Sales tumble at Ubisoft

Despite announcing a drastic drop in sales for its half-year, and a loss of 78m euros, Ubisoft says strong sales of Assassin’s Creed II – up 32 per cent on the original game in its first week – point to a bright future for big name franchises.

The firm’s R&D spend has decreased significantly from €63m to €48m, due to a reduced portfolio of game releases. The difference is that R&D has gone from just under 30 per cent of sales income to less than 20 per cent.

In contract, marketing spend has risen from 15 per cent of sales to 25 per cent, although it has decreased in absolute terms to €42m.

Although the strategy of focussing on big titles has proven successful with ACII, Ubi’s financial managers will be crossing fingers upon the release of the Avatar game, the success of which will undoubtedly hang on the much-anticipated movie’s box office draw. Additionally, Ubi yesterday announced plans to release a game based on its own classic franchise, and Jake Gyllenhaal’s spring movie release, Prince of Persia.

CEO Yves Guillemot said the firm’s "strategy of developing bigger franchises" had been vindicated by ACII, and predicted that more success would follow Avatar "which is expected to be the biggest blockbuster [movie] of this holiday season".

On a darker note, he added that "our Wii games have got off to a more contrasted start in a less predictable market" echoing general industry frustration with Wii as a third party platform of any great value.

Ubisoft’s €78m loss for the period, ended September, compares with a profit of €33m for the same period last year, while sales dropped from €345m to €166m. The company is sticking to previous guidance of 2010 revenues of over €1bn and profits of €73m.

Despite what seems like a conservative withdrawal to big brand blockbusters, Ubi says it won’t abandon risk and experimentation. In a financial earnings call, Guillemot confirmed that the firm would develop 10 Natal games within the first six month’s of Microsoft’s launch, with perhaps half as many for Sony’s hands-free effort, although he said these would have a casual emphasis suggesting relatively low levels of investment per title.