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Ubisoft Forms New Gaming Unit with Tencent Investment

Ubisoft used to be one of the most successful videogame companies in the world. Its Assassin’s Creed and Far Cry series have been played by hundreds of millions of people and sold nearly 300 million copies combined.

In February 2021, Ubisoft’s stock price was valued at 85 Euros. Now, it’s worth 11 Euros. That’s quite a decline in just four years, and this decline was caused by a series of mistakes and failures, both commercial and PR-related.

Tencent to the Rescue

In an attempt to recover and avoid the worst-case scenario, Ubisoft have announced that they’ve accepted an investment of €1.16 billion from Tencent Holdings.

The famous Chinese conglomerate already owns 40% of Epic Games, 86% of Grinding Gear Games, a majority stake in Riot Games, and other videogame companies. So their decision to buy 25% of Ubisoft’s new subsidiary, which includes Assassin’s Creed, Far Cry, and Tom Clancy’s Rainbow Six, is not that surprising.

Ubisoft’s decision is part of a broader trend in the gaming industry, where major companies are either bought by giants like Microsoft or are diversifying their portfolios to offer more engaging and immersive experiences. This isn’t limited to traditional gaming. Other sectors, like online gaming, are also embracing change to attract players.

Ubisoft’s New Subsidiary

Ubisoft’s new subsidiary aims to consolidate game development teams from the company’s studios located in Montréal, Quebec, Sherbrooke, Saguenay, Barcelona, and Sofia.

The objective is simple: reorganise to produce higher-quality games that people actually want to play. Ubisoft used to be very good at this. Now that a new major investor can influence the company’s decisions, things are likely to start moving in the right direction.

Strategic direction is very important for companies like Ubisoft because with so many employees and projects that are worth hundreds of millions of dollars, mistakes can be devastating. In the last four years, there have been quite a few AAA games that failed to attract an audience despite their massive budgets.

Such games will no doubt be considered cautionary tales for years to come. The gaming industry has a very demanding audience that tends to be allergic to certain trends and has plenty of options to choose from.

What this means is that companies like Ubisoft cannot rely on endless loyalty from their fan base. They need to stay relevant and produce games that are genuinely fun to play. Not that long ago, when Ubisoft made this a top priority, the company was highly successful.

Tencent’s Investment and Ubisoft’s Newest Game

Tencent’s decision to invest in Ubisoft’s new subsidiary will likely boost investor confidence. That’s because the Chinese conglomerate is famous for its smart acquisitions and already has an impressive portfolio.

Prior to the announcement, Ubisoft’s investors were dissatisfied with the company’s performance in recent years. But the situation is likely to improve relatively quickly. In the next 3-4 years, we might see multiple successful releases.

Ubisoft’s latest game, Assassin’s Creed Shadows, is doing well on Steam at the moment, having an 81% approval rating. In its first week, the game attracted more than 3 million players, which is not that bad all things considered.

Of course, it could have done much better but it’s not a bad start. It’s estimated that nearly three-quarters of the sales were on consoles.

Tencent has clearly taken a risk with this move but it’s a calculated one. The set of teams and games they’ve invested in are very famous and the purchase was made at a tiny fraction of the potential value. The downside is not that big but the upside is huge.

We could, potentially, see a revival of Ubisoft and its stock value as early as 2025. For now, investors want to see what the next steps will be and it’s not hard to guess.

Gamers should expect a new Assassin’s Creed and a new Far Cry game in the next few years. When things go wrong, companies tend to go back to what was working. These two series account for a large portion of Ubisoft’s success, so it’s clear that they will be prioritised.

Conclusion

Ubisoft’s worst days seem to be over. Given enough time for the new strategic vision to be properly implemented, the company is likely to go back to making great games and regaining the trust of its investors.