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Ubisoft counting on open world games, digital business for future growth

Ubisoft is running into some bumps due to the video game console transition, but long-term, the publisher is counting on big open world games and high-margin digital to keep the ball rolling.
Ubisoft is running into some bumps due to the video game console transition, but long-term, the publisher is counting on big open world games and high-margin digital to keep the ball rolling. Sales during the quarter ended September 30 were up, but those transitional challenges were apparent in operating profits, which took a notable dip. CEO Yves Guillemot said in a statement accompanying an earnings release today, "We are confident in our capacity to rise to the short-term challenges posed by the transition phase, thanks to the very high quality of our games." These "short-term challenges" manifested in October, with the major delays of Watch Dogs and The Crew to at least April 2014. Though Ubisoft intends to capitalize on momentum from the coming launches of Xbox One and PlayStation 4 this month, those two Ubisoft games effectively miss the consoles' launch windows, and the busy holiday shopping season. The delays led Ubisoft to downgrade its annual fiscal forecasts last month. The effects of the console transition are also seen in the company's first-half financials for the fiscal year. Ubisoft reported a 47 percent jump in R&D expenses to €138.9 million ($186.8 million) during the period, which partially reflected cancelled projects. Those expenses helped contribute to a first-half operating loss of €98.0 million, compared to a €58.2 million loss for the same period a year prior. For the second fiscal quarter ended September 30, Ubisoft reported sales of €217 million, up 47 percent compared to the same quarter a year ago. Sales beat previously announced guidance of €200 million. The company said "robust" sales of catalog titles such as Far Cry 3 and Assassin's Creed 3 helped boost sales for the quarter, along with growth in digital sales. Ubisoft is expecting annual sales of between €995 million and €1.05 billion, and an operating loss between €70 million and €40 million. Guillemot added, "Open world games are becoming ever-more popular with gamers. These creations give gamers the freedom of expression and immersive experiences that are now central to their expectations. This deep-seated market trend – which Ubisoft has fully embraced – is going to move up another gear when the next-generation consoles arrive." He reiterated that Ubisoft will continue to commit much of its resources to creating annualized open world games and franchises. The publisher also plans to expand its digital business, as well as extend its franchises through TV and movies.

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