Ubisoft cancels three games, slashes targets on worsening conditions

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Tencent has increased its stake in French games maker Ubisoft, the company behind popular franchises like Assassin’s Creed. But analysts said this has effectively closed the door on a full takeover of the company.

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Ubisoft canceled three unannounced games and slashed its full-year financial targets Wednesday, blaming “worsening macroeconomic conditions” that have plagued the video game industry.

The French game publisher said it expects 2022 net bookings to come in at 725 million euros ($779.4 million), lower than an earlier target of 830 million euros.

The company cited poor performance of its Mario + Rabbids Sparks of Hope and Just Dance 2023 titles, as well as a challenging economic environment.

For the full year, Ubisoft said it expects its 2022 net bookings to fall 10%. The company had earlier forecast net bookings growth of 10%.

“We are clearly disappointed by our recent performance,” said Ubisoft CEO Yves Guillemot, in a statement. “We are facing contrasted market dynamics as the industry continues to shift towards mega-brands and everlasting live games, in the context of worsening economic conditions affecting consumer spending.”

Faced with higher prices and borrowing costs, consumers are cutting back on discretionary purchases. Gaming especially has come under pressure.

Global sales of games and services, including console and PC games, were expected to contract 1.2% year-on-year to $188 billion in 2022, according to a July research note from market data firm Ampere Analysis.

With the industry seeing increased consolidation, Ubisoft is viewed by analysts as a potential takeover target. Its share price sank more than 38% in 2022, erasing 3 billion euros from the company’s market value.

Meanwhile, internal scandals have also haunted the company. Ubisoft underwent an executive shakeup in 2020 following reports of sexual harassment and abuse. Numerous leaders stepped down, including former Chief Creative Director Serge Hascoet.

Michael Pachter of Wedbush Securities said Ubisoft’s lineup of games over the holidays “just aren’t good enough to command attention.” He said he expects improvement with upcoming games like Avatar, Assassin’s Creed and Skull & Bones, “but they couldn’t pull it off with Mario + Rabbids this year,” he told CNBC via email.

In September, Chinese tech giant Tencent upped its stake in the company. Tencent invested 300 million euros in Guillemot Brothers Limited, taking a 49.9% stake in the family investment firm which owns 15% of Ubisoft.

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