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Artwork for the upcoming game “Assassin’s Creed Shadows” from Ubisoft.
John Keeble | fake images
French video game publisher. Ubisoft is facing doubts about its future, while dealing with a lackluster game portfolio and pressure from investors to seek a sale.
The company, which produces the “Assassin’s Creed” franchise, said in an updated guidance 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 Feb. 14, 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 reach between €350 million and €370 million, up from €500 million previously forecast.
“The revised goals are primarily a reflection of the decisions made for Assassin’s Creed Shadows and the softer-than-expected launch for Star Wars Outlaws,” Ubisoft said.
It comes after the company’s “Star Wars Outlaws” game, an action-adventure title based on the iconic sci-fi film series, which debuted this summer, had disappointing sales performance and mixed reception by part of the players. Ubisoft said that what it learned from the launch of Star Wars Outlaws prompted it to give more time to polishing Assassin’s Creed Shadows.
The company said it was also scrapping plans to launch its new Assassin’s Creed game with a “Season Pass,” which was a paid add-on that provided access to an extra mission and additional downloadable content at launch.
Ubisoft added that it now plans to release Assassin’s Creed Shadows on Valve Corporation’s Steam online game store on launch day, ending its history of exclusively distributing PC versions of its games on Epic Games’ digital store.
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 | fake images
“In light of recent challenges, we recognize the need for greater efficiency while delighting players,” Ubisoft CEO Yves Guillemot said in a statement last week, adding that the company’s executive committee company is launching a review to further improve its execution.
Ubisoft shares have fallen to decade lows amid gloomy investor expectations for its triple-A games portfolio and financial prospects.
To further compound the company’s woes, the company is facing a possible strike in France after the country’s STJV video game workers union called a three-day strike from October 15 to 17 over the company’s attempt to for workers to return to the offices. three days a week.
Activist investor pressure
Following the decision to delay its upcoming Assassin’s Creed game, AJ Investments, an activist investor with a less than 1% stake in Ubisoft, said it was working with other company shareholders to pressure the French firm to sell itself to Ubisoft firms. private capital. or the Chinese gaming giant Tencent.
Tencent owns a approximately 10% stake in Ubisoft.
In an open letter last week, AJ Investments said it had secured the support of 10% of Ubisoft shareholders for its pressure campaign, adding that it intends to cooperate with proxy advisory firms in preparation for the vote in the next general meeting of the company. CNBC was unable to independently verify this figure.
“We have spoken to industry experts such as potential board members and executives to replace the current management and achieve our strategic objectives; we will propose our candidates in due course,” AJ Investments said.
AJ Investments said it should speak to Ubisoft management on Tuesday to discuss its proposals. The firm added that it would demonstrate in front of Ubisoft’s headquarters in Montreuil, Paris, if necessary.
Several banking analysts lowered their price targets for Ubisoft following news of delays to its next game, although many kept their ratings unchanged.
Deutsche Bank, which downgraded the stock from a “buy” to a “hold,” said Ubisoft’s guidance cut was “bigger than we expected” and that the postponement of Assassin’s Creed Shadows “drives a substantial amount of revenue.” ” to the next fiscal year. .
Deutsche Bank’s George Brown also said he anticipated Assassin’s Creed Shadows would perform worse than he initially expected, forecasting sales of 7 million units in the 12-month period after release. That’s down from a previous projection of 8 million.
Meanwhile, JPMorgan said in a note last week that they now expect lower unit sales from Ubisoft’s triple-A game releases and see a slower cadence of releases in the future. JPMorgan maintained its “neutral” rating on Ubisoft shares, but reduced its price target to 11 euros from 21 euros.
“Mid-sized developers continue to be pressured by development cost inflation, which has not been accompanied by sufficient volume/monetization improvement to sustain attractive returns,” JPMorgan analysts Daniel Kerven and David W said in the note. Peat.
“UBI’s capital structure and lack of cash generation in recent years have left it under increasing pressure to cut investments and costs.”
Reaction
Still, some analysts were more sympathetic to Ubisoft’s problems.
Analysts at Wedbush Securities suggested that the company had become the victim of coordinated “trolling” by people trying to drive down user rating averages for the company’s Star Wars Outlaws game on review sites.
“We believe Star Wars Outlaws was affected by a coordinated effort that sought to control Ubisoft games specifically and Star Wars content generally,” Wedbush analysts Michael Pachter, Alicia Reese and Kade Bar wrote in the note last week. .
“The game received an unusual number of user reviews with a clear negative bias (including a large percentage of “zero” reviews), despite earning acceptable review scores on reputable review sites. This is a case of a rare incel victory that led Ubisoft to have to write down its numbers,” they added.
Analysts at Wedbush said that despite delays to its upcoming Assassin’s Creed title, they expect the game to sell 7 million units in its launch quarter and believe it has “the potential to be one of Ubisoft’s biggest sellers.”
Industry decline
Ubisoft’s problems come at a time when the broader video game sector is facing an industry-wide crisis.
The global games market is It is expected to grow just 2.1% year-over-year in 2024.according to research firm Newzoo. That is versus 0.5% growth in 2023but nowhere near the increasing levels of growth seen during the Covid-19 pandemic years of 2020 and 2021.
James Lockyer, technology research analyst at British investment bank Peel Hunt, said part of the problem for game publishers today is that gamers spend more time on older games than newer titles.
“In the years following Covid, the number of games released per year has grown substantially,” Lockyer told CNBC via email. “Consequently, consumers have had more choices in recent years.”
“However, more options, plus a wallet squeezed by the cost of living, have meant that consumers’ cash has been spread thinner, leading to the revenue and ROI (return on investment) of those games often fall short of expectations,” he added.
