting new "Halo" projects from its Monday E3 press conference and the developer canceling its planned announcement of a new game on Wednesday. (If you want full background on the imbroglio combined with what I'm reporting now, read my story in today's Daily Variety)

What was the reason for all the fussing and the feuding? According to a source very close to one of the companies involved, Microsoft was seriously peeved that Bungie was making its own plans to announce its new game on Wednesday at E3.

Even though Bungie's now an independent company, Microsoft is still its publisher and apparently wants to be in charge of PR strategy, especially when it comes to major new game announcements. While that may not be the only cause of tension, I'm told it has been the major issue in the past week and is what precipitated Xbox head Don Mattrick's decision to omit all references to new "Halo" projects on Monday, even "Halo Wars" (which Bungie isn't even developing and is being shown at Microsoft's booth). And it's also, of course, the reason why Microsoft (the mysterious "publisher" in Bungie president Harold Ryan's Tuesday website posting) forced the developer to delay plans to announce its new game.

The view within Microsoft, however, is that Bungie made a premature promise to announce something new at E3 and is now trying to shift the blame.

Going forward, of course, this leaves both sides in an awkward position. Don Mattrick and Harold Ryan are not the best of buddies right now, to say the least.

But it seems like they have to work something out. Microsoft is still Bungie's publisher and owns a minority stake in the studio. And it would be a PR disaster of major proportions for Microsoft if it pissed off Bungie enough that the studio that created "Halo" stopped even consulting on future incarnations.

There has been lots of other relevant reporting on this topic elsewhere today. MTV Multi-player has Don Mattrick saying that Bungie is working on a new "Halo" game It's not clear exactly what that means (is it solely developing? Helping another developer?), but it's definitely my understanding that Bungie's plan on Wednesday was to announce an original project, not another "Halo" spin-off or sequel.

The L.A. Times quotes Don Mattrick saying that "Halo" was cut from the Monday presser simply due to time concerns. I think it's safe to say he's being less than totally forthright. It's possible, if doubtful, that Microsoft just couldn't fit a demo of "Halo Wars," one of its biggest first party titles coming out in the next year, in the 90 minute event.  But the fact that "Halo Wars" was never even mentioned, nor was the mysterious project Multi-Player reported, is conclusive proof in my mind that something else is going on.

The Times also quotes Mattrick comparing the absence of "Halo" to the absence of the "Grand Theft Auto IV" downloadable content from the press conference. But while neither got a demo, I have it here in my notes that some exec at the press conference specifically mentioned that the "GTA IV" episode is coming "later this year." That's more love than any new games with the word "Halo" in the title got.

Finally, the Times implied that Ryan's assertion that Bungie's publisher canceled the planned project announcement was referring to the absence of "Halo" from the Monday press conference. It is quite possible Microsoft was going to announce a new "Halo" game (that Bungie is perhaps working on, per Multi-Player) at Monday's press event and then pulled it.  But I know for a fact that Ryan was referring to an announcement planned for Wednesday and I'm pretty sure that it was non-"Halo."

Many of you may have already seen the note on Bungie's website where President Harold Ryan said the newly independent development studio behind "Halo" had been planning to reveal "something exciting" it has been working on but that those plans "were just changed by our publisher."

Ryan didn't provide any more details, but I can shed a little light. The publisher in question is Microsoft. Bungie Studios has apparently had a conflict with Microsoft that let to the decision to excise any reference to new "Halo" products, even 2009's "Halo Wars"  or the mysterious Peter Jackson project, from Microsoft's press conference on Monday (an absence that surprised many gamers and observers). My understanding is that that call was made very recently, as in the past few days.

Separate from Microsoft's press conference, however, Bungie was planning to take the wraps off its first original, post-"Halo" project today (Wednesday). But the dispute with Microsoft apparently put the kibosh on those plans as well. That decision was made on Tuesday evening, just a few hours before Ryan posted his note.

This is all a bit hazy, of course. Assuming that Bungie's stake in any future "Halo" projects was clearly spelled out in the deal where it divested itself last year, what could the conflict have been that led to Microsoft choosing to not even discuss future plans for its top franchise? And given how massive the interest in anything new that Bungie is making would be, what kind of a fight could lead to those involved not wanting to announce it at E3?

I don't know the answers, at least not yet. But I'll keep reporting this in the days to come and will hopefully find out more. I should also note that I haven't yet reached anyone from Microsoft to comment and a spokesperson for Bungie didn't have anything to say.