Ubisoft Faces Challenges as Game Delays and Underperformance Impact Q3 Outlook

French gaming giant Ubisoft is grappling with significant challenges, reporting an anticipated 39% drop in third-quarter revenue (July to September 2024) to approximately €380 million ($412 million). This sharp decline is largely due to the absence of new game releases in the quarter, highlighting broader difficulties within the company.

The past year has been particularly tough for Ubisoft, with its stock value halving. The company’s recent game, Star Wars Outlaws, launched in August, underperformed in sales. This is part of a larger pattern, as Ubisoft has faced multiple setbacks, including delays in game releases and titles that have not met expectations.

Efforts to Revive Star Wars Outlaws

Ubisoft is working to turn things around with Star Wars Outlaws by releasing regular updates. The significant patch that was released on November 21st included enhancements to the combat and stealth mechanics, as well as new story content featuring Lando Calrissian. Furthermore, the game’s debut on Steam is anticipated to expand its player base and increase sales.

Cost-Cutting Measures

In response to its struggles, Ubisoft’s CEO Yves Guillemot has initiated an Executive Committee review aimed at enhancing execution and putting players first. The company is also focused on cost-saving measures, having already reduced expenses by €200 million compared to two years ago.

Potential Buyout Rumours

Amidst these challenges, a report by Bloomberg News suggests that Tencent Holdings and the Guillemot family may explore a potential buyout of Ubisoft’s highly successful Assassin’s Creed franchise. While Ubisoft has not confirmed this, it stated that it regularly reviews strategic options to benefit its stakeholders.

Bright Spots in Ubisoft’s Portfolio

Despite the setbacks, Ubisoft has seen growth in its back catalog, which increased 12% year-over-year in the second quarter. Flagship franchises like Assassin’s Creed have generated €4 billion over the past decade, and Rainbow Six Siege has earned over €3.5 billion, demonstrating the enduring appeal of these titles.

Workforce Optimization

Ubisoft has also optimized its workforce, reducing employee numbers from 19,410 in September 2023 to 18,666 by September 2024. Despite these cuts, employee retention has improved, reaching levels last seen during the company’s successful period from 2010 to 2020.

Looking ahead, Ubisoft remains committed to achieving its 2024-25 fiscal year targets, including projected net bookings of €1.95 billion and breaking even on non-IFRS operating income. The company is dedicating additional time to refining key titles like the upcoming Assassin’s Creed Shadows, ensuring a high-quality release.