Rumors of takeover, strike, “old-fashioned” formula, sluggish sales: the future of video game giant Ubisoft in question

Les lapins crétins d'Ubisoft ont moins le sourire. L'entreprise qui les a créés traverse une mauvaise passe. Midi Libre – GIACOMO ITALIANO

While a social movement could be widely followed this week in French studios, the industry is wondering about the future of the company that could fall into the Chinese fold.

“What's happening at Ubisoft ?” The question is agitating the video game industry as the French giant falters on the stock market and faces a new strike starting Tuesday, against a backdrop of takeover rumors.

Stock market crash

The publisher of franchises such as “Assassin's Creed” and “Just Dance” enjoyed a boom period in the late 2000s and then at the turn of the 2020s, rivaling American and Japanese giants. But in a few years, its stock price collapsed until it reached its lowest level in 10 years in September. “Ubisoft is suffering from a series of releases that have not achieved the expected success,” believes Oscar Lemaire, from the specialist site Ludostrie, citing in particular the pirate game “Skull and Bones” and the new episode of “Prince of Persia”.

In late September, Ubisoft founder and CEO Yves Guillemot admitted that early sales of “Star Wars Outlaws”, released in late August, were “weaker than expected”, forcing Ubisoft to revise downwards its financial objectives. And the release of the next episode of its most popular series, “Assassin's Creed”, has been pushed back by three months to allow the teams to refine it. “They know they can't miss their shot”, anticipates Oscar Lemaire. Another failure would be disastrous for Ubisoft.

“”Old-fashioned” formula

If its “open-world” game formula – where the player can explore a virtual universe at will – was authoritative in the 2010s, “it's starting to get a little old-fashioned“, underlines the creator of Ludostrie. “What is holding Ubisoft back is its lack of adaptation to the evolution of the industry”, adds Martin Szumski, financial analyst at Morningstar.

Since the success of online games like “Fortnite”, which generate significant revenue each month thanks to content sold in the game, all the big publishers are trying to copy this so-called “game as a service” recipe. Ubisoft made this bet in May with the shooter “XDefiant” but the title did not meet “expectations”, according to Yves Guillemot. By missing this mark, Martin Szumski believes that Ubisoft finds itself “behind the rest of the industry“.

Social discontent

With nearly 45 studios in France (including Montpellier) and abroad (Canada, Italy, China, etc.) 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 going through for two years. Announced in January 2023, its cost-cutting plan resulted in the departure of 1,700 people in 18 months. In France, where Ubisoft employs 4,000 people, discontent is growing over working conditions and salaries.

After an initial strike movement that mobilized nearly 700 people in February – one of the largest in the sector – several unions are calling for a three-day walkout starting Tuesday to protest the decision to impose at least three days of in-person work per week. “We are currently examining how to refine (our model) to better balance the benefits of remote and in-office work”, Ubisoft said after a meeting with unions last Tuesday.

Towards a buyout…

On October 4, the Bloomberg agency reported a potential buyout of Ubisoft by the Chinese tech giant Tencent and the Guillemot family, the group's main shareholder, to take it off the stock market. Ubisoft “regularly reviews all its strategic options” and “will inform the market in due course, if necessary”, the company responded.

Tencent, with whom the Guillemot brothers sealed a union in 2022 to keep control of the company, holds nearly 10% of the capital – a threshold that it is not allowed to cross before 2030, according to the agreement – while the Guillemot family owns around 14%. “If a takeover happens, Tencent will likely push for more control than before,” judges Martin Szumski, “even if the Guillemot family wants to keep as much of the management of the company as possible“.

… and a stock market exit ?

“Tencent is very strong in the Chinese market, especially in the field of mobile games and +free-to-play+ (free games)”, explains Oscar Lemaire. A buyout would allow it to get a foot in the Western market and big-budget games that Ubisoft specializes in.

Going public would not necessarily be negative for Ubisoft, "to implement its strategy without being constantly monitored by the markets", says Michael Hodel, an analyst for Morningstar. "In the short term, it's a way for the Guillemots to be at peace. But it leaves a sword of Damocles hanging over their heads", concludes Oscar Lemaire.

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