Ubisoft SA (UBI) fell the most ever after Europe’s largest video-game maker said two new games would be postponed and Christmas tent-pole “Watch Dogs” will miss holiday sales.
Ubisoft predicted an operating loss of 40 million euros ($54 million) to 70 million euros in the year ending in March after delaying “Watch Dogs” and “The Crew” to improve game-play quality. The shares fell as much as 32 percent, the most since its 1996 debut on the Paris exchange.
“We made a choice that will pay off in the long run,” Chief Executive Officer Yves Guillemot said in an interview. “The market has changed -- we need huge blockbusters, and that means making very high-quality games.”
The Christmas season accounted for more than half of Ubisoft’s sales last year. Delayed releases are becoming more common in the industry as games become more complex. Take-Two Interactive Software Inc. (TTWO:US)’s latest “Grand Theft Auto” was slated for spring 2013 before being delayed for further development. The game, which features gangsters, cost $250 million to develop and market. It surpassed $1 billion in retail sales in its first three days.
Ubisoft, based in Montreuil, dropped 23 percent to 8.50 euros at 10:44 a.m. in Paris trading, parring the advance this year to 7.6 percent.
“Watch Dogs” was originally set for release in November. A debut between March and September 2014 will give the gamemaker a better view of how new consoles by Microsoft Corp. and Sony Corp. gain traction after they’re released next month.
“It’s little bits of polish and fine-tuning, but they really matter -- we want these games to be the best out there for new-generation consoles,” said Guillemot, the 53-year-old Ubisoft co-founder. “‘Watch Dogs’ could be as big as ‘Assassin’s Creed,’ even bigger. It’s a great opportunity to increase our market share.”
Ubisoft cut its full-year sales forecast by as much as a third to 995 million euros to 1.05 billion euros. It previously forecast operating profit of as much as 125 million euros on sales of as much as 1.45 billion euros.
Operating profit will be at least 150 million euros next fiscal year and 200 million euros or more in the following one ending March 2016, Ubisoft said, using figures that aren’t based on International Financial Reporting Standards. That compares with operating profit of 100 million euros last year.
Ubisoft had the idea behind “Watch Dogs” four years ago and has been developing the game for more than three years.
To differentiate from cheap games for tablets, smartphones and Facebook Inc.’s platform, game developers are releasing fewer titles, focusing instead on quality, with high-end titles priced around $60.
Ubisoft, which is smaller than American gamemakers Electronic Arts Inc. (EA:US) or Activision Blizzard Inc. (ATVI:US), has bet it can gain market share by improving graphics and storylines, hiring real actors to do voice-overs and making movies, comic books and stuffed animals to promote brands like its multimillion-unit franchise “Assassin’s Creed.”
Ubisoft will start selling “Assassin’s Creed IV” this month after it sold 12.5 million units of the previous edition last year. Like “Assassin’s Creed,” the “Watch Dogs” brand will be developed into a game, film and action figures, all based on the world of a hacker roaming the streets of Chicago.
Development costs run from 60 million euros to 70 million euros on average for Ubisoft’s biggest games, according to the company. Games go through an extensive testing process involving testers who spot bugs and complain when the game gets too slow or fast, easy or hard. In “Watch Dogs,” how quickly players access the hacking functionality is one example of something developers want to tweak to perfection, Guillemot said.
“In our market, console cycles are five to eight years long, and our brands outlive that,” Guillemot said. “If consumers see enough potential, they’ll give us the time we need until the next release.”
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