U.S. Markets closed

Being Good Enough Isn't Good Enough For Picky Gamers

Alex Webb
1 / 3

Being Good Enough Isn't Good Enough For Picky Gamers

(Bloomberg Opinion) -- Video games usually give you infinite attempts to fail and respawn when trying to pass a level. Ultimately, though, you’d rather succeed at the first attempt. And the more time you spend playing just a handful of different games, the better you’ll get at them.

That’s much like the gaming industry itself. If Ubisoft Entertainment SA’s latest flagship title proves to be a flop, the French company can try to fix any problems with downloadable software updates over the subsequent months. But it’s still better to get everything right the first time around.

That’s why the decision last Thursday from the maker of games such as Assassin’s Creed and Far Cry to cut its profit outlook and push back three of its major game releases is sensible. But if the brothers who founded and control the firm are astute, it should also herald a long overdue strategy pivot. The shares fell 16% on Friday, and have yet to fully recover.

Ubisoft’s approach has long differed from its major rivals, Activision Blizzard Inc., Electronic Arts Inc. and Take-Two Interactive Software Inc. While those U.S. firms have reduced the number of blockbuster releases (known as AAA games) to two or three a year, Ubisoft still launches five or six.

Not only does that inevitably spread resources more thinly, it also ignores the new realities of gaming habits, per Bloomberg Intelligence analyst Matthew Kanterman. Gamers are increasingly spending their time (and therefore money) on just a handful of games. The world of a title such as Red Dead Redemption — made by Take-Two — is so rich, it offers as much as 80 hours of gameplay before the gamer even has to think about going online to compete against other players. That means its fans have little incentive to splash out on other games.

The upshot is that, by May, Take-Two had sold 24 million copies of Red Dead Redemption, just seven months after its release. That’s five million units more than all of Ubisoft’s titles combined in the entire last fiscal year.

Were Ubisoft to focus its resources, then it might expect to improve the quality of its games. The most recent release — the first-person shoot-em-up “Tom Clancy’s Ghost Recon: Breakpoint” — has a score of 58 out of 100 on Metascore, a website that aggregates user and critic reviews to rate games. For a game to sell well, it usually needs a rating of 80 or more, Mirabaud Securities analyst Neil Campling reckons.

Disappointing sales of Ghost Recon have prompted the Ubisoft rethink. By pushing back the release dates for “Gods & Monsters,” “Tom Clancy’s Rainbow Six Quarantine” and “Watch_Dogs Legion,” Ubisoft Chief Executive Officer Yves Guillemot will be able to dedicate engineers to improving Ghost Recon with patches. But he’s also buying time to avoid a repeat of that misstep with the other titles. After all, the company insisted the game tested well. Clearly there was something wrong with its data.The lackluster response to Ghost Recon and The Division 2, plus the delays, prompted Ubisoft to say that net bookings for the 12 months through March would be 1.5 billion euros ($1.7 billion), below its earlier forecast for 2.2 billion euros. It now expects adjusted operating income for between 20 million and 50 million euros, down from 480 million euros.

Concentrating on a few blockbusters that could sell close to 20 million copies apiece in their first year might also make it easier to create an ecosystem around titles like Ghost Recon or Assassin’s Creed — a thriving community of regular players, willing to spend more money on upgrades. That bolsters higher-margin recurring revenue.

The concern remains that, while it’s delaying some games for now, Ubisoft will persist with the strategy of releasing half a dozen major titles a year. It might not quite be game over, but it would be a mistake.

To contact the author of this story: Alex Webb at awebb25@bloomberg.net

To contact the editor responsible for this story: Melissa Pozsgay at mpozsgay@bloomberg.net

This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.

Alex Webb is a Bloomberg Opinion columnist covering Europe's technology, media and communications industries. He previously covered Apple and other technology companies for Bloomberg News in San Francisco.

For more articles like this, please visit us at bloomberg.com/opinion

©2019 Bloomberg L.P.