Ubisoft: Digital Games Aren't Profitable Enough

[Tom Goldman]

Ubisoft: Digital Games Aren't Profitable Enough

Ubisoft's experiments with free-to-play games and social networking haven't paid off yet.

With videogame companies like Zynga flourishing [http://www.escapistmagazine.com/news/view/106913-Zyngas-CityVille-Continues-to-Set-Records] without ever releasing any physical products, you'd think it'd be easy for more traditional publishers to jump right into the mix. Not so, says Ubisoft CEO Yves Guillemot, who recently talked about how digital games aren't bringing in much revenue for the company.

In this case, "digital games" refers to free-to-play titles and those found on social networks. Guillemot specifically mentioned two of Ubisoft's titles: The Settlers [http://www.facebook.com/CSIcrimecity].

According to Guillemot, despite the quality of these games they're not earning enough money yet. CSI: Crime City has an average of 2 million monthly users, which the company is pleased with, but Guillemot thinks that more investment will be needed for digital games to truly bear fruit. Part of that investment includes launching them worldwide, as it plans to do with Settlers Online by bringing it to new markets in China and Russia.

Even Scott Pilgrim vs. The World, which was one of the biggest selling games on the PlayStation Network in the second half of 2010 in addition to XBLA sales, doesn't appear to be profitable enough for Guillemot. He says the cost of investment for many of these digital games may be higher than their returns.

However, Ubisoft is still positive about where this segment of the market is going, and plans to launch a new "digital initiative" in the next fiscal year that will improve on what has been done already. Guillemot's words are surprising, because you're used to hearing about how digital markets are earning cash hand-over-fist for publishers all over the world.

Source: Siliconera [http://www.siliconera.com/2011/02/14/digital-games-weighing-down-ubisofts-profits-says-ceo/]

Permalink

 

[Something Amyss]

That's only because they haven't figured out a way to make these titles (F2P included)cost 60 bucks up front.

 

[brunothepig]

I don't know, two million users seems pretty damn good to me. I think what they mean is their digital games aren't profitable enough.
And what's this about cost of investment? Surely digital games would be much cheaper to produce, very very cheap in the grand scheme of things. Unless he's talking about infrastructure and such. Whatever. This Settlers Online sounds fun though, haven't played Settlers since number three... May check that out when I get a good internet connection.

That's only because they haven't figured out a way to make these titles (F2P included)cost 60 bucks up front.

This made me laugh. Thankyou.

 

[manythings]

Gabe Newell's wallet disagrees.

EDIT: I thought it said The Settlers Online CSI. I think that would be a pretty good game.

Compared to their physical sales, of course F2P and digital games aren't going to turn them a profit. The only reason Zynga has so much bank to show is because they've grown a sizable audience through a social network, and rely on micro-payments from users. They still won't make nearly enough money to compete with Ubisoft, so I'm shocked that this was news for them.
Maybe if they dropped some of their crappier titles, they'd save a little revenue.

Zynga makes about $1 million daily. Their games have virtually $0 investment costs.

 

[ZombieGenesis]

Compared to their physical sales, of course F2P and digital games aren't going to turn them a profit. The only reason Zynga has so much bank to show is because they've grown a sizable audience through a social network, and rely on micro-payments from users. They still won't make nearly enough money to compete with Ubisoft, so I'm shocked that this was news for them.
Maybe if they dropped some of their crappier titles, they'd save a little revenue.

 

[Booze Zombie]

They are profitable in the long-run; go ask Gabe Newell.

 

[Jumwa]

Ubisoft appears to be a company very out of tune with the market as it is. Last I recall them saying that the only way for a publisher to make money is massive budget, AAA games. Not to mention their belief that draconian DRM that punishes paying customers is the way to go.

However, I've never really liked anything they've done anyhow. All their games have felt a little stunted to me, with less than spectacular gameplay. That's just my personal opinion though.

 

[Scabadus]

You mean to tell us that these games based on existing popular franchises, thus costing a lot in licensing and investment, that are being given to people for free are making a loss?

Ubisoft continues to astound me with its intelect and genius in solving the deep mathematical problem of large investment + zero sales = net loss. Congratulations Ubisoft, I think you just graduated from primary school.

 

[Xannieros]

They had free to play, and social networking games?

 

[squid5580]

CSI Crime City sucks. It is clunky and unrewarding. It completely misses the mark of what makes Farmville so appealing and profitable. Here is a tip you need more than just clicking squares.

 

[mjc0961]

It's Ubisoft, so I don't take much stock into what they have to say about the industry. Remember, these are the guys who released piles upon piles upon piles upon mother fucking piles of shovelware for the Wii and especially the DS, and then had the nerve to stand up and say "The games that are not triple-A are not profitable anymore." No Ubisoft, that's not it at all. It's just that nobody wants anything from your mountain of shovelware.

You mean to tell us that these games based on existing popular franchises, thus costing a lot in licensing and investment, that are being given to people for free are making a loss?

Ubisoft continues to astound me with its intelect and genius in solving the deep mathematical problem of large investment + zero sales = net loss. Congratulations Ubisoft, I think you just graduated from primary school.

Plus, that. I'm starting to wonder if Ubisoft's mother doesn't still dress it every morning before it heads off to work.

 

[Antari]

Reap what you sow Ubisoft. You've angered enough people its starting to make a difference.

 

[Ravek]

'Digital games' is perhaps the dumbest term one could use to refer to these kind of games. All video games by their nature are digital. Non-digital games would be the like of board or card games.

Why not just call them free-to-play games or some other specific term?

 

[Jandau]

"Digital games" are profitable, however YOUR "digital games" just suck. You have a facebook game and the bastard offspring of a franchise you're run into the ground (last Settlers game was terrible), of course you're not making money.

Seriously, this would be like Microsoft declaring that Digital Distribution isn't profitable because nobody is using their GFWLive (because it's crap), while Valve is sitting on their Cash Mountain going "U MaD bRo???".

If "Digital games" (yes, I'm putting it in air-quotes because it's a silly phrase) weren't profitable, then I'm guessing LotRO is making up its soaring profit margins that went sky high since they went F2P? I'm guessing Riot (makers of League of Legends) got a huge investment from some chinese dudes a few weeks ago because they are hemorrhageing money?

Just because you suck at it doesn't mean it sucks in general. It just means you suck, Ubisoft.

 

[Atmos Duality]

Even Scott Pilgrim vs. The World, which was one of the biggest selling games on the PlayStation Network in the second half of 2010 in addition to XBLA sales, doesn't appear to be profitable enough for Guillemot. He says the cost of investment for many of these digital games may be higher than their returns.

Are we talking about "profit" or "revenue"?
They mean two different things.

Raw income is Revenue, net income (after costs) if positive, is Profit.

Something cannot be turning a profit and still be in the red; that contradicts the definition of profit.
However, you can be taking in revenue while not turning a profit.

Just looking for some clarity, that's all. Based on the title of the article, it would appear that investors are complaining about making money, but not making as much as they were hoping.

 

[HentMas]

I think its more about timing and mommentum, i mean, Zynga had a great time to grow and create a userbase, and most Zynga games have ingame links to its other games, so that if, lets say, you dont liked Farmville, well maybe you will like city ville, or Poker, or any of the other games it haves

I, personaly have never heard about CSI watever and Settlers for Face Book, and i spend roughly 30 minnutes on Facebook checking my friends updates, fotos and sending trains to theirs cities in Citi ville, and every single time i have seen an add for "Somethingville" "Wateverwars" and stuff like that, lack of marketing is one HUGE issue, i would like to check Settlers and CSI blablak, but how will i do it if i dont see it when i´m on!?

 

[Wandrecanada]

Note: Larger corporations desire higher net returns to entice investors to both invest and keep their money in the company. Since investors generally want to put their money into whatever generates the most return the fastest they will put money into a company that earns the highest net profit each quarter/year (since public reports are quarterly or yearly).

What does this mean for large production firms like EA? They have to make each project return more dollars than their competitors for each dollar spent on the project. For a studio like Ubi who wants to sell their services at a premium they have to continue to output projects that make larger net returns.

Independent developers without the brand recognition of Ubisoft generally have to give away a much larger chunk of the profit to publishers to offset the idea that their products will have inferior net returns. This is why studios like Hothead, The Behemoth and DoubleFine aren't seen complaining about low return projects as much. They're usually just happy enough to keep their studio doors open by breaking even.

 

[The_root_of_all_evil]

Still stick with my original timeline of Ubisoft going down the tubes.

Guys, you have HEARD of Popcap, Steam, GoG etc. I assume? Perhaps it's just that your lacklustre titles and crappy DRM are blocking your inflow?

 

[BENZOOKA]

Last time I checked: digital did not equal free-to-play. Am I missing something?

They obviously have some incredible unnecessary money holes somewhere in between, or they're only making a load of profit and not a shitload.