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Updated below with excerpts from interview with Microsoft/Bungie.

Breaking news: Microsoft just e-mailed a news release confirming that Bungie Studios, maker of the big Halo video-game franchise, will become independent. The announcement confirms news first reported this week by Jake Metcalf on his P-I reader blog and 8bitjoystick.com.

From the news release:

Microsoft Corp. today announced a plan for Bungie Studios, the developers of the "Halo" franchise, to embark on a path to become an independent company. Microsoft will retain an equity interest in Bungie, at the same time continuing its long-standing publishing agreement between Microsoft Game Studios and Bungie for the Microsoft-owned "Halo" intellectual property as well as other future properties developed by Bungie.

The confirmation comes a day after Microsoft announced that "Halo 3" had topped $300 million in first-week worldwide sales. Given the equity stake, the financial implications of Bungie going independent aren't immediately clear, but that's among the questions I'll be asking.

Another key question is whether Bungie will be able to develop games for consoles other than Microsoft's Xbox 360.

Update, 1 p.m.: Bungie's "Weekly What's Update" gives more insight into the studio's desire to go independent.

"Bungie has long been built on creativity, originality and the freedom to pursue ideas. Microsoft agreed, and rather than stifle our imagination, they decided it was in both our best interests to unleash it. We'll continue to make Xbox 360 games, and we'll continue to make amazing games for MGS. In that regard, nothing has changed. All that has changed is that now Bungie Studios is once again, the property of the folks of Bungie Studios. Microsoft is and will continue to be, a brilliant, inventive and creatively collaborative publishing partner. Practically speaking, nothing has changed and you guys won't see much, if any difference, for a while. ..."

Read on past the jump for excerpts from my phone interview with Shane Kim of Microsoft Game Studios and Harold Ryan of Bungie Studios:

Q: Why did Bungie and Microsoft do this?

Kim: We've always had active conversations with the guys at Bungie. This is really about supporting their desire to return to their independent roots. Over the course of many conversations, we decided that this was the best path for both parties to undertake.

Ryan: It's about us becoming independent and feeling independent, but we're still partnered with Microsoft Game Studios ... for the Halo universe and other IPs that we bring out for the foreseeable future and hopefully for a long time with Microsoft Game Studios.

Q: What will be Microsoft's percentage ownership stake in Bungie? Will it be more or less than 50 percent?

Kim: It will be undisclosed.

Q: I think it is important for people to know at least whether it's majority or minority. I mean, that's key. You've got to disclose that.

Kim: No, actually I don't think we have to disclose it. We have mechanisms in place where we're going to work together for the foreseeable future. And it's really not material to the story.

Update, 11 a.m.: In a separate news release, Bungie says Microsoft will have a minority equity interest. Since that fact was being made public, I don't know why it wasn't disclosed when I asked in the interview.

At any rate, here's the rest ...

Q: When will the deal take effect?

Kim: This is in effect now. The deal has closed, and so we are going down this path. It's in effect today.

Q: What are the financial implications for Microsoft? How much revenue will you lose?

Kim: We won't lose any revenue. We're going to continue to be the publisher of the Halo-related projects that Bungie is working on, and our intent is to continue to be their publisher in the future.

Ryan: Yeah, we're absolutely committed to keep working with Microsoft Game Studios as our partner for publishing and developing games into the foreseeable future.

Q: I understand. But obviously the game developer itself receives revenue apart from the revenue the publisher itself receives. So isn't Microsoft going to lose some?

Kim: No, I mean, again, we're not going to disclose those details. The biggest change, truthfully, is that today Bungie employees are employees of a different company. That's the biggest change, and in the same way that I'm not going to answer questions about what is the equity arrangement, I'm not going to answer questions about what is the revenue or cost splits or things like that.

Ryan: The creatives that want to be entrepreneurial, free and independent in the studio are excited and engaged. If anything I expect Bungie to be more successful and to generate bigger hits with Microsoft Game Studios.

Q: Harold, who will be the principals in Bungie Studios? Is it you and other individuals?

Ryan: The company is a private (limited liability company) so we're not disclosing who the principals are at this point. But the company is owned by ... it's owned and operated by Bungie.

Q: Are you bringing in any outside investors?

Ryan: No, we are not bringing in any outside investors.

Q: Who owns the Halo franchise?

Kim: We (Microsoft) own the Halo intellectual property.

Q: What about future Bungie properties that it might create. How are you going to work out which consoles those are developed for?

Ryan: As I've said, Microsoft Game Studios has been a great publisher for us over the past years and for the foreseeable future, they're the publisher we plan to work with. Xbox is what we know, it's what we've built on, and it is the best platform at this point. Our plans are absolutely to stay with Microsoft Game Studios for the foreseeable future.

Q: Are you contractually obligated to do that, or is it your option?

Ryan: Exactly where the lines are between contract and option, we're not going into details there. It's definitely our preference to stay with Microsoft Game Studios.

Kim: And we already have agreements in place for the foreseeable future. Really, nothing is going to change in how Microsoft Game Studios and Bungie work together.

Ryan: As with any other developer, as we develop games, we will sign publishing agreements with our publisher, and the terms of any individual game will depend on the publishing agreement.

Q: So at some point, which you're not defining, Bungie will be free to do whatever it wants with the new intellectual property that it creates?

Kim: At some point, as a fully independent company, Bungie is in control of its own destiny. ... As the press release says, we are embarking on this path for Bungie to become fully independent. Now, how, when all of that happens, really we're not going to discuss.

Q: But once it's fully independent, then it has the option of doing what it wants.

Kim: Yeah, just like any fully independent developer would.

Q: When you say fully independent, does that mean, at that point, that Microsoft has no further equity stake?

Kim: It doesn't matter about equity stakes. Fully independent, completely in control of their future and doing what they want to do, regardless of who owns what.

Q: What about existing IP other than Halo, such as Myth? Who will own that, and what happens there?

Ryan: Myth is something that Microsoft didn't acquire in the acquisition of Bungie. It actually still belongs to Take-Two.

Q: Why did Bungie want to become independent?

Ryan: It has a lot to do with that feeling of independence. We have a lot of independence already, having our own separate offices in Kirkland. But I think it's the same thing that strikes most people when they go leave a great job at a great company and go off to form their own company, in a lot of cases probably work harder then they worked before. ... This is just about that feeling of entrepreneurial independence.

Q: Was this a situation where employment contracts had expired and so the alternative was that key Bungie employees and managers would leave if this kind of spin-off was not arranged?

Kim: No, we don't have employment contracts here. ... That's not the case at all.

Q: Was there any kind of broader agreement with a group of people at Bungie, not an employment agreement, but a business contract, that expired?

Kim: No, this really is talking about the creative talent, and figuring out what's the best way to enable them to continue doing what they're great at with us.