Artwork for Ubisoft's upcoming game “Assassin's Creed Shadows.”
John Keeble | Getty Images
French video game publisher Ubisoft faces questions about its future, grappling with a weak gaming offering and investor pressure to push for sales.
The company that produces the “Assassin's Creed” series said in updated guidance last week that it has postponed the release of the next title in the popular game series – titled “Assassin's Creed Shadows” – by three months, to February 14, 2025.
Ubisoft also lowered its guidance for the 2024-2025 fiscal year, saying it now expects net bookings to decline to around €1.95 billion. Ubisoft said it expects net bookings in the fiscal second quarter to be between €350 million and €370 million, up from a previously expected €500 million.
“The revised targets primarily reflect decisions made for Assassin's Creed Shadows and the softer-than-expected launch of Star Wars Outlaws,” Ubisoft said.
The release comes after this summer's release of “Star Wars Outlaws,” an action-adventure game based on the iconic sci-fi film series, was met with disappointing sales and mixed reception from gamers. Ubisoft stated that lessons learned from the launch of Star Wars Outlaws forced it to allow more time to polish 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 will be a paid add-on that provides access to additional quests 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 its launch day, ending its previous record of exclusively distributing its PC games on the Epic Games digital store.
Yves Guillemot, CEO and co-founder of Ubisoft, speaks during the Ubisoft Forward live broadcast in Los Angeles, California, June 12, 2023.
Robyn Beck | AFP | Getty Images
“In light of recent challenges, we recognize the need for greater performance while delighting gamers,” Ubisoft CEO Yves Guillemot announced last week, adding that the company's executive committee is launching a review to further improve its execution.
Ubisoft shares fell to their lowest level in a decade amid gloomy investor expectations for the AAA gaming franchise and its financial outlook.
To further worsen the company's problems, the company is facing possible strike action in France after the national union of video game workers STJV called for three days of industrial action from October 15-17 over an attempt to return employees to offices three days a week.
Pressure from the activist investor
Following the decision to delay the upcoming Assassin's Creed game, AJ Investments, an activist investor with less than 1% of Ubisoft, said it was working with the company's other shareholders to persuade the French company to sell itself to private equity funds or Chinese gaming giant Tencent.
Tencent owns, among others, approximately 10% of shares in Ubisoft.
Last week, in an open letter, AJ Investments said it had secured the support of 10% of Ubisoft shareholders for its pressure campaign, adding that it intended to work with proxy advisory firms in preparation for the vote at the company's next annual general meeting. CNBC could not independently verify this number.
“We have spoken to industry experts as potential board members and executives to replace current management and advance our strategic goals. We will propose our candidates in due time,” said AJ Investments.
AJ Investments said it was scheduled to talk to Ubisoft's management on Tuesday to discuss its proposals. The company added that it would hold a demonstration outside Ubisoft's headquarters in Montreuil, Paris, if necessary.
Several banking analysts lowered their price targets for Ubisoft following news of delays for the upcoming game, though many left their ratings unchanged.
Deutsche Bank, which downgraded the company's stock from “buy” to “hold,” said Ubisoft's cut in expectations was “greater than we expected” and that postponing the release of Assassin's Creed Shadows “shifts a significant portion of revenues” into the next fiscal year.
Deutsche Bank's George Brown also said he expected Assassin's Creed Shadows to perform worse than he initially expected, forecasting unit sales of 7 million units in the 12 months after launch. This is less than the previous forecast of 8 million.
Meanwhile, JPMorgan said in a note last week that it now expects lower unit sales for Ubisoft's triple-A games and is seeing slower game release rates. JPMorgan maintained a “neutral” rating on Ubisoft shares, but lowered the price target to €11 from €21.
“Mid-market developers continue to be pressured by development cost inflation that is not accompanied by sufficient improvement in volume/monetization to maintain attractive earnings,” JPMorgan analysts Daniel Kerven and David W Peat said in a note.
“UBI's capital structure and lack of cash generation in recent years have left it under increasing pressure to cut investment/costs.”
Reaction
Still, some analysts were more sympathetic to Ubisoft's struggles.
Analysts from Wedbush Securities suggest that the company has become the victim of coordinated “trolling” by people trying to lower the average user ratings of Star Wars Outlaws on review sites.
“We believe Star Wars Outlaws was influenced by a concerted effort to troll Ubisoft games specifically and Star Wars content generally,” Wedbush analysts Michael Pachter, Alicia Reese and Kade Bar wrote in a note last week.
“The game received an unusual number of user reviews with a clearly negative bias (including a large percentage of 'zero' reviews), despite acceptable ratings on reputable review sites. This is a case of a rare incel victory that led to Ubisoft having to write down its numbers,” they added.
Wedbush analysts said that despite delays in the release of the upcoming Assassin's Creed, they expect the game to sell 7 million copies in its launch quarter and believe it has “the potential to become one of Ubisoft's best-selling products ever.”
Industry collapse
Ubisoft's woes come as the broader video game space faces an industry-wide collapse.
There is a global gaming market in 2024 it is expected to grow by only 2.1% year-on-year– says the research company Newzoo. This is up from 0.5% growth in 2023but not to anywhere near the surge seen 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 for game publishers today is that gamers are devoting more time to older games than newer titles.
“In the years following Covid, the number of games released annually has increased significantly,” Lockyer told CNBC via email. “As a result, consumers have had more choice over the last few years.”
“However, greater choice and tighter wallets mean that consumers' cash is spread thinner, leading to revenues and returns on investment in these games often falling short of expectations,” he added.