Ubisoft Q3 Sales Edge Down, As It Ramps Up Big Franchises

French Assassin's Creed publisher Ubisoft posted a sales decline for its October-December quarter, despite the release of the high-profile multiplatform action game, Assassin's Creed II. Ubisoft said it generated sales of €495 million ($678.9 million) for the fiscal third quarter ended December 31, 2009, a 2.7 percent year-on-year drop. The decline came even as November's Assassin's Creed II has sold 8 million units worldwide to date--1.6 million of that coming from its opening week. The next Assassin's Creed installment will take place in Rome, the company said. For the first nine months of Ubisoft's fiscal year, the publisher reported €661 million ($906.6 million) in sales, a 22.5 percent year-on-year decrease. Ubisoft said its performance is in line with revised targets announced in mid-January. The shortfall comes as "significant" market softness hit the Nintendo DS market, a market that had previously been a viable market for the publisher, but has now since been halved. The reduction in DS focus means that Ubisoft is spending less money on external development investments, the company said. In addition, lower-than-anticipated performance of James Cameron's Avatar: The Game movie tie-in negatively impacted sales for the period. Back-catalog game sales also lagged, the company said. Ubisoft plans to remedy its current situation by focusing on its strength in "high-end" games, by "concentrating on more regular releases for its major franchises." The company also said it will reduce "new creation investments," a strategy that Ubisoft says will lower risk and give investors higher visibility, reducing volatility, while accelerating cash flow. The publisher is also focusing on online initiatives, such as its Uplay online hub for use with Ubisoft's games, and games including Trackmania 2. The company still has casual game plans that are tied to Microsoft's Project Natal and Sony's PS3 motion controller, as well as Facebook. For the fiscal Q4 ending March 31, Ubisoft plans to release Assassin’s Creed 2: Director’s Cut Edition for PC, Red Steel 2 for Wii, The Settlers 7: Paths to a Kingdom for PC, and Silent Hunter 5: Battle for the Atlantic for PC. The publisher reiterated its January guidance of annual sales of €860 million ($1.17 billion) and a current operating loss before stock-based compensation of around €50 million ($68.6 million). The full-year results rely partly on "a product mix in favor of franchises for Xbox 360 and PlayStation 3," signifying the shift towards high-end products. [UPDATE: Ubisoft chief Yves Guillemot further outlined the publisher's strategy to focus on more regular releases for major franchise installments during a post-earnings release conference call. One analyst wondered if Ubisoft was worried about the franchise fatigue that sometimes comes with frequent releases of a given series. "Our goal is to increase [release frequency], and release games more often," Guillemot said. "If we can [release major franchise installments] more often, we don't think it will fatigue, but actually increase the visibility of those brands, and allow our customers to expect them more often." He added, "...It's very important to come out with very high quality products each time you release, so we're working to make sure our teams have enough time to come out with those franchises with very high quality for those games." "You will see more creativity, and more re-use of tools and engines that will be created," noted the long-time Ubisoft head. Ubisoft CFO Alain Martinez used the Rabbids casual game franchise as an example of the benefits of more regular, possibly annual, releases. Martinez said that an iteration of Rabbids has launched once a year for the past three years, and along with the sales spike of each new version of the series came a boost in sales for previous versions of the franchise. Interestingly, the exec said that Ubisoft observed a similar sales bump for the original Assassin's Creed when its sequel released in November. Martinez said that Ubisoft currently takes about three or four years between major franchise releases. "Some people will buy the new one, some people will buy the cheaper, more cost-effective game," the CFO said, indicating that you win both ways. "That's what you have to keep in mind."]