It was almost two years ago that Frank O’Connor — the shepherd of the Halo brand, so to speak — said from his Mircrosoft tower that the company was “still interested” in making a Halo film, but that they were “in no particular hurry.”

For many, even with plenty of coverage of the film’s collapse in October 2006, the reasons behind the collapse of a Halo film seem merely like typical Hollywood bullshit clogging up the pipeline of what would surely be a monster hit. While that is partly the case, there’s always been the sense that a Halo film has, perhaps, a little too much preordained success for its own good. When there’s no gambling involved, everyone wants a slice and nobody wants to back down- and that doesn’t just mean the big Hollywood studios.

The full story of the deal-making, pre-production, and ultimate collapse surrounding Microsoft’s partnership with Fox and Universal to make a Halo film with Peter Jackson is told in a new book called Generation XBox: How Video Games Invaded Hollywood by Jamie Russell. WIRED has published the chapter of the book that deals with this particular debacle, and it’s a great read. Captured in it is a story of a two immovable corporate forces colliding and learning that their business cultures were simple too many round pegs to fit into square holes. For example, Russell describes Microsoft as not only confident, but prepared to make the biggest deal ever and ready to accept nothing less.

“We were literally setting out to be the richest, most lucrative rights deal in history in Hollywood,” says Shapiro. “You have to remember that no property, not even Harry Potter, was getting [what we were asking for].” Microsoft, a global software giant used to getting its own way, wasn’t about to kowtow to Hollywood. It knew Halo was the jewel of videogame movies, the one that could be a true blockbuster hit. According to Variety, Microsoft wanted $10 million against 15% of the box office gross, in addition to a $75 million “below-the-line” budget and fast-tracked production.

Most remember the hype surrounding Microsoft’s (CAA managed) stunt of sending the script and deal terms out to studios in the arms of costumed Master Chiefs, who gave executives only a few hours to read and make their offers. But for a known quantity like Halo, everyone knew what was on the table and whether they were or were not interested in playing ball. It was a nice move dumping a million bucks in the lap of Alex Garland — he was known for 28 Days Later at the time, and would go on to write the interesting Sunshine and brilliant Never Let Me Go — and commissioning a blockbuster screenplay, but the suits barely needed to read it- everyone knew the deal, and the thing would be rewritten anyway. Attention-grabbing stunts or not, the studios still looked at it like business as usual, and weren’t bashful about coordinating and colluding in ways that Microsoft didn’t bank on.

Most of the studios who read the Halo screenplay passed immediately. Microsoft’s terms were simply too demanding. By the end of Master Chief Monday there were only two horses in the race: Fox and Universal. Microsoft hoped to use each to leverage off the other but hadn’t banked on the studios’ very different approach to doing business. “What the games industry doesn’t understand is that this town is all about lunch,” explains Shapiro. “It doesn’t happen like that in the games industry. If there was a movie studio going out to the games publishers to license Avatar or something like that, they’d say ‘Ok we’re licensing Avatar, send us your best deal. But none of the games publishers would talk to each other and say ‘Hey, what are you going to offer them?’”

The studios weren’t so reticent in sounding each other out. “What happened was Universal called Fox and asked them what they were going to offer,” continues Shapiro, who watched events unfold close-up. “They decided to partner on it. ‘Let’s offer the same deal and offer to partner’. So now we lost our leverage.” Universal agreed to take U.S. domestic, Fox would take foreign. In the blink of an eye Microsoft’s bargaining position had been pole-axed.

From there is a story of pushing and pulling, wasted time, expensive pre-development, constant haggling, and ultimately a huge difference in vision. Fox, up to their usual tricks, began making it clear that they saw no room for reinterpretation or adaptive vision. With an attitude at Fox that recalled the studio — circa 1991 — that turned another huge, inevitable science fiction film, Alien 3, into a clusterfuck of epic proportions, executives made it clear to Peter Jackson and director Neil Blompkamp that this was a hired gun gig at best. Clearly the taste in Blompkamp’s mouth remains rather bitter…

“The way Fox dealt with me was not cool. Right from the beginning, when Mary [Parent, Universal’s former president of production turned Halo producer] hired me up until the end when it collapsed, they treated me like shit; they were just a crappy studio. I’ll never ever work with Fox ever again because of what happened to Halo – unless they pay me some ungodly amount of money and I have absolute fucking control.”

Ultimately the end drew near for the project as development crawled along and a studio demand for a reduced producers was met with steadfast resistance. In fact, it was Peter Jackson, Bungie, and Microsoft digging their heels in the sand that led Fox and Universal to pull a common Hollwood trick: the ole “fuck it and fuck you” maneuver. Like a poker player knowing when to fold, the studios were perfectly comfortable quite suddenly cutting their losses on $10-15m of development and getting out of the deal. Plug-pulling is virtually an art-form for studio executives.

From there you may remember a little film called District 9 ultimately benefiting from some wisely rerouted WETA momentum, and a few sharp commercials and shorts used to promote Halo 3. That’s the legacy of the deal made in ’05, along with a real chance that Halo will go untapped as a cinematic property for some time. Unless Microsoft wants to learn a thing or two from Hasbro about dealing with a major studio (which has its own spotty implications), it’s unlikely a deal’s going to be made anytime soon. When you have to factor in two studios, theater cuts, a giant Microsoft backend deal, development costs, budget increases, a big producer name, a director, and all the other various hangers on, that’s a lot of slices to cut from one pie, even if the pie is really fucking big. Unless Microsoft starts to feel the Halo brand needs some help, I don’t see them acquiescing anytime soon.

The excerpt of the book at Wired is much much more extensive than what I’ve quoted above, so take some time and dig into it. Russell gets into the nitty gritty details of where and when these tenuous relationships broke down, and why. It’s always amazing to witness the insanity and friction that develops around, and eventually chokes out, a surefire hit. It’s the same kind of thing that kept the Hobbit and James Bond dormant for so many years, except Microsoft isn’t bleeding out like MGM. Since the atmosphere in Tinsel Town at the present moment isn’t any more favorable to risky sci-fi ventures either, this particular stalemate could go on for a decade.

Or two executives could have a productive lunch tomorrow and shit’s greenlit. C’est la Hollywood.

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