Another key factor for games companies is to own most, if not all, of the intellectual property (IP) in a company’s portfolio, the CFO says. While Ubisoft has made games based on the TV show Lost and the film King Kong, it normally focuses on in-house brands from which it takes all revenues rather than paying royalties. Owning the licence for a game based on the next popular Pixar movie is good, Martinez admits, “but if you’re capable of creating your own IP that can [be equally as popular as a movie], that’s even better.”
To this end, Ubisoft struck a deal earlier this year with American author Tom Clancy to buy the rights to all IP using his name, having previously developed action games over the past ten years such as Tom Clancy’s Rainbow Six and Tom Clancy’s Splinter Cell. The deal gives the group a chance to develop the franchise in new ways. Initially it went from books to films to games, but Martinez sees no reason why the newer games can’t be made into books and movies under Ubisoft’s ownership.
This kind of multimedia thinking led to Ubisoft’s acquisition in July of Hybride Technologies, a Montreal-based special-effects studio known for its work on films such as 300 and Sin City. Martinez believes the move should bring Ubisoft several benefits: along with new technology the games group can use, Hybride has contacts in Hollywood that he hopes will allow Ubisoft to obtain new licences, as well as turn its own IP into movies.
Back on more familiar ground, Ubisoft’s challenge is to repeat the success of last year, when the company had a runaway hit with Assassin’s Creed, a game which allows users to pretend they’re assassins in 12th-century Jerusalem. Martinez isn’t worried about the pressure. Assassin’s Creed was hugely successful, but it was the only new Ubisoft franchise launch last year. This year the company expects to launch five, giving it reason to raise its full-year revenue forecast from €1 billion to €1.02 billion. “We don’t think last year was exceptional,” the CFO adds. “On the contrary, even though this year we won’t launch another Assassin’s Creed, we’re still capable of growing, and hopefully growing as fast as the industry — if not faster.”
Publishers need to sell about one million copies of a game on the PS3 or Xbox 360 just to break even. But as in the film industry, ploughing money and time into a new title is no guarantee that it will receive good reviews or attract consumers. So if Ubisoft’s slate of five new franchises looks ambitious, what does that say for the 14 new brands scheduled at its $3.7 billion American rival, EA?
One of the best-known names in the games industry, EA hasn’t had it easy. “We were essentially flat in our performance [in fiscal 2007] in an industry that was growing nicely with the console cycle,” says its California-based CFO, Eric Brown. “The net result was that we lost some share. That’s not something EA is accustomed to.”