Modern Warfare 2 broke retail records, and a third installment could perform even better. With music genre revenue declining, sources say Activision is eager to have Infinity Ward start on Modern Warfare 3. Infinity Ward, on the other hand, would rather finish the new IP its contract allows.

Numerous sources with knowledge of the situation have speculated to Gamasutra that the contract dictates only Infinity Ward may make games in the Modern Warfare arm of the Call of Duty franchise. Other studios, like fellow Activision subsidiary Treyarch, may continue develop other Call of Duty-branded titles.

Sources say one development candidate would be newly-founded Sledgehammer Games, but Activision can't put another studio to work on the third Modern Warfare installment any more than it can force Infinity Ward to work on it now.

Another source suggests West and Zampella could have demanded a larger share of profits in return for developing Modern Warfare 3 on Activision's schedule instead of in line with Infinity Ward's original plans. According to that account, those attempts to re-negotiate or add to the current contract prompted Activision's ire.

Some media reports have inaccurately conflated this week's situation with outstanding royalties from Activision to Infinity Ward. But sources confirm to Gamasutra that Activision routinely pays royalties at the end of the quarter after which they were earned, which will begin next month, meaning the publisher is not overdue in its financial responsibilities.

The major issue is that Activision's hands are tied by the contract, sources say -- and that may be the root of the "insubordination" allegation against Infinity Ward's leaders.

Activision has a history of using legal muscle to get the better end of its agreements, as it did with its Brutal Legend spat with EA and the DJ Hero battle that caught Scratch developer 7 Studios in the crossfire.

Another source with knowledge of the situation tells Gamasutra that although Infinity Ward is only about 75 developers strong, Activision brass demanded layoffs at the studio anticipating a refusal -- which they received, potentially opening the door for Activision to use that refusal as a way to launch a breach suit that would help it escape its contract.