Illustration for Ubisoft’s upcoming game “Assassin’s Creed Shadows”.
John Keeble | Getty Images
French video game publisher Ubisoft it faces questions about its future as it struggles with a lack of gaming supply 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 has delayed 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 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 the fiscal second quarter to be 350 million to 370 million euros, down from the 500 million euros previously expected.
“The revised targets are largely 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 was released this summer – was met with disappointing sales results and a mixed reception from players. Ubisoft said that learnings from the release of Star Wars Outlaws prompted it to allow more time to refine Assassin’s Creed Shadows.
The company said it is also scrapping plans to release its new Assassin’s Creed game with a “Season Pass,” which was a paid add-on that gave access to a bonus 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 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.
Robyn Beck | AFP | Getty 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 board is launching a review to further improve its execution.
Shares in Ubisoft fell to their lowest levels in a decade amid gloomy investor expectations about its triple-A game offering and financial outlook.
To add to the business woes, the company faces a possible strike in France after the STJV video game workers union there called a three-day industrial action from October 15-17 over the company’s attempt to bring workers back to offices three days a week.
Pressure from activist investors
Following the decision to delay the upcoming Assassin’s Creed game, AJ Investments, an activist investor with less than 1% stake in Ubisoft, said it was working with other shareholders in the company to encourage the French company to be sold to private equity firms or Chinese gaming giant Tencent.
Tencent owns a roughly a 10% 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 intended to work with proxy advisory firms in preparation for a vote at the company’s next general meeting. CNBC could not independently confirm this figure.
“We have talked with industry experts as potential board members and CEOs to replace the current management and achieve our strategic goals, we will propose our candidates in due course,” said AJ Investments.
AJ Investments noted that it is scheduled to speak with Ubisoft management on Tuesday to discuss its proposals. The company added that it would demonstrate outside Ubisoft’s headquarters in Montreuil, Paris, if necessary.
Several bank analysts cut their price targets for Ubisoft following news of its upcoming game’s delay, 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 delay of Assassin’s Creed Shadows “pushes a significant amount of revenue” into the next fiscal year.
Deutsche Bank’s George Brown also said he expects Assassin’s Creed Shadows to perform worse than he initially expected, predicting unit sales of 7 million in the 12 months after release. This is less than the previous 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 releases and see a slower pace of releases moving forward. JPMorgan maintained its “neutral” rating on Ubisoft shares, but lowered its target price to 11 euros from 21 euros.
“Mid-cap developers continue to be pressured by development cost inflation not accompanied by sufficient volume/monetization growth to sustain attractive returns,” JPMorgan analysts Daniel Kerven and David W Peat said in a note.
“UBI’s capital structure and lack of cash in recent years have left it under increasing pressure to reduce investment/costs.”
Return
Still, some analysts were more sympathetic to Ubisoft’s struggles.
Analysts at Wedbush Securities suggest the company fell victim to coordinated “trolling” by people trying to lower average user ratings for the company’s Star Wars Outlaws game on review sites.
“We believe Star Wars Outlaws was influenced by a coordinated effort to troll Ubisoft’s games in particular and Star Wars content in general,” Wedbush analysts Michael Pachter, Alicia Reese and Kade Bar wrote in a note last week.
“The game has received an unusual number of user reviews with a clear negative bias (including a large percentage of “zero” reviews), despite acceptable review scores from reputable review websites. This is a case of a rare incel victory that has led to Ubisoft having to drop its numbers,” they added.
Wedbush analysts said that despite the delay of the upcoming 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 Ubisoft’s best-sellers ever.”
The decline of industry
Ubisoft’s woes come as the broader video game space faces an industry-wide downturn.
The global game market is growth of only 2.1% at the annual level in 2024according to research firm Newzoo. That’s it compared to growth of 0.5% in 2023but nowhere near the rapid growth levels we saw during the Covid-19 pandemic years of 2020 and 2021.
James Lockyer, a technology research analyst at British investment bank Peel Hunt, said part of the problem with game publishers today is that players spend more time on older games than newer titles.
“In the post-Covid years, the number of games released annually has increased significantly,” Lockyer told CNBC via email. “Consequently, consumers have had more choices over the last few years.”
“However, greater choice plus a reduced cost-of-living wallet means consumers’ cash is spread more thinly, leading to income and ROI [return on investment] from those games that often fall short of expectations,” he added.
