🎙️ Embracer vs. Ubisoft: Who rises back to glory?

A Deep Dive into Two Struggling Gaming Giants

Look for a new interview every week discussing current and relevant game industry development topics!

This week, I reunited with the Pixels & Profits brothers, Matthew Kanterman and Brian Peganoff, to discuss The Embracer Group and Ubisoft's struggles and potential comeback.

I believe it’s essential to understand the critical drivers of success and failure in the industry to learn lessons on how to succeed and win.

While we point out some potentially significant issues with both companies, we do so in the spirit of determined optimism and wish both companies the best of luck for their future success!

🎧 Listen on Spotify, Apple Podcasts, or Anchor

Speakers:

• Joseph Kim. CEO at Lila Games.

• Brian Peganoff. Founder at Timber Advisors.

• Matthew Kanterman. Director of Business Development at Supersocial.

In this latest episode of Pixels & Profits, we examine the current state and future prospects of two major but struggling gaming companies: Embracer and Ubisoft.

Both companies have faced challenges in the current market environment, and the discussion aimed to illuminate their strategies, financials, and potential for growth.

Embracer: A Roll-up of Studios and IPs Background

• Embracer is a Swedish company that has grown through acquisitions of multiple game studios across various platforms (PC, console, mobile, board games, and other media).

• The company operates through four segments: PC and console games, mobile games, tabletop games, and entertainment and services.

Recent Developments

• Embracer has been shifting its business by closing some studios and selling others, such as Gearbox (sold to Take-Two) and Saber Interactive.

• The company has faced challenges due to the shift from a zero-interest-rate policy (ZIRP) environment to a higher interest-rate environment.

Financials and Debt

• Embracer's debt situation has been a concern, with the company taking on more debt to finance large acquisitions towards the end of the ZIRP era.

• The company has been working to meet debt covenants by selling assets and raising cash.

• As of Q3 2023, Embracer's core business generated around €3.6 billion in revenue, with approximately 11,000 employees and 135 games in development.

Future Outlook

• Embracer's PC and console division has the most significant potential impact on the company's future success.

• The company's tabletop gaming business, including popular titles like Settlers of Catan and Ticket to Ride, has significantly contributed to revenue and profitability. Surprisingly, it was 35% of last year’s fiscal contribution to revenue.

• Embracer's mobile gaming business faces headwinds, particularly in the hyper-casual segment, and may be impacted by changes in fingerprinting and user acquisition.

Ubisoft: Focus on Big Franchises and Live Service Games Background

• Ubisoft is a French company known for developing and publishing games for console, PC, and mobile platforms.

• The company's strategy focuses on expanding the reach of big brand games (e.g., Assassin's Creed) and building a recurring revenue model through live service games (e.g., Rainbow Six Siege).

Financials and Efficiency Concerns

• Ubisoft has seen a sharp decline in console and PC revenue but has experienced growth in its mobile segment.

• The company has faced criticism for its low revenue per employee compared to industry peers, suggesting operational inefficiencies.

• Ubisoft's R&D expenses have been high, and the company has struggled with game delays and quality issues upon release.

Upcoming Titles and Future Outlook

• Ubisoft has a lineup of highly anticipated titles for fiscal year 2024, including Avatar: Frontiers of Pandora, Assassin's Creed Mirage, and Skull and Bones.

• The company also invests in free-to-play and mobile titles based on its popular franchises, such as Rainbow Six Mobile, The Division Resurgence, and Assassin's Creed Jade.

• Concerns remain about Ubisoft's ability to execute on its ambitious slate of games and its capacity to adapt to industry trends, such as the increasing success of smaller, more agile development teams.

Conclusion

Both Embracer and Ubisoft face unique challenges in the rapidly evolving gaming industry.

While Embracer's focus on acquisitions and diverse portfolio of studios and IPs has provided a foundation for growth, the company must now navigate a more challenging financial environment and optimize its operations.

Ubisoft, on the other hand, has a strong lineup of upcoming titles and a focus on big franchises. However, it must address concerns about its operational efficiency and ability to adapt to changing market conditions.

As the industry continues to evolve, both companies must demonstrate agility, innovation, and strong execution to succeed in the long term.

Be sure to check out the full discussion on YouTube or Podcast!