The numbers don't lie: Games as "live" services bring in more money over time.
For a long time, Ubisoft was known for cranking out annual or near-annual releases in popular franchises like Assassin's Creed, Just Dance, Far Cry, the Tom Clancy games, and more. Now, though, the company is signaling it is in the middle of a major change in direction, focusing on fewer big-game releases that draw long-term support from both developers and players.
"New releases now only represent a part of our business, which is now focused on longterm engagement with our player communities," Ubisoft CEO Yves Guillemot writes in a sprawling 256-page annual report released this week. "Our players not only play for more hours at a time, but do so over a period of months or even years. We are thus able to offer them new experiences and content, thereby extending the lifetime of our games."
Guillemot points to Rainbow Six: Siege as the primary example of this new focus; the game saw its player base double between February 2016 and February 2017. But continued developer refinement and player engagement with online-focused titles like The Division, For Honor, and Steep also reflect the company's focus on "live" games, Guillemot says.
Ubisoft's new focus doesn't come entirely out of left field. For years now, the industry as a whole has been gravitating toward a "games as a service" model that prizes continuing support for existing games. Now, though, Ubisoft is being quite explicit in moving to "a model which is less dependent on releasing new games" and more focused on "developing numerous multiplayer games... which have dramatically increased player engagement."
Things like "low user engagement" and "hit driven cyclical business" belong in the past, Ubisoft says.
Increasing "players' recurring investment" is increasingly key to Ubisoft's profit margins.
"Live" games are maintaining their money-making potential much better than "traditional" games, according to Ubisoft's data.
An accompanying quarterly report Powerpoint presentation helps explain just why these long-lasting "live" games have become the company's primary concern. While "traditional" games tend to maintain only 13 percent of their revenue into their second year, "live" games bring in 52 percent of that first-year level into year two, according to Ubisoft's data.
In another slide, Ubisoft cites advantages like "recurring revenue business," "high user engagement," and a focus on "lifetime value" as benefits of these continuing games. The "digital-first" focus generates a "more predictable & cash-generative business model and market" than the former annual release cycle, Ubisoft says.
With the new model also comes a new focus on the "players' recurring investment" as a major metric for the health of Ubisoft's business. Things like in-game items, DLC, season passes, subscription, and advertising revenue now make up 18 percent of Ubisoft's revenue, the company says, compared to 38 or 39 percent for the likes of EA and Activision. Raising this ratio "has the potential to deliver prodigious value for our shareholders," Guillemot writes in the annual report.
With these kinds of numbers, it's not hard to see why Ubisoft would shift its focus almost entirely away from annual single-player adventures and toward online-focused platforms that can be extended with new content indefinitely. Don't be surprised as you see that focus reflected more and more in the big-budget games released by Ubisoft and others going forward.
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