Why is Assassin’s Creed maker Ubisoft facing questions about its future?

Ubisoft is facing mounting pressure from investors after delaying its highly anticipated “Assassin’s Creed Shadows” game by three months and reporting weaker-than-expected sales for “Star Wars Outlaws.”

These setbacks have sparked concerns about the company’s financial performance and future direction, causing its stock to plummet.

The delay of “Assassin’s Creed Shadows,” now set for release on February 14, 2025, and poor sales of “Star Wars Outlaws” have forced Ubisoft to lower its net bookings estimate for the 2024-2025 fiscal year to 1.95 billion euros.

This is a significant drop from previous projections, and the company’s shares fell 19%, marking their lowest point since November 2013.

The company’s stock has plunged over 65% in the past year alone.

Ubisoft’s poor sales

The underwhelming reception of “Star Wars Outlaws” has been a significant factor in Ubisoft’s challenges.

The action-adventure game, based on the “Star Wars” franchise, failed to meet the company’s sales targets and received a mixed response from gamers.

This has prompted Ubisoft to adjust its approach, ensuring that “Assassin’s Creed Shadows” will receive additional time for development and polish.

In response to recent setbacks, Ubisoft has made key strategic changes.

The company has abandoned plans to launch “Assassin’s Creed Shadows” with a paid “Season Pass” at launch, a shift from its usual business model of offering bonus content through such add-ons.

Additionally, Ubisoft plans to release the game on Valve’s Steam platform, ending its previous practice of exclusively selling PC versions through Epic Games’ storefront.

Ubisoft CEO Yves Guillemot acknowledged the company’s struggles, stating, “In light of recent challenges, we recognize the need for greater efficiency while continuing to delight players.”

He added that the company’s executive committee is undertaking a review to improve overall execution and strategy.

Activist investor calls for sale of Ubisoft

Amid Ubisoft’s difficulties, activist investor AJ Investments has called for the company to consider selling itself.

With a stake of less than 1% in the firm, AJ Investments has voiced dissatisfaction with Ubisoft’s leadership and sought backing from other shareholders.

The firm claims to have garnered support from investors holding 10% of Ubisoft’s shares and is engaging with proxy advisory firms ahead of the company’s next general meeting.

“We have engaged with industry experts and are prepared to propose new board members to help realize our strategic objectives,” AJ Investments said in an open letter.

The investor further revealed that it plans to meet with Ubisoft’s management to discuss its proposals and could stage a demonstration at the company’s headquarters if necessary.

Tencent, the Chinese gaming giant, already owns a 10% stake in Ubisoft.

Ubisoft stock: analysts slash price targets

Several bank analysts have lowered their price targets for Ubisoft following news of the delayed release and disappointing financial outlook.

Deutsche Bank downgraded the company’s stock from “buy” to “hold” and noted that the guidance revision was “bigger than expected.”

The bank’s analysts also forecasted that “Assassin’s Creed Shadows” would sell 7 million units in its first 12 months, down from an initial projection of 8 million.

JPMorgan, meanwhile, has cut its price target for Ubisoft from 21 euros to 11 euros.

The bank cited increasing development costs and the company’s slow release schedule as factors contributing to a weaker financial performance.

“Mid-size developers like Ubisoft are being squeezed by rising costs without a corresponding increase in monetization to support returns,” JPMorgan analysts noted.

Industry-wide slowdown weighs on Ubisoft’s prospects

Ubisoft’s challenges are not occurring in isolation; the broader video game industry is also experiencing a slowdown.

The global games market is projected to grow by just 2.1% year-over-year in 2024, according to research firm Newzoo, marking a modest recovery from 2023’s 0.5% growth but far below the pandemic-driven boom of 2020 and 2021.

James Lockyer, a technology research analyst at Peel Hunt told CNBC in a report that consumers are spending more time on established games, which has limited demand for new releases. He said,

The sheer number of games released post-Covid has given players more options, while cost-of-living pressures have led to less disposable income being spent on new titles.

Despite these challenges, some analysts remain optimistic about Ubisoft’s long-term prospects.

Wedbush Securities analysts suggested that “Star Wars Outlaws” had been subject to an organized “trolling” campaign aimed at lowering user review scores.

The firm remains confident in the potential of “Assassin’s Creed Shadows,” predicting that it could sell 7 million units in its first quarter and become one of Ubisoft’s bestsellers.

As Ubisoft navigates financial headwinds and investor pressure, its ability to execute upcoming releases like “Assassin’s Creed Shadows” will be critical to shaping its future.

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