LOS ANGELES -- The large spasm of movie- and TV-related games lately has been one of the bright spots in the often-uneasy marriage between Hollywood and the technology industry.
But that relationship took another weird turn Monday when video-game maker Activision, holder of the interactive license for Star Trek, sued Viacom for breach of contract.
Activision wants to be let out of the deal. It says media giant Viacom has allowed the franchise to crash and burn like the Enterprise did in a couple of Star Trek movies, thus undermining the license's value.
The tribble fur really started flying Wednesday when Viacom struck back with a release saying that Star Trek continues to go strong and that Activision is dead wrong.
"Activision appears to be trying to use the courts in an effort to renegotiate a deal it made in 1998 to secure the rights to the valued Star Trek franchise for interactive games," said a Viacom Consumer Products press release.
What's already emerging, knowledgeable observers say, is a cautionary tale about an ill-conceived long-term deal in which both sides essentially -- to use the vernacular -- screwed the pooch.
"It feels to me like (Activision CEO) Bobby Kotick is a little desperate and is pissed at Viacom," said one senior gaming industry executive who asked not to be named. "This suit is going to be very hard to sustain."
Activision picked up the interactive rights to Star Trek in 1998. Activision guaranteed payments to Viacom of $20 million over the 10-year span of the agreements, as well as warrants on Activision stock. The game maker has already paid $11 million in royalties to Viacom since 1998, according to the complaint Activision filed Monday in California Superior Court in Los Angeles.
The senior gaming industry executive who asked not to be named has negotiated a number of licensing deals for interactive rights to entertainment properties. He said he believes the deal included at least two large lump-sum payments -- one at the beginning of the deal in 1998, and one at the midpoint, which is this year.
He thinks that Activision -- after poor sales of the 14 Star Trek titles it has released since 1998 -- tried to renegotiate the terms of the deal, only to be rebuffed by Viacom. With another lump-sum payment looming, Activision pulled out and filed suit, accusing Viacom of failing to maintain its commitment to the franchise by keeping new movies and TV shows in the pipeline.
That version of events was essentially confirmed yesterday by a senior Paramount executive who also asked not to be named.
The Star Trek franchise in recent years has been flaming out. The last Star Trek film, Nemesis, was released this past December and raked in a paltry $43 million at the box office. The only Star Trek TV show currently in production, Enterprise, airs on Viacom's UPN, has been in the ratings cellar and has been hit hard by hardcore fans.
This is a depiction that Viacom hotly contests -- although it won't reveal any plans for further movies or TV shows. Instead, it points to the huge value of the franchise's past successes, which continue in forms such as re-runs of Star Trek: The Next Generation as cable channel TNN's flagship prime-time offering.
"OK, so one movie doesn't do well," said the Paramount executive. "Come on, (Activision) made an agreement."
For its part, Activision says that it decided to terminate the deal and sue after it became clear that Viacom has no clear plans to keep the franchise going with new movies or TV shows.
"We expressed our dissatisfaction with the situation some time ago and have attempted to find a mutually agreeable solution," said Activision spokesman Maryanne Lataif. "However, when we couldn't come to an agreement, we decided to file the complaint."
Observers say that Activision hasn't helped matters by shipping games that have mostly been crappy or lacked broad-based appeal. The most recent Activision Star Trek title, Elite Force II (originally tied to the Star Trek Voyager TV series) was released just last week to good, if not rave, reviews.
The combination of the franchise's declining appeal and Activision's missteps have been reflected in the retail sales numbers for Star Trek games.
Analyst Michael Pachter of Wedbush Morgan Securities in Los Angeles picked through data from the NPD Group and estimated that Star Trek games over the past two years have sold a paltry 300,000 units in the United States and Europe at bargain wholesale prices averaging $20. He further estimated that Activision needs to make $30 million in revenue each year to break even on the Star Trek deal, but has only been clearing $6 million.
Activision has been aggressively licensing other entertainment properties and last year scored with games tied to Spider-Man, the year's No. 1 box-office hit. A game tied to the X-Men franchise, X2: Wolverine's Revenge, is currently spotlighted on the company's homepage.
Other gaming companies have increasingly tied their fortunes to big entertainment licenses. Gaming giant Electronic Arts is pinning its hopes for Christmas on games tied to James Bond, Harry Potter and Lord of the Rings.
Still, what the Viacom-Activision imbroglio puts into stark relief is that making games -- even ones based on huge entertainment franchises -- is always a risky business. Analysts said Activision's mistake was in signing a deal that was too rich and that bet on Star Trek -- which already dates back to the 1960s -- remaining relevant past its 40th anniversary in 2006.
"Maybe it's a warning to Hollywood studios that they may need to offer ancillary licensees some protection against franchise failure, but I'm not sure I see that happening," said the gaming industry executive who asked to remain unnamed. "It would be a remarkable change in the way Hollywood does business, because they view their licensing departments as generators of ready cash."
