Ubisoft Lowers Forecasts On Weak DS, Catalog; Delays Splinter Cell

Ubisoft is lowering its third quarter and year-end forecasts due to a poor DS market, weak back catalog sales and stiff AAA competition -- as it delays Splinter Cell: Conviction and R.U.S.E.
Ubisoft is lowering its forecast for the current fiscal year due to challenging market factors, and pushing its Splinter Cell: Conviction and R.U.S.E into its next fiscal year. Specifically, the highly-anticipated Splinter Cell: Conviction, which had been slated for a February 23 launch, will now release in April 2010 -- Ubisoft's fiscal year ends in March. The publisher is revising its third quarter estimates downward from €540 million ($783.5 million) to €495 million ($720.8 million) and annual estimates downward from €1,040 million ($1.5 billion) to €860 million ($1.2 billion), blaming a decline in the market for DS titles, an underperforming back catalog and a more competitive AAA market. Ubisoft adds that it now expects an operating loss of about €50 million ($72.5 million) for the fiscal year, compared to the €70 million ($101.6 million) income it had initially forecast, due to these market factors and in part to the title delays. "After several years of very strong growth, the significant correction of the DS market in 2009 particularly affected Ubisoft," the publisher said in a statement. The company's casual and kids'-focused DS lines, such as Imagine, are a major component of its business. Although it says sales of casual titles on the Wii remain "relatively robust" and that its Just Dance saw a strong launch on the platform, its casual portfolio overall is down about 50 percent to €160 million ($233 million). The publisher also says that retail trends favor high-quality AAA games, and although it measures up with Assassin's Creed II -- which it says has sold through 6 million units to date -- titles like its Avatar film tie-in game and "several non-casual Wii titles" are not selling as well as expected. "Despite a number of highly successful titles, such as Assassin’s Creed II – which is expected to reach 9 million sell-in units by the end of March 2010 – and Just Dance – our great Wii success during the holiday season – Ubisoft has not met its financial targets," says CEO Yves Guillemot. Finally, the company again said its back catalog is underperforming, due in part to aggressive retailer discounting over the holiday season, a factor the company first raised when it reported losses in its second quarter. "Against this backdrop and with a view to further reduce our exposure to the DS, we intend to continue to refocus our development resources on our major franchises and on the Xbox 360 and PS3, the two consoles that are expected to see sales growth in games for gamers in 2010," says Guillemot. Fellow top-tier publisher Electronic Arts revised its own estimates downward just two days earlier, similarly citing a challenging market for publishers of AAA games.

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