Rumors of a Buyout, Sluggish Sales... The Uncertain Future of Ubisoft, French Video Game Giant
In just a few years, its stock has plummeted, reaching in September its lowest level in 10 years.
"What is happening at Ubisoft?" This question is stirring the video game industry as the French giant wobbles on the stock market and faces a new strike starting Tuesday, against a backdrop of buyout rumors. The publisher of franchises like Assassin’s Creed and Just Dance enjoyed a successful run in the late 2000s and at the turn of the 2020s, competing with American and Japanese giants. But in recent years, its stock has collapsed, reaching its lowest point in 10 years in September. "Ubisoft is suffering from a series of releases that haven’t met the expected success," says Oscar Lemaire from the specialized site Ludostrie, citing, in particular, the pirate game Skull and Bones and the new installment of Prince of Persia.
At the end of September, Ubisoft's founder and CEO, Yves Guillemot, admitted that the initial sales of Star Wars Outlaws, released at the end of August, were "weaker than expected," forcing the company to lower its financial targets. The release of the next installment in its most popular series, Assassin’s Creed, was delayed by three months to allow the teams to fine-tune it. "They know they can’t afford to miss the mark," anticipates Oscar Lemaire. Another failure would be disastrous for Ubisoft.
Outdated Formula
While its "open-world" game formula—where players can freely explore a virtual universe—was groundbreaking in the 2010s, "it’s starting to feel a bit outdated," notes the creator of Ludostrie. "What’s holding Ubisoft back is its lack of adaptation to the evolution of the industry," adds Martin Szumski, a financial analyst at Morningstar. Since the success of online games like Fortnite, which generate significant revenue each month through in-game purchases, all major publishers have tried to replicate this "live service" model. Ubisoft made this bet in May with the shooter XDefiant, but the game failed to meet "expectations," according to Yves Guillemot. By missing this opportunity, Szumski believes Ubisoft is now "lagging behind the rest of the industry."
With nearly 45 studios in France and abroad (Canada, Italy, China…) and around 19,000 employees, Ubisoft is one of the largest companies in the sector. But it has not been immune to the crisis that the video game industry has been experiencing for two years. Announced in January 2023, its cost-cutting plan resulted in the departure of 1,700 people over 18 months. In France, where Ubisoft employs 4,000 people, discontent is growing over working conditions and wages.
Strikes and Buyout Rumors
After a first strike in February that mobilized nearly 700 people—one of the largest in the sector—several unions are calling for a three-day walkout starting Tuesday to protest against the decision to impose at least three days of in-office work per week. "We are currently exploring ways to fine-tune (our model) to better balance the benefits of remote and in-office work," Ubisoft said after a meeting with unions last Tuesday. On October 4th, Bloomberg reported on a potential buyout of Ubisoft by Chinese tech giant Tencent and the Guillemot family, the group’s main shareholder, to take the company private. Ubisoft "regularly reviews all its strategic options" and "will inform the market in due time, if necessary," the company responded.
Tencent, with whom the Guillemot brothers formed a partnership in 2022 to maintain control of the company, holds nearly 10% of the capital—a threshold it cannot exceed before 2030 according to the agreement—while the Guillemot family owns about 14%. "If a buyout happens, Tencent will likely push for more control than before," assesses Martin Szumski, "even though the Guillemot family wants to retain as much control as possible over the company." "Tencent is very strong in the Chinese market, especially in mobile games and free-to-play games," explains Oscar Lemaire. A buyout would allow them to gain a foothold in the Western market and into the big-budget games Ubisoft specializes in.
Taking the company private wouldn’t necessarily be negative for Ubisoft, "as it would allow them to implement their strategy without being constantly scrutinized by the markets," says Michael Hodel, an analyst at Morningstar. "In the short term, it’s a way for the Guillemots to have peace of mind. But it leaves a sword of Damocles hanging over their heads," concludes Oscar Lemaire.