Ubisoft has been in a prolonged crisis for a long time, but the latest news raises even greater doubts about the company's future fate. Gamesindustry.biz portal speakwhy the gaming industry is not so optimistic about the French publisher's split and the deal with Tencent.
While smaller European publishers like Kepler and those publishing their own games like CD Projekt Red are doing well, the overall position in the market is poor. Partly due to the acquisition of veteran publishers like Codemasters; and partly because the collapse of Embracer has damaged many companies across the continent.
But there's no denying that all those little things pale in comparison to the shadow of Ubisoft's gradual demise. Eidos and Infrogrames have long since ceased to exist, so through a misguided attempt to expand Embracer through a series of ill-advised acquisitions, Ubisoft became the de facto main game publisher in Europe. Yves Guillemot's company is the last independent giant in Europe. Its successes and international importance are important not only from an economic point of view but also from the point of view of national pride.
Yes, to say that Ubisoft has had serious problems in the past 10 years is an understatement. The publisher's stock price has fallen 95% from its peak. The company's financial results consistently disappointed shareholders as key releases failed to meet expectations; Star Wars Outlaws' poor sales have severely damaged Ubisoft's reputation. Thousands of employees lost their jobs during the restructuring and layoffs.
Now, Ubisoft has presented an action plan for the near future – a massive reorganization aimed at staving off the company's decline. Building on the massive deal with Tencent announced last year, Ubisoft plans to distribute its studios and IP across five divisions (“creative houses”) with significant financial independence and creative control over their own work.
On paper, it's not hard to see why an idea like this could succeed. The cause of many of Ubisoft's problems, as is the case with many other corporations, is the wrong decisions of management, aggravated by internal conflicts and redistribution of spheres of influence. Projects languish in production hell for years, consuming tons of resources without yielding any positive results. Therefore, in theory, dividing the company into sub-structures could focus managers' attention as financial responsibilities become closer to creative decisions.
However, the market is not very optimistic about this project. Ubisoft's shares fell another 40% following the announcement of the upcoming restructuring, although in reality the figure is not as dramatic as you might think. 40% of an already catastrophically low price is not too much.
For now, we can only guess what has investors so worried. However, most likely, the reality is that Ubisoft's actions do not resemble a business recovery plan but a complete destruction of the publisher to sell assets.
Under the terms of the deal with Tencent, the original creator will control Ubisoft's flagship franchises like Assassin's Creed, Far Cry and Rainbow Six. The Chinese giant will receive a stake in this subsidiary, and at a valuation much higher than the publisher's current market capitalization allows.
The remaining sections will be divided by genre. At least partly. CH2 (from the creator) will focus on shooters, CH3 on service games, CH4 on adventure and fantasy games, and CH5 on family projects and mobile releases. Obviously, the problem is that the creation of a leading IP ownership division would clearly deprive other companies of the opportunity to release large projects based on them. What's the point of adventure and fantasy without Assassin's Creed? And in shooters – no Far Cry and Rainbow Six?
Now, creative companies look like easier prey as the next round of downsizing and downsizing takes hold. Of course, this is the most cynical view of the situation, but it's hard to argue with it: it's suspicious that the most valuable franchises belong to a single division.
Comprehensive restructuring is unlikely to be a panacea. First, it is unclear whether the new departments will actually be protected from senior leadership interference in their work. Ubisoft's official position states that each creator will be guided only by his own experience and his financial management, but the devil, as always, lies in the details. It is possible that in reality, they will have to constantly fend off attacks from regulators, especially since Yves Guillemot has stubbornly protected his control of Ubisoft from investors in the past.
In addition, there is reason to believe that the new structure will not protect the publisher from rash decisions, because Ubisoft immediately ordered employees to return to the office. Companies that are doing well do not need to resort to such demonstrations. In theory, newly autonomous units should have the right to refuse instructions from superiors, citing employee needs and their own work experience.
Therefore, unfortunately, the market reaction to major reforms within Ubisoft is more questionable than not. The company's leadership will remain the same: Guillemot has made it clear that he would rather bury Ubisoft than hand over power. The new innovative companies don't seem to have any real freedom, making the revamped structure more like a private equity lunch menu than a recipe for success.
