Takeaways from Ubisoft’s Earnings Report: established franchises and microtransactions
Four new AAA titles to be released by March 2018
Ubisoft has released its full-year sales and earnings report for the 2016–17 fiscal year, recording record-high digital revenue and back-catalog sales. The company recorded total annual sales of €1,459.9 million with 50.0% of that figure being from digital sales. Despite the year-on-year growth of income, Ubisoft’s debt has almost doubled in the last 12 months, leaving their balance sheet in a position of debt to the tune of €80.4 million.
The report sees Ubisoft list itself as the “number one publisher worldwide since the beginning of calendar 2017” in relation to physical and digital sales of games for the period of January to March 2017. It also lists Ghost Recon Wildlands and For Honor as the number one and two top selling games this year respectively. The Tom Clancy brand continues to be the company’s most popular venture, with 44 million unique registered players across Ghost Recon Wildlands, The Division and Rainbow Six Siege.
The company has also revealed its plans to release four AAA titles in the 2017–18 fiscal year (running from April 2017 to March 2018) comprising a new Assassin’s Creed (recent leaks suggest the game will be set in Egypt), The Crew sequel, Far Cry 5 and South Park: The Fractured But Whole (which is apparently definitely coming out this fiscal year and absolutely won’t be delayed or cancelled).
Everything detailed above is written in plain black-and-white in the report. However, it’s the insinuations included in the Yves Guillemot’s statement that prove more telling as to the company’s outlook. The Co-Founder and CEO stated:
The execution of our strategic plan fully paid off in 2016–17, with further very strong growth for the digital segment — which now accounts for 50% of total sales — and an ever-more recurring profile.
Throughout his statement, Guillemot’s uses the word ‘recurring’ no less than four times, usually as part of the phrase ‘player recurring investment’. He claims that Ubisoft’s “new business model is much more recurring and more profitable and is now significantly less exposed to new releases.” It seems clear that Ubisoft’s focus going forward is to double down on their existing franchises and are looking to increase the percentage of revenue gained from DLC sales and microtransactions. This same sentiment was echoed in Activision Blizzard’s recent earnings call, with that company not planning any new IP releases in the coming year, focusing instead on extracting revenue from existing titles. It’s no secret that the industry favours bankable sequels to established franchises over the risk of new IP, but it seems that the emergence of microtransactions in AAA games is proving too profitable for publishers to stop.
Guillemot’s comment about the new business model being “less exposed to new releases” is a somewhat unclear one. This could be taken to mean that due to the increased profitability of the company’s model, the comparatively risky venture of a new release no longer poses such a threat. They can, essentially, buoy their income so reliably that new releases can’t harm them so much. In context, though, I’m more inclined to take this statement to mean that the company feels no inclination to explore new releases when their established franchises prove so bankable.
Ubisoft is the biggest publisher in the industry and, as such, their strategy moving forward is likely to be a clear indication of the shape of the industry as a whole. So if you were hoping for a year of fresh new IP announcements or a move away from rapacious microtransactions in premium AAA games, you might want to temper your expectations. Unsurprisingly, it looks like we’re in for another year of season passes and recycled franchises from the AAA space. At least we’ve got indies.