Physical Address
304 North Cardinal St.
Dorchester Center, MA 02124
Artwork for the upcoming game “Assassin’s Creed Shadows” by Ubisoft.
John Keeble | Getty Images
French video game publisher Ubisoft is facing questions about its future, as it grapples with a lackluster pipeline of games and pressure from investors to seek a sale.
The company, which produces the “Assassin’s Creed” franchise, said in an updated guide last week that it has postponed the release of the next title in the popular game series – called “Assassin’s Creed Shadows” – by three months to the 14 of February 2025. .
Ubisoft also cut its guidance for the 2024-2025 fiscal year, saying it now expects net bookings to fall to around €1.95 billion. Ubisoft said it expects net bookings for its fiscal second quarter to come in at 350 million to 370 million euros, down from the 500 million euros previously expected.
Ubisoft said: “The revised targets are primarily a reflection of the decisions made for Assassin’s Creed Shadows and the softer than expected launch for Star Wars Outlaws.
It comes after the company’s “Star Wars Outlaws” game – an action-adventure title based on the iconic sci-fi film series, which was released this summer – was greeted with a sales performance disappointing and mixed reception from gamers. Ubisoft said its learnings from the release of Star Wars Outlaws prompted it to spend more time polishing Assassin’s Creed Shadows.
The company said it also scrapped plans to release its new Assassin’s Creed game with a “Season Pass,” which was a paid add-on that provided access to a bonus quest and additional downloadable content at launch.
Ubisoft added that it now plans to release Assassin’s Creed Shadows on Valve Corporation’s online game store Steam on the day of its launch, ending its history of exclusively distributing PC versions of its games on the digital storefront by Epic Games.
Yves Guillemot, CEO and co-founder of Ubisoft, speaks at the Ubisoft Forward livestream event in Los Angeles, California on June 12, 2023.
Robyn Beck | AFP | Getty Images
“In light of recent challenges, we recognize the need for greater efficiency while making players happy,” Ubisoft CEO Yves Guillemot said in the statement last week, adding that the company’s executive committee launch an overhaul to further improve its execution.
Ubisoft’s shares fell to decade lows amid disappointing investor expectations about its pipeline of triple-A games and financial prospects.
To add to the business woes, the company is facing a possible strike in France after the country’s STJV video game workers union called for three days of industrial action on October 15-17 on the company’s offer to get the workers back into the office. three days a week.
Pressure from activist investors
Following the decision to delay its next Assassin’s Creed game, AJ Investments, an activist investor with a stake of less than 1% in Ubisoft, said it was working with the company’s other shareholders to push the French firm to sell itself to private equity firms. or to the Chinese gaming giant Tencent.
Tencent owns a about 10% of the stake in Ubisoft.
In an open letter last week, AJ Investments said it had gathered the support of 10% of Ubisoft’s shareholders for its pressure campaign, adding that it intends to cooperate with proxy advisory firms in preparation for the vote at the next general meeting of the company. CNBC could not independently verify this figure.
“We have spoken with industry experts as potential board members and executives to replace the current management and achieve our strategic objectives, we will propose our candidates over time,” said AJ Investments.
AJ Investments noted that he was due to speak with Ubisoft management on Tuesday to discuss his proposals. The firm added that it will demonstrate in front of Ubisoft’s headquarters in Montreuil, Paris, if necessary.
Several banking analysts have reduced their price targets for Ubisoft following news of the delays to its next game, although many are keeping their ratings unchanged.
Deutsche Bank, which downgraded the stock to “hold” from “buy,” said Ubisoft’s guidance cut was “larger than we expected” and that the return to Assassin’s Creed Shadows “will drive a substantial amount of revenue ” in the next fiscal year. .
George Brown of Deutsche Bank also said that he anticipated Assassin’s Creed Shadows to do worse than he initially expected, predicting unit sales of 7 million in the 12-month period after release. That’s down from an earlier projection of 8 million.
Meanwhile, JPMorgan said in a note last week that they now expect lower unit sales of Ubisoft’s triple-A game and see a slower cadence of releases moving forward. JPMorgan maintained its “neutral” rating on Ubisoft stock, but cut its price target to 11 euros from 21 euros.
“Mid-sized developers continue to be squeezed by development cost inflation that has not been accompanied by sufficient volume/monetization improvement to support attractive returns,” JPMorgan analysts Daniel Kerven and David W Peat said. said in the note.
“UBI’s capital structure and lack of cash generation in recent years have left it under increasing pressure to reduce investments/costs.”
Backlash
However, some analysts are more sympathetic to Ubisoft’s struggles.
Analysts at Wedbush Securities suggested that the company had become the victim of coordinated “trolling” by people trying to force the average user score for the company’s Star Wars Outlaws game on review sites. .
“We believe that Star Wars Outlaws was affected by a coordinated effort that sought to troll the Ubisoft game specifically and Star Wars content in general,” Wedbush analysts Michael Pachter, Alicia Reese and Kade Bar wrote in the note a last week
“The game received an unusual number of user reviews with a clear negative bias (including a large percentage of ‘zero’ reviews”), despite seeing acceptable review scores from reputable review sites. This is a case of a win rare incel that led to Ubisoft having to take their numbers,” they added.
Wedbush analysts said that despite delays to its next Assassin’s Creed title, they expect the game to sell 7 million units in its launch quarter and think it has “the potential to be one of the best sellers by Ubisoft”.
Industry slump
Ubisoft’s misfortune comes as the wider video game space is facing an industry-wide downturn.
The global games market is in 2024, it will grow only 2.1% year on yearaccording to research firm Newzoo. Here we go by 0.5% growth in 2023but nowhere near the soaring growth levels witnessed during the 2020 and 2021 Covid-19 pandemic years.
James Lockyer, a technology research analyst at British investment bank Peel Hunt, said part of the problem for game publishers today is that gamers spend more of their time on older games than on newer ones. newer titles.
“In the years following Covid, the number of games released each year has grown dramatically,” Lockyer told CNBC by email. “Consequently, consumers have had more choice in the last two years.”
“However, more choice plus a tighter portfolio at the cost of living has meant that consumers’ money has been spread more thinly, leading to lower revenue and ROI. [return on investment] of those games are often below expectations,” he added.
