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Artwork for Ubisoft’s upcoming game Assassin’s Creed Shadows.
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French video game publisher Ubisoft faces questions about its future as it struggles with a lackluster pipeline of games and pressure from investors to sell.
The company behind the “Assassin’s Creed” franchise said in updated guidance last week that it has delayed the release of the next game in the popular series – titled “Assassin’s Creed Shadows” – by three months to February 14, 2025. .
Ubisoft also cut its guidance for the 2024-2025 financial year, saying it now expects net bookings to fall to around €1.95 billion. Ubisoft said it expects net bookings to come in between 350 million and 370 million euros in the fiscal second quarter, up from the 500 million euros previously expected.
“The revised targets are mainly a reflection of the decisions made for Assassin’s Creed Shadows and the softer than expected launch of Star Wars Outlaws,” Ubisoft said.
This comes after the company’s Star Wars Outlaws game, an action-adventure based on the cult sci-fi film series that came out this summer, was met with disappointing sales figures and a mixed reception from gamers. Ubisoft said that the information it received from the release of Star Wars Outlaws prompted it to allow more time to polish Assassin’s Creed Shadows.
The company said it was also scrapping 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 Steam online store on launch day, ending its track record of exclusively distributing PC versions of its games on Epic Games’ digital storefront.
Yves Guillemo, CEO and co-founder of Ubisoft, speaks at the Ubisoft Forward live event in Los Angeles, California on June 12, 2023.
Robin Beck | AFP | Getty Images
“In light of recent challenges, we recognize the need to improve efficiency while keeping players happy,” Ubisoft CEO Yves Guillemo said in a statement last week, adding that the company’s executive committee is launching a review to further improve execution.
Ubisoft shares fell to a decade low amid gloomy investor expectations for its triple-game pipeline and financial outlook.
To compound business woes, the company is facing a possible strike in France after the country’s video game workers’ union STJV called for three days of protests Oct. 15-17 over the company’s bid to bring workers back to the office three days a week.
Pressure from an activist investor
Following the decision to shelve the upcoming Assassin’s Creed game, AJ Investments, an active investor with less than 1% stake in Ubisoft, said it was working with the company’s other shareholders to force the French firm to sell itself to private equity firms. or the Chinese gaming giant Tencent.
Tencent owns a roughly 10% of Ubisoft’s stock.
In an open letter last week, AJ Investments said it had received the support of 10% of Ubisoft’s shareholders for its pressure campaign, adding that it intended to work with proxy advisory firms in preparation for a vote at the company’s next general meeting. CNBC was unable to independently verify that number.
“We have spoken with industry experts as potential board members and executives to replace the current management and realize our strategic goals, we will offer our candidates at the appropriate time,” AJ Investments said.
AJ Investments said it is due to speak with Ubisoft management on Tuesday to discuss its proposals. The firm added that it would hold a demonstration in front of Ubisoft’s headquarters in Montreuil, Paris, if necessary.
Several banking analysts cut their price targets on Ubisoft following news of the upcoming game’s delays, although many kept their ratings unchanged.
Deutsche Bank, which downgraded the stock from “buy” to “hold”, said the cut in Ubisoft’s guidance was “larger than we expected” and that the delay in the release of Assassin’s Creed Shadows “carries a significant amount of revenue” into the next financial year.
Deutsche Bank’s George Brown also said he expects Assassin’s Creed Shadows to do worse than he originally expected, predicting sales of 7 million in the 12 months after release. That’s down from a forecast of 8 million earlier.
Meanwhile, JPMorgan said in a note last week that they now expect unit sales of Ubisoft’s triple-A game releases to decline and are seeing a slowdown in releases. JPMorgan maintained its “neutral” rating on Ubisoft shares, but lowered its price target to €11 from €21.
“Mid-sized developers remain under pressure from development cost inflation not accompanied by sufficient volume/monetization improvement to sustain attractive profitability,” JPMorgan analysts Daniel Curwen and David W. noted in a note. Pete.
“UBI’s capital structure and lack of cash in recent years have left it under increasing pressure to cut investment/spending.”
Clearance
Still, some analysts were more sympathetic to Ubisoft’s struggles.
Analysts at Wedbush Securities suggested the firm was the victim of coordinated “trolling” by people trying to lower average user scores for the company’s Star Wars Outlaws game on review sites.
“We believe Star Wars Outlaws was affected by a concerted effort to troll Ubisoft games in particular and Star Wars content in general,” Wedbush analysts Michael Pachter, Alicia Reese and Cade Barr wrote in a 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 receiving acceptable review scores from reputable review sites. This is a case of a rare incel victory that has led to Ubisoft having to remove his numbers,” they added.
Analysts at Wedbush said that despite delays with the upcoming Assassin’s Creed title, they expect the game to sell 7 million units in its release quarter and believe it has “the potential to become one of Ubisoft’s best-sellers.”
Decline of industry
Ubisoft’s woes come as the broader video game space faces an industry-wide downturn.
World market of games in 2024 will grow by only 2.1% compared to the same period last yearaccording to research company Newzoo. like this compared to 0.5% growth in 2023but nowhere near the rapid growth seen during the Covid-19 pandemic in 2020 and 2021.
James Locker, technology research analyst at British investment bank Peel Hunt, said part of the problem for game publishers today is that gamers are spending more time on older games than newer titles.
“In the post-Covid years, the number of games released per year has grown substantially,” Locker told CNBC via email. “So consumers have had more choice over the last couple of years.”
“However, greater choice and smaller wallets mean that consumers’ cash is spread more thinly, resulting in revenues and ROI (return on investment) in these games often being lower than expected,” he added.
