Ubisoft: Buying Declines Despite Bookings Disappointment (OTCMKTS:UBSFY)
Ubisoft ( OTCPK:UBSFY ) fell sharply near its recent historic lows after its earnings called out disappointing numbers and guidance, something that would have been very easy to predict given our previous coverage. We’re not convinced by the version Comments on Skull and bonesThey believe that the project has failed, with others occupying the fort. We also note that it’s likely the back catalog that is doing the heavy lifting. It appears that below-expected guidance was the main reason behind the poor earnings day performance.
The drop in stock buying struck us as premature, but now with a release XDefiantWe think one of our concerns about Ubisoft has been dispelled. The problem: the big releases of 2024, Star Wars: Outlaws And AS: Shadows They receive a lot of opposition from players, with all of them Its release trailers generated poor ratings and significant controversy over the price tags and worsening pre-ordering practices. Furthermore, there are accusations of messaging and activism that are becoming a more motivating issue for players, and creating a risk of boycotts that we will not ignore.
Fiscal year profits
Let’s see the development from the first half to the fiscal year to see how momentum has built up in the booking results.
First, you should know what contributes to bookings. The back catalog is contributions from previous titles, and what’s left between that and the total is what comes from new releases.
New releases:
- Skull and bones
- Prince of Persia: The Lost Crown
- Crew: Motorcycle Festival
- AC: Mirage (Assassin’s Creed)
Back catalogue:
- Rainbow Six Siege (R6)
- AC franchise
In our recent coverage, we paid some attention to the poor reception of Skull and Bones. Ubisoft highlighted in the release that it has the second highest play time numbers with high average daily play times. This sounds great, but it’s a game that runs without a free trial for a while until it’s time to switch to a paying customer, and the price is about as high as AAA games get these days at around $70. Playtime numbers are boosted by the free trial. We don’t think there are a lot of conversions going on, and according to some reports, the project is internally classified as a failure at Ubisoft. This is not surprising given the problems faced in development, having been in development for years and at several in-house studios, but more importantly, the quality of the final product and its hefty price.
Avatar may not have performed well due to the price promotion strategy and was not mentioned in the fiscal year release. AC: Mirage has certainly done well, and the new Crew game will probably do well too. Prince of Persia was a beloved side-scrolling game. The AC Mirage was enough to bring the numbers up nicely between H1 and FY, but the back catalog was even more impressive. The financial year saw total bookings worth around €700 million more than the year-on-year first half figure, around €300 million of which can be explained by additional performance from the back catalogue. p.6 It has carved out a niche in the live action shooter arena with an innovative concept, which is quite an accomplishment considering how competitive it has become.
The guidance has been a concern, with bookings expected to reach €275 million in the upcoming first quarter. Bloomberg surveys indicated expectations were around €376 million, which could be explained by either the company throwing cold water on expectations for its back catalog or new releases. The three main games in the pipeline are:
- Xdefiant (Q1)
- Star Wars: Outlaws
- AS: Shadows
Some early reports on XDefiant look good in terms of player numbers, around 10% of a game like Apex Legends which is impressive, no major complaints. It seems to have done a good job of targeting a niche group of former TDM-style CoD players who have been left behind by Activision’s focus on Warzone. This will be the only new release impacting the first quarter, so we think it’s about this year’s new releases being short-tailed and likely to be disappointing in the back catalog. Wall Street analysts may not realize how much Skull and Bones is hated due to how careful Ubisoft is with its player numbers data, and the fact that it’s not possible to access those numbers using third-party trackers because people play through the Ubisoft client. And nothing like Steam for PC.
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We’ve been very concerned about XDefiant, but if we’re to believe some of these early numbers reported by gaming journalists, our fears might be dispelled. It seems like a good game. This is a positive development for us and brings us closer to Ubisoft, which remains close to its historic lows.
However, we have a lot of lingering concerns about Star Wars: Outlaws and AC: Shadows. Both are used in pre-order strategies that ask players too much money for a video game, according to players who generally oppose these titles. Outlaws also engage in the annoying practice of charging a higher price for a package with an additional task. Although DLC is not actually very popular, it is at least being produced after the game’s release. This is a case where final content that could easily be present in the base game is sold separately. This did not go unnoticed.
For AC: Shadows we have similar concerns about the pricing, which is very high and uses the same three-tier system as Outlaws, and we also feel that the market is tired of Ubisoft’s open world RPGs in Assassin’s Creed. There’s a fatigue with the open world in general, and taking a cool and predictable setting like Japan and using it for that could lead to some disappointments, especially since it seemed like Ubisoft was taking the franchise back to its roots with Mirage, which has paid off. Furthermore, there has been opposition to the ability to pass the game in AC: Shadows to unlock certain unlockable cosmetic items, and other practices that are considered a bit weak for a single-player story-driven game. Finally, there have been a lot of complaints about perceived political messages in the game, and AC: Shadows is likely at risk of being included on SBI Detected’s heavily-followed regulation page for a boycott of Steam, along with a lot of other Ubisoft. Titles. SBI Detected has roughly 400,000 followers, and is only available on Steam, which means PC players, where a game like Shadows might reach around 20 million players – less on PC (probably around 5-6 million based on Epic). There will be more people outside the group who may choose to pass on the game due to the backlash. It’s not necessarily a death sentence for a game, but it can be, and it’s the kind of alternative data that is more likely to give investors an edge in these markets.
In any case, the games haven’t been really well received by some measures, when you look at their relative release trailers, though Ubisoft says pre-orders for Outlaws have been strong.
Players are certainly responding well to the pricing, but also to some of the other creative choices made by the game’s teams. There is a degree of protest for players to “vote with their wallets” in order to curb these practices. It’s very difficult to know whether these things are widespread and likely to influence the results due to online echo chamber effects, but the hate numbers and county county projects give us some hard numbers to start from.
However, AC is a huge franchise, and although the Japanese releases have saturated some things, e.g Ghost of Tsushima, it may even outperform Ubisoft’s other successful open world games in terms of setting alone. Many people will want a Japanese setting for an AC game for many years. Likewise, fans have been wanting an open-world Star Wars game for decades, and this will be the first ever. Although many people would have preferred self-insertion and character creation. With Ubisoft stock still in relative stagnation, two major franchise releases could deliver exceptional performance. Using Mirage as a conservative figure, since it was a lower tier game, probably around 5 million players or around €300 million each for six months (or more if people actually responded to the three-tier pricing), and about double that over 12 months. Bookings for the new issue reached around €800 million in FY2024, so 2025 could be a really exciting year.
But we think it’s possible there could be a boycott in the air, and with the way information spreads and spreads, we think it becomes more likely as we get closer to the release dates. We stay away, despite the low price and an EV/EBITDA multiple of 3.3x or so (ATVI was acquired at closer to 20x, albeit in the last low price era).
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