Artwork for the upcoming game “Assassin's Creed Shadows” from Ubisoft.
John Cable | Getty Images
French video game publisher Ubisoft It faces questions about its future, as it grapples with a lackluster gaming pipeline and pressure from investors to seek a sale.
The company, which produces the “Assassin's Creed” franchise, said in updated guidance last week that it had postponed the release of the next title in the popular game series – called “Assassin's Creed Shadows” – by three months, until February 14, 2025. .
Ubisoft also lowered 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 the second fiscal quarter to reach between 350 million and 370 million euros, down from the 500 million euros previously expected.
“The revised goals are primarily a reflection of the decisions made regarding Assassin's Creed Shadows and the lighter-than-expected launch of Star Wars Outlaws,” Ubisoft said.
This comes after the company's “Star Wars Outlaws” game – an action-adventure title inspired by the popular sci-fi film series, which was released this summer – was met with disappointing sales performance and mixed reception from players. Ubisoft said that what it learned from the release of Star Wars Outlaws prompted it to devote more time to polishing Assassin's Creed Shadows.
The company said it also canceled plans to release a new Assassin's Creed game with a “Season Pass,” which was a paid add-on that provided access to an additional mission and additional downloadable content at launch.
Ubisoft has added that it now plans to release Assassin's Creed Shadows on Valve Corporation's online game store Steam on its launch day, ending its track record of exclusively distributing PC versions of its games on Epic Games' digital storefront.
Yves Guillemot, CEO and co-founder of Ubisoft, speaks at the Ubisoft Forward livestream event in Los Angeles, California, on June 12, 2023.
Robin Beck | AFP | Getty Images
“In light of recent challenges, we acknowledge the need for greater efficiency while keeping players happy,” Ubisoft CEO Yves Guillemot said in a statement last week, adding that the company's executive committee is launching a review to further improve its implementation.
Ubisoft shares fell to their lowest levels in a decade on the back of dismal investor expectations for its triple-A gaming pipeline and financial prospects.
To further compound the company's woes, the company is facing a potential strike in France after the country's STJV video game workers union called a three-day industrial strike from October 15-17 over the company's attempt to send workers back to their offices. Three days a week.
Pressure from activist investors
Following the decision to postpone the upcoming Assassin's Creed game, AJ Investments, an activist investor that owns less than 1% of Ubisoft shares, said it was working with other shareholders in the company to push the French company to sell itself to private equity firms. Or to 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 lobbying campaign, adding that it intended to collaborate with proxy advisory firms in preparation for a vote at the company's next general meeting. CNBC was unable to independently verify this number.
“We have spoken to industry experts as potential board members and executives to replace current management and achieve our strategic objectives, and will propose our candidates in due course,” AJ Investments said.
AJ Investments indicated that it is scheduled to speak with Ubisoft management on Tuesday to discuss its proposals. The company added that it will demonstrate in front of Ubisoft's headquarters in Montreuil, Paris, if necessary.
Several banking analysts lowered their price targets for Ubisoft following news of the postponement of its upcoming game, although many kept 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 postponement to Assassin's Creed Shadows “pushes a significant amount of revenue” into the next fiscal year.
Deutsche Bank's George Brown also said he expected Assassin's Creed Shadows to perform worse than initially expected, predicting unit sales of 7 million units in the 12-month period after release. This is lower than the previous forecast of 8 million.
Meanwhile, JPMorgan said in a note last week that they now expect unit sales of Ubisoft's triple-A game releases to decline and see a slower cadence of releases moving forward. JPMorgan maintained its “neutral” rating on Ubisoft stock, but cut its price target to €11 from €21.
“Mid-sized developers continue to be pressured by development cost inflation that is not matched by sufficient volume/monetization improvement to sustain attractive returns,” JPMorgan analysts Daniel Kirvin and David W. Pitt 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 were more sympathetic to Ubisoft's struggles.
Analysts at Wedbush Securities suggested that the company has become the victim of coordinated “trolling” from people trying to bring down user score 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 troll Ubisoft games specifically and Star Wars content generally,” Wedbush analysts Michael Pachter, Alicia Reiss, and Cady Barr wrote in the note last week.
“The game received an unusual number of user reviews with a distinct negative bias (including a large percentage of 'zero' reviews), despite seeing acceptable review scores from reputable review sites. This is a case of a rare incel victory that resulted in a win for Ubisoft They added that they had to lower their numbers.
Wedbush analysts said that despite the delay in the upcoming Assassin's Creed title, they expect the game to sell 7 million units in its first quarter of launch and believe it has “the potential to be one of Ubisoft's best-selling games of all time.”
Industry stagnation
Ubisoft's woes come as the broader video game space faces an industry-wide slump.
Global gaming market It is set to grow by just 2.1% year-on-year in 2024According to research company Newzoo. this Up from 0.5% growth in 2023but not close to the high levels of growth seen during the COVID-19 pandemic years in 2020 and 2021.
Part of the problem facing game publishers today is that players are devoting more time to older games than newer ones, said James Lockyer, a technology research analyst at British investment bank Bill Hunt.
“In the years following Covid, the number of games released annually has increased dramatically,” Lockyer told CNBC via email. “Consumers have therefore had more choices over the past couple of years.”
“However, more choice combined with a compressed cost-of-living portfolio means that consumers' money is spread less thinly, resulting in revenue and return on investment (ROIs) for those games often coming in below expectations,” he added.
