Assassin's Creed maker Ubisoft (UBI) faces questions on its future

French video game publisher Ubisoft is facing questions on its future as the corporate struggles with a lackluster games pipeline and pressure from investors to pursue a sale.

The company that produces the “Assassin's Creed” series announced in an updated forecast last week that it had postponed the discharge of the following title in the favored game series – called “Assassin's Creed Shadows” – by three months to February 14, 2025 has .

Ubisoft also lowered its forecast for the 2024-2025 financial 12 months and now expects net bookings to fall to around 1.95 billion euros. Ubisoft expects net booking revenue of 350 million to 370 million euros for the second fiscal quarter, down from the previously expected 500 million euros.

“The revised goals primarily reflect the decisions made for Assassin's Creed Shadows and the weaker start than expected for Star Wars Outlaws,” Ubisoft said.

This comes after the corporate's game “Star Wars Outlaws” – an action-adventure title based on the enduring sci-fi film series released this summer – posted disappointing sales and received a mixed response from gamers. Ubisoft said that lessons learned from the discharge of Star Wars Outlaws led it to provide more time to remodel Assassin's Creed Shadows.

The company also announced that it had scrapped its plans to release its recent Assassin's Creed game with a “Season Pass,” which was a paid add-on that may provide access to a bonus quest and extra downloadable content at launch offered.

Ubisoft added that it now plans to release Assassin's Creed Shadows on Valve Corporation's online game store Steam on launch day, ending its track record of exclusively distributing PC versions of its games through Epic Games' digital storefront.

“Given recent challenges, we recognize the need for greater efficiency while keeping players happy,” Ubisoft CEO Yves Guillemot said within the statement last week, adding that the corporate’s board is launching a review to further implement it to enhance.

Ubisoft shares have fallen to decade lows amid gloomy investor expectations for its triple-A games pipeline and financial outlook.

To further compound the corporate's woes, the corporate is facing a possible strike in France after the video game union there, STJV, called for 3 days of business motion from October 15 to 17 over the corporate's efforts to bring staff back to the office has three days per week.

Following the choice to delay the upcoming Assassin's Creed game, AJ Investments, an activist investor with lower than 1% stake in Ubisoft, said it was working with other shareholders in the corporate to influence the French company to go private -Equity corporations to sell or to the Chinese gaming giant Tencent.

Tencent owns around 10% of Ubisoft.

In an open letter last week, AJ Investments said it had won the support of 10% of Ubisoft shareholders for its pressure campaign, adding that it planned to work with proxy advisory firms to organize for the vote at the corporate's next annual general meeting to organize. CNBC couldn’t independently confirm this figure.

“We have spoken to industry experts as potential board members and executives to replace current management and achieve our strategic goals. We will propose our candidates in due course,” said AJ Investments.

AJ Investments said it is going to speak to Ubisoft management on Tuesday to debate its proposals. The company added that it might display in front of Ubisoft's headquarters in Montreuil, Paris, if vital.

Several banking analysts lowered their price targets on Ubisoft following news that the upcoming game was delayed, although many left their rankings unchanged.

Deutsche Bank, which downgraded the stock to “Hold” from “Buy,” said that Ubisoft's cut to its forecast was “larger than we expected” and that the postponement of Assassin's Creed Shadows “will require a significant portion of revenue into the next one.” Fiscal 12 months postponed”. .

Deutsche Bank's George Brown also said that he expected Assassin's Creed Shadows to perform worse than he initially expected, predicting sales of seven million units for the 12-month period after release. That's down from the previous forecast of 8 million.

Meanwhile, JPMorgan said in a press release last week that it now expects lower sales of Ubisoft's triple-A game releases and sees a slower release frequency going forward. JPMorgan maintained its “neutral” rating on Ubisoft shares, but lowered its price goal from 21 euros to 11 euros.

“Mid-sized developers continue to face pressure from development cost inflation, which is not accompanied by sufficient volume/monetization improvement to maintain attractive returns,” JPMorgan analysts Daniel Kerven and David W. Peat said within the note.

“UBI’s capital structure and lack of cash generation in recent years has resulted in UBI coming under increasing pressure to reduce capex/costs.”

Nevertheless, some analysts showed more understanding of Ubisoft's problems.

Analysts at Wedbush Securities suspected that the corporate was the victim of coordinated “trolling” by people attempting to lower average user rankings for the corporate's Star Wars Outlaws game on review sites.

“We believe Star Wars Outlaws was influenced by a coordinated effort aimed at trolling Ubisoft games specifically and Star Wars content in general,” Wedbush analysts Michael Pachter, Alicia Reese and Kade Bar wrote last week within the note.

“The game received an unusually high number of user reviews with a clearly negative bias (including a large percentage of “zero” reviews), despite having acceptable review scores from reputable review sites. “This is a case of a rare incel victory that led to Ubisoft having to record its numbers,” they added.

Analysts at Wedbush said that despite delays to the upcoming Assassin's Creed title, they expect the sport to sell 7 million units in its launch quarter and consider it “has the potential to become one of Ubisoft's best-sellers ever.”

Ubisoft's problems come because the broader video game space faces an industry-wide slump.

According to research firm Newzoo, the worldwide gaming market will grow just 2.1% year-on-year in 2024. That is in comparison with 0.5% growth in 2023but nowhere near the rapid growth rates observed throughout the Covid-19 pandemic years of 2020 and 2021.

James Lockyer, technology research analyst at British investment bank Peel Hunt, said a part of the issue for game publishers today is that gamers are devoting more time to older games than newer titles.

“In the post-Covid years, the number of games released per year has increased significantly,” Lockyer told CNBC via email. “As a result, consumers have had more choice in recent years.”

“However, greater choice and tighter budgets when it comes to cost of living have resulted in consumers’ money being spread more thinly, resulting in sales and ROI.” [return on investment] “One of these games often fell short of expectations,” he added.