Ubisoft: pirate game is a dragging anchor for Assassin’s Creed group

Piracy, real or merely suspected, can work well in video games. One thinks of Nintendo’s Donkey Kong, deemed legally different from Universal Studios’ King Kong. But piracy is a double-edged cutlass for Ubisoft. Delays to its Skull and Bones game and weak Christmas trading pushed shares in the French studio down as much as 18 per cent on Thursday.

Ubisoft is less vulnerable to opportunistic bids than it was, however. Chinese games giant Tencent took a stake of up to 10 per cent in the business only four months ago, via a deal with the founding Guillemot brothers.

Limited takeover prospects will deter many from owning the shares at a time when the company is struggling. Previous profit warnings and game delays have already soured financial fortunes.

Shares have dropped 55 per cent over the past year. At nine times forward earnings, they carry a discount of a half to peers.

Ubisoft said weaker sales shaved €100mn off net bookings which it thinks will now be €725m in the Christmas quarter. Games like Mario + Rabbids: Sparks of Hope and Just Dance 2023 underperformed. Full year net bookings are now expected to contract by one-tenth from an expansion of the same magnitude expected previously.

The company also took a depreciation charge on capitalised research and development spending of €500mn from scrapped projects. A non-IFRS operating profit of €400mn, previously expected for this year, should now become a €500mn loss.

That makes things sound worse than they are. The slate of games for the year starting in April looks strong. A new title from the best-selling Assassin’s Creed series and a game based on James Cameron’s Avatar movies bode well, assuming no further delays.

Talk of a strategy tilt is also promising. Ubisoft says it will focus more on its better-performing brands and live titles. The company will take on fewer projects, which should reduce scope for delays.

Ubisoft boss Yves Guillemot has lately resembled a fumbling Jack Sparrow more than a swashbuckling Sir Francis Drake. Even so, the shares look cheap given the strength of the company’s core brands.