A Video Game Crash Is Actually Here?

Summary

The video discusses the potential of a modern-day video game crash, highlighting Ubisoft's financial struggles as a key indicator. The company has faced multiple setbacks with games like 'Skull and Bones,' 'Prince of Persia,' and even the 'Assassin's Creed' franchise. A proposed buyout by Tencent and the Guillemot family could lead to Ubisoft going private, which might result in massive layoffs and changes within the company. This situation raises concerns about the broader industry, where rising development costs and unmet sales expectations are creating a challenging environment for major publishers.

Takeaways

• 🎮 Ubisoft is facing significant financial struggles, with their stock value dropping nearly 80% over the last few years.
• 💥 The potential for a 'new age' video game crash is being discussed, with Ubisoft's struggles seen as a key indicator of industry-wide issues.
• 🕹️ Ubisoft's major franchises like Skull and Bones, Prince of Persia, and Ghost Recon have all underperformed or faced delays, contributing to the company's financial difficulties.
• 💸 Assassin's Creed, one of Ubisoft's most successful franchises, is now facing delays and controversy, further affecting the company’s bottom line.
• 📉 Ubisoft’s market value has sharply declined, going from $85 per share in 2021 to $14.20 per share recently, with concerns about the company's long-term viability.
• 👥 There are discussions of Tencent and the Guillemot family potentially buying out Ubisoft to make it a private company, allowing for more flexibility in decision-making.
• 🔄 A private buyout could lead to significant layoffs, potentially up to 30-50% of Ubisoft's 19,000 employees, which could affect the video game industry’s talent pool.
• 🎬 Even with big IPs like Avatar and Star Wars, Ubisoft's games have not been able to generate the expected sales or impact, highlighting systemic issues in their game development process.
• 📈 High development costs and unmet sales expectations are becoming common in the industry, leading to concerns about the sustainability of large publishers like Ubisoft.
• 🤔 The script suggests that Ubisoft's challenges could signal broader issues in the video game industry, including rising development costs and potential layoffs, which could drive a major shift or crash in the market.

Q & A

What is the main concern discussed in the transcript about the video game industry?

The main concern is the potential for a new video game crash, which could result in a steep decline in spending on games and a loss of interest in game development. This could lead to major publishers struggling and possibly needing buyouts or financial assistance.

What comparison is made between the current potential crash and the previous one in the 1980s?

The comparison is made between the current situation and the video game crash of the 1980s, when Atari flooded the market with low-quality games, leading to a collapse before Nintendo revived the industry. The current crash would be different, focusing more on declining revenue, loss of talent, and a reduced interest in game development.

Why is Ubisoft considered a key example of potential industry collapse?

Ubisoft is struggling with multiple failed projects, declining game quality, and underperforming sales. Its market value has dropped significantly, and it may soon be forced to become a private company with assistance from Tencent, which could have widespread effects on the gaming industry.

What are some examples of Ubisoft's recent struggles mentioned in the transcript?

Some examples include the long-delayed and poorly received 'Skull and Bones,' the failure of the 'Prince of Persia: Sands of Time' remake, the unsuccessful attempt to integrate NFTs into 'Ghost Recon,' and the disappointing performance of their 'Avatar' game.

How has the market reacted to Ubisoft's declining performance?

Ubisoft's stock has dropped significantly, losing around 77% of its value over the last five years. At its peak in 2021, the stock was valued at $85 per share, but it has since dropped to around $14, signaling a massive loss of confidence in the company's future.

What role is Tencent expected to play in Ubisoft's future?

Tencent is reportedly planning a buyout of Ubisoft, along with the Guillemot family, which could lead to Ubisoft becoming a private company. Tencent currently owns a significant portion of Ubisoft's shares and could help finance the company's transformation.

How would going private help Ubisoft, according to the transcript?

Going private could allow Ubisoft to make more nimble decisions without the pressure of external stockholders, potentially giving them more freedom to reform their game design process and focus on long-term growth rather than short-term stock performance.

What is the Ubisoft 'formula' mentioned in the transcript, and why is it problematic?

The Ubisoft 'formula' refers to the repetitive structure of many of their open-world games, where players follow a checklist of objectives across a large map. This formula has become stale and predictable, contributing to the declining interest in Ubisoft's games.

What could happen to Ubisoft's workforce if the company is bought out?

If Ubisoft is bought out and goes private, it's expected that 30-50% of their workforce could be laid off, which could lead to a significant number of people leaving the gaming industry entirely.

What broader industry trends are contributing to concerns about a potential crash?

There is a trend of games being released with high budgets that fail to meet sales expectations, longer development cycles, and rising development costs. These factors, combined with external economic challenges, are creating concerns that even larger publishers may struggle to remain profitable.