January 10, 2025 • 25 mins
In this episode, Richard Hoeg dives into the recent delay of Assassin's Creed Shadows and the broader financial challenges faced by Ubisoft. He discusses Ubisoft's official announcements, strategic updates, restructuring efforts, and cost reduction measures. Hoeg explores the legal implications surrounding potential sales of Ubisoft, along with the financial impact of game cancellations. He provides an analysis of Ubisoft's recent game performance and shares insights from Bloomberg regarding Ubisoft shares and Tencent's interest. The episode also covers organizational changes within Ubisoft, before concluding with a sponsor message, disclaimer, and closing remarks.
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Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:14):
Hello, and welcome to another episode ofvirtual legality.
I'm your host, Richard Hogue, managing memberof the Hogue Law Business Law Firm of
Northville, Michigan.
And once upon a time, there was a video gameseries called Assassin's Creed and an entry in
that series called Assassin's Creed shadows, orit would be if the game ever released.
Now you might not think that a business lawyerwould have a lot to say about a video game
(00:35):
consistently being delayed by a video gamecompany, but in this particular instance, that
turns out to not be the case.
Why?
Well, let's take a look.
First, let's look at some of the announcementsfor the delay.
Originally, assassin's creed shadows was set tocome out November 15, 2024, but it was delayed
last fall in this first announcement.
(00:55):
Dear players, assassin's creed shadows is adream project for us, finally bringing the
series to feudal Japan with many featuresdeveloped with our community in mind such as
parkour or the renewed stealth brought by newtechnology, all set in a beautiful and
immersive world.
And those that know me or know my appearanceson other channels know that I'm a big fan of
the assassin's creed series.
This is an ambitious addition to the franchise,a rich experience that can be lived through the
(01:19):
eyes of 2 unique protagonists, but we realizewe need more time to polish and refine the
experience, pushing further some of our keyfeatures.
And all of this makes sense so far.
Right?
We see this all the time in video game delays,especially after the somewhat tortured release
of Cyberpunk 2077, which released in a statethat not a lot of people like that Sony
actually wound up pulling off of theirstorefront because its performance on the
(01:41):
PlayStation 4 series of consoles was sounfortunate.
So we see game companies now a little bit morereticent to release completely unfinished games
or games in an unfinished state.
And so for Assassin's Creed shadows, this is anormal kind of announcement.
As such, we've made the decision to postponethe release date to February 14, 2025.
The game will release on a broad range ofplatforms including steam at launch.
(02:04):
That was a big move for Ubisoft because theyhave their own launcher, and then we're gonna
launch it on both launchers at once.
Additionally, preorders will be refunded, andall future preorders will be granted the first
expansion for free.
We understand this decision will come asdisappointing news, especially to those who've
been waiting patiently for an Assassin's Creedgame inspired by feudal Japan, but we sincerely
believe that this is in the best interest ofthe game and ultimately your experience as a
(02:26):
player.
Rest assured, we are looking forward to themoment you will embark on a memorable adventure
with Nawei and Yasuke.
Until then, we thank you for your ongoingsupport.
So all is pretty much normal in Ubisoft worldas of this announcement, except, of course,
that it wasn't.
And then the announcement came this week thatfurther delayed the game, now releasing on
March 20, 2025 or so we assume.
(02:48):
Dear players, we want to extend our heartfeltthanks to our incredible fans and dedicated
teams for your unwavering support since ourannouncement in September to further refine and
polish assassin's creed shadows.
Since November, we've been thrilled to shareour progress through gameplay overviews, and
the overwhelming excitement has truly inspiredus.
Each week has brought valuable feedback fromour community.
While we've already made remarkable strides, webelieve a few additional weeks are needed to
(03:11):
implement that feedback and ensure an even moreambitious and engaging day 1 experience.
Accordingly, the new release date is March 20,2025.
We remain committed to delivering a highquality immersive experience fostered by
ongoing dialogue between our players anddevelopment teams.
Again, a very kind of standard looking delayannouncement for a video game.
We're gonna try to fix it up.
We're gonna polish it even more.
(03:32):
It's gonna be even better than it would havebeen.
Get excited about that potential players andhopefully engender what we see on social media
from folks that are trying to look reasonable,which is to say, yes.
Take all the time you need to polish it.
We don't want a broken game release likeCyberpunk 2077.
But, of course, Cyberpunk is only one kind oftouch point in video games, and as I tell
(03:53):
Twitter commenter Julius Caesar in his tweethere, I don't believe the official Julius
Caesar has been dead for a long time.
Are we in for another Cyberpunk like situation?
I say, no.
I don't think so.
This is a story that's very different from allof that.
I don't think this means that, I say, but Iobviously can't promise one way or the other.
This reads as far more about their tenuouscapitalization table state to me.
(04:15):
And what I mean by that is that Ubisoft,outside of Assassin's Creed Shadows, outside of
any of this discussion, has been in a state ofkind of limbo with respect to what their
investors want of them, what their company isdoing because of the slate of releases that
happened in 2024.
Or as Bloomberg reported last fall, Tencent,GEMO family said to consider buyout of Ubisoft.
(04:39):
Right?
In this particular case, for this particularcompany who has faced hostile takeover bids and
other potential investment takeovers in thepast, their company was doing so poorly in 2024
that they were looking to potentially havetheir major investor, Tencent, the Chinese
corporation, and more on that in a minute, lookto take over their company.
In fact, I talked about this particular stateof affairs on Lastan Media.
(05:01):
You can check that out.
That is Paywalt, but I have a long conversationwith Colin Moriarty about that, last year, and
I was on a number of episodes with respect tothat point.
Or if you prefer a more freewheeling discussionwhere we talk about a lot of things, I'm on the
season gaming bit cast every weekend talkingabout all things video games, and we did talk
about Ubisoft and their situation a couple oftimes.
(05:22):
You can check out that, and I will link that inthe description to this video or at least the
podcast version of this video if you'rewatching later.
Now all that is to say, Ubisoft was in trouble,and they were delaying this game that was a
major tentpole of their release schedule, notonce now, but twice.
And so the business lawyer in me sees somethinga little bit different from others.
(05:42):
I look at this and say, alright.
Assassin's Creed Shadows is now a huge bet forUbisoft.
It's a huge bet on their future success onwhether this current management structure,
whether the Gimo family, Yves, and everyoneelse can stay in control of this company.
And when you make a bet of that size, sometimesif you're thinking about selling the company or
thinking about trying to encourage otherinvestment, it's more useful to have that asset
(06:05):
value be essentially an unknown question markthan to have it locked in as a failure or maybe
not as big of a success as you might need it tobe.
So I look at this story as that, and that wasbefore I got some of the other announcements
that happened as part of this story as well.
Which is to say Ubisoft didn't just delayAssassin's Creed yesterday, they also put out a
strategic update that read as follows.
(06:28):
Following the strategic and execution reviewsinitiated by the executive committee a few
months ago, for those of you not following thisstory, what happened was Ubisoft was in
potential takeover talks with Tencent asreported by Bloomberg.
But because the Yves Guillemot family trust orthe trust group didn't want to lose control of
the company, one of the things they did is tryto stave off that potential takeover or
(06:50):
investment attempt was to have outside forcesconsult with the company and evaluate their
strategic and execution at the company level.
In other words, evaluate whether the managementof the company, Yves Gamont and Friends, had a
good strategic vision for how to utilize theassets of the company, and then if that vision
was good, whether or not they were executing onthat vision properly.
(07:12):
So they initiated a review of that type to helpstave off potential takeovers in the fall of
last year, and now they say they are takingdecisive steps to reshape the group in order to
deliver best in class player experiences,enhance operational efficiency, and maximize
value creation, which is all a lot of corporatespeak.
Right?
But what it basically says is they reviewed us.
(07:32):
We're not gonna talk about specifically whatthat review said, but we are now taking
decisive steps to reshape the group, to moveorganizations around potentially to, yes, have
layoffs in the video game industry to movepeople into different jurisdictions.
We'll see that in a minute.
And to enhance operational efficiency, toreduce costs and increase revenues, and
(07:52):
maximize value creation for our shareholders,which is why you gave us your money to begin
with.
Ubisoft announced today that it has appointedleading advisers to review and pursue various
transformational strategic and capitalisticoptions to extract the best value for
stakeholders.
Now this is really, really important.
This is the most important thing that they saidyesterday even further than the Assassin's
(08:13):
Creed delay, and that is to say they are nowhaving outside consultants look at the ways
that they might package their company topotential new investors or to sales partners,
including separating their assets up,presumably, to extract the best value for
stakeholders.
So you've invested money in Ubisoft.
You wanna get that money out.
In a perfect world, you're getting that moneyout because they're using that money to make
(08:37):
products that will make more money, and you'llget more money out that way.
But if that isn't happening for whateverreason, whether it's bad management, bad
execution, some other things that are happeningin the marketplace, whatever it might be, you
might look at the assets that the companyalready has and see if you don't just liquidate
entirely.
So now what Ubisoft is saying in so manycorporate easy words is that they are looking
(08:58):
at potential sales partners.
They're looking at potential investors.
They're even potentially looking at, isolatingtheir assets and selling them off in a
different way to extract the best value forstakeholders because they might not be best
positioned to actually run this company as anoperating entity into the future.
This process will be overseen by theindependent members of the board of directors.
(09:19):
This entire statement is very defensivealready.
Right?
We had a strategic and execution level review.
We're reshaping the group.
We're adding value to stakeholders.
Please don't fire us.
Please don't come at us in a hostile takeoverkind of situation.
We are appointing advisers to come and look atways to extract value for you investors, and,
also, that process will be overseen not by thedirectors that have a tangible stake either in
(09:42):
continuing as management or in their investorcapacity, but by the independent members of the
board that don't have that kind of vestedinterest in the company, whether it's in stock
or management roles.
Ubisoft will inform the market in accordancewith applicable regulations if and once a
transaction materializes.
This is also important as we will see in thereporting on this.
(10:02):
You'll see an IGN article go out today oryesterday depending on where you are.
It says Ubisoft Investors Grill CEO, CFO onpotential 10¢ sale delays and financial woes.
They will inform the market if and whenappropriate.
But when is that, says the sub headline.
We also have another article from GameSpot.
They refused to comment on 10¢ rumors, but saythey are exploring options to maximize value.
(10:24):
And 10¢ is the major player here because theyare the most significant investor outside the
family at Ubisoft, and, of course, they have alot of money to potentially throw around for a
transaction like this one.
But they won't say.
And why won't they say?
Well, that's a legal question in of itself, andthat has to do with being a public company.
Right?
So for you for those of you that don't know,the Securities Exchange Commission and other
(10:48):
like bodies around the world essentially takethe role of requiring public companies to
disclose material information about theiroperations to investors on a very specified
time frame so that nobody is left in the lurchby not knowing something or by somebody else
knowing something in advance.
Right?
The entire nature of secondary markets, themarkets that sell shares of companies amongst
(11:12):
each other and not from a primary issuer, thecompany itself, is that everybody has a similar
amount of information.
So So in a situation like this where thecompany is going out there and putting out a,
admittedly, corporate easy statement that sayswe are looking to sell or we're looking at
potential sales venues, then we are not gonnabe allowed as Ubisoft to say that this one we
(11:32):
think is gonna go through or this one we thinkis not gonna go through until something is
actually signed, that there's some obligationbetween the parties because we don't want
anybody outside the company in a public marketcontext to be disadvantaged by what they don't
know.
Right?
And this kind of situation, the shadow of anacquisition as we might call it in the law, is
(11:52):
the kind of thing where you do see potentialfor fraud.
You do see the potential for insider trading.
Right?
Because somebody in the room talking to Tencentor someone else is going to get a feeling for
when the the two sides are close, when the twosides are likely to enter into a letter of
intent or some other binding obligation in thenear future and potentially could go and buy
(12:13):
more stock or sell more stock if thetransaction is the opposite of what we might
think it would be on the premise that they havethis information and no more than the market
itself does.
That's where insiders get into trouble.
But Ubisoft is at least saying the right thingsto the public now and saying, look.
We are entered into talks.
We've got advisors looking at these things.
We are definitely making all the noisespossible that we are looking at a potential
(12:37):
transaction.
But until we have something to actually tellyou on a formal basis, we can't share anything
with you.
And, yes, the IGNs and GameSpot of the worldreport on it as if they're withholding
information, which makes sense from a certainpoint of view.
But I'm here to tell you that from a legalpoint of view, the lawyers at Ubisoft or anyone
else related to transactions like this aretelling them, be very, very careful not to
(13:02):
imply that something is closer to done than itis.
Do not imply that something is definitely offthe table or on the table because we need to
make sure that we don't offend the regulatorshere and more importantly to our other
investors.
Because if there is some kind of footfall here,if there is some kind of technical disclosure
that turns out not to be true or potentiallyworse turns out to be true, but people couldn't
(13:24):
act on it because it wasn't through a formalmechanism, then we're gonna get into a lot of
trouble, potentially lawsuits from theregulators, potentially lawsuits from our own
investors, potentially lawsuits from our salespartner, should it come down to it.
There's a whole host of things that couldhappen in a bad way if information gets out
that shouldn't get out in this context.
So the lawyers are doing their jobs here,telling Ubisoft and their communications teams
(13:46):
not to speak on specifics, to talk only in thiskind of corporate easy sense because we don't
know whether any of these deal possibilitiesare gonna come to complete fruition.
Operationally, continues the Ubisoft statement,the company will continue to drive significant
cost reductions together with a highlyselective approach to investments and now
(14:07):
expects to exceed €200,000,000 in reduction ofits fixed cost base by fiscal year 2025, 26
versus fiscal year 22, 23 on an annualizedbasis.
So they are saying that they can go findanother €200,000,000 in cost savings, probably
layoffs admittedly, to go against what theywere operating at just a few years ago.
(14:29):
In December, xDefiant was discontinued, and 3production studios in high cost geographies
were closed.
Now if you follow these stories with me, eitheron Last Stand or on Season Gaming, you know
that the high cost geographies that were closedwere those development houses in San Francisco
that we're working on XDefiant.
And one of those parts of the story that I havesaid in a number of instances now is that
(14:52):
Ubisoft and other game publishers in thisenvironment where AAA games are not selling the
way that they hoped, where live service gamesare go coming out and then bombing like
Concord, is that they are gonna be looking toreduce costs, not just in headcount, but in
geography.
California might be one of the most expensiveplaces on earth to make video games.
The United States, alone, one of the moreexpensive places on earth to make video games.
(15:14):
So a company like Ubisoft that does operate outof France will have every incentive in the
world to potentially look at other geographiesthat are maybe not so high cost in order to
make their video games or other products.
Additionally, as part of the renewed focus ongameplay quality and engaging day 1
experiences, it has been decided to provide anadditional month of development to assassin's
(15:35):
creed shadows.
Now one thing I will say here, as part of thisvideo, you'll hear me talk about assassin's
creed delay.
Be a part of this sales concept.
Right?
We don't necessarily want this bet that we havemade on ourselves that this game is going to
help show what the future of Ubisoft can be tobe something that is out there and shows that
maybe that future isn't as strong as we hadhoped, and so the delay makes sense in the
(15:58):
context of the sale.
That doesn't mean that I think they are lyinghere.
In fact, I think that this communication and infact all of Ubisoft's communications are very
clearly vetted by regulatory and legal counselto make sure that they aren't lying to their
investors in this capacity, but I do think itmaybe doesn't tell the complete story.
This additional time will allow the team tobetter incorporate the player feedback gathered
(16:20):
over the past 3 months and help create the bestconditions for launch by continuing to engage
closely with increasingly positive Assassin'sCreed community.
The game is now scheduled for March 20th.
So this is a story where Assassin's CreedShadows is one of the most important things
that Ubisoft has ever looked at in their entirehistory, and that's a part of this story even
(16:42):
more than the polish or cyberpunk 2077 issue inthe video game community on the whole.
Quarter 3 fiscal year 24, 25 net bookings arenow expected at around €300,000,000, primarily
reflecting lower than expected holiday sales,mainly for Star Wars Outlaws, as well as the
discontinuation of X Defiant.
(17:02):
So every public company goes out there withprojections about what they think they're gonna
do this year so that people know.
They're saying that X Defiant obviously didn'twork out.
They've canceled the all production on that.
Star Wars Outlaws, which was thought to besomething of a gimme for Ubisoft, a big license
for a big franchise with one of their biggestcompanies making it and a game that they really
believed in, didn't wind up selling as much asthey had hoped.
(17:24):
Obviously, if you follow this channel, you knowI was a big fan of Star Wars Outlaws at the end
of the day even though I didn't like it when Ifirst started playing it, but it didn't connect
with audiences.
Ubisoft doesn't exactly know why.
And part of this story is also that they'reskittish about assassin's creed shadows because
if they didn't know why on basically everythingthat they released in 2024, what's to say that
they know exactly what will sell in theassassin's creed or any other thing that they
(17:45):
try to sell in 2025 and beyond?
And I really liked how Christopher Dring putthis, formerly of Games Industry Biz, now
apparently writing for Video Games Chronicle,VGC, which is a site I really like, although
this is a pretty big sellout of theadvertisement space on this particular article,
and he frames the Ubisoft story, I think,pretty well here.
Practically everything Ubisoft tried to do lastyear underperformed, as new IPs, Skull and
(18:10):
Bones, and XDefiant were always a risk,especially when trying to compete in the
seemingly impenetrable live service space, andthey certainly didn't deliver what was needed.
Meanwhile, Star Wars Outlaws was a hugelydisappointing launch from a commercial point of
view, a seemingly decent game, more thandecent, I would say, from one of Ubisoft's most
acclaimed studios based on a major IP and aftera successful reveal at Summer Games Fest 2023,
(18:31):
it felt like a bankable hit, yet it missedspectacularly.
Across Europe, the game was the 47th bestselling game of the year and sold less than
star wars Jedi survivor, which was released theyear before.
That spooked the company when it came toassassin's creed shadows, which as the firm's
own IP is a lot more commercially significant.
I do think it's very, very significant, and thecompany is now in a situation where they
(18:51):
basically bet on it being the pillar of theirfuture, but I don't think that makes it more
significant than star wars.
Star wars was a very significant outlay.
It's just they had a licensing fee that theywould have had to pay to Disney slash
Lucasfilm.
However, after a string of disappointments, itperhaps speaks to fading confidence in its
overall creative decisions.
And then mister Drin goes on to do someanalysis in this article that you can of course
(19:13):
read.
I highly recommend checking it out that I don'tnecessarily agree with, but it is useful to see
different perspectives on these stories.
And after all this happened, we have anotherBloomberg article talking about Ubisoft shares
sinking after the Assassin's Creed shadowsdelay.
So Ubisoft continues to be in trouble.
Ubisoft continues to be potentially looking ata purchase by 10 Cent Holdings.
(19:36):
Whether they wanna purchase them or not is anopen question, and part of the story here is
also that the Gimo family has apparently saidthat they don't wanna give up control as part
of any purchase, which you can organize in asell sale of a company like this one.
But I really think that the story of thisparticular moment in time is that Ubisoft is
delaying Assassin's Creed probably to give itsome more polish.
(19:58):
You can always get more polish in video gameseven after releases we see with patches
nowadays, but also because they don't actuallywant that target to be known.
They don't want whether Assassin's Creedshadows is as successful as they need it to be
to be known as part of the conversations thatare happening with their consultants and
potential outside purchasers, like 10¢ andanyone else that may come to the table.
(20:21):
Now if you're in the business world, you mightsay, Rick, aren't there contractual ways to
handle it from the 10¢ or other perspective?
And I would say, yes.
There are.
There are things called earnouts.
Right?
And I brought up this Investopedia article totalk about them with you here.
But an earnout is a pretty simple concept.
Right?
You've got a buyer that says this company isworth $10,000,000,000 and a seller that says,
no.
It's definitely not.
It's worth a 1,000,000 maybe.
(20:42):
And the and the the seller says, no.
We've got a product that's gonna come out.
It's gonna light the world on fire, and whyshouldn't we make some of the profits out of
that process?
Why should you get them all just from buying itat the last minute?
Well, an earn out is a contractual provisionthat says, okay.
Well, we'll pay you the $1,000,000 we think youthe the company is worth right now, but how
about we also say we owe you x amount ofadditional dollars if this product that's gonna
(21:04):
light the world on fire hits these markersafter we bought the company.
Right?
We can set up a conditional payment price thathas to be worked through with tax lawyers and
financial advisors and everyone else to makesure nobody gets totally screwed over by
taxation and and the like, but we can do that.
This is described as an earnout.
Often when buyers and sellers wanna complete adeal but can't agree on the price, they employ
(21:25):
a strategy called an earnout.
So you can easily imagine that even withUbisoft saying, well, we're not gonna settle
this Assassin's Creed value proposition rightnow.
We're gonna push it out until we've probablyhad to enter into an LOI or some kind of early
stages of a deal with 10¢ or someone else.
And so that risk is gonna be borne by you, 10¢,or other buyer, and not so much by us that a
(21:46):
contractual provision will be put in that says,okay.
Well, you want x amount of dollars for yourcompany or for your shares or however we
organize this deal.
We're still gonna say, it's only gonna be moreif Assassin's Creed Shadows does x, y, or z out
there.
You can still potentially arbitrage thatopportunity.
You can make a certain amount of money.
You can allocate risk between the parties justby setting those numbers and thresholds in a
(22:07):
way that is more advantageous to one side orthe other.
So I think it's possible that Ubisoft throughits advisors, consultants, or otherwise is
looking at the situation and saying, we don'twanna put a marker in the sand.
We don't want folks to know how successful ornot successful the Assassin's Creed shadows
product is going to be out there in the marketbecause that will have a deleterious effect on
(22:27):
our ability to sell the company at the value wewant to get.
And that's a part of the story.
It's a part of the story they can't say in somany words and said they'll use the typical
video game language, say we're gonna polishthis up.
We're gonna delay it another month, but that's,in my view, what I see happening here.
I don't think anybody's lying.
I don't think anybody's violating laws byputting it in the way that they have put it
here, but I think it's an important part of thestory, and I would have folks see it that way
(22:51):
because I think that Ubisoft is in a lot oftrouble.
I think Ubisoft is looking to sell theircompany.
They've said so said it in so many words intheir own commentary and documentation, and I
think that part of the story maybe isn't beingas covered online as well as I would like to
see it covered.
So that's why I had a virtual gallery today.
I hope you found it useful and and interesting.
(23:12):
The last thing I will say on this topic beforeI send you out is that the buyer in this
question has its own kind of issues happeningat the same time, but that is part of a future
conversation.
So Tencent, potential buyer of Ubisoft.
I do think Ubisoft is very likely to haveorganizational and structural changes of a very
significant kind in the very near future,whether that's just switching geographies of
(23:36):
their studios, whether that's a severereduction in headcount, a severe reduction in
the products that they are making in 2025 andbeyond, or the wholesale sale of their company
to Tencent or someone else, or the bifurcationof their assets to a whole host of companies
like what happened in the THQ bankruptcy somany years ago, I can't say.
But I do think we're looking at a verysignificant kind of inflection point for the
(23:59):
video game industry and for Ubisoft inparticular.
And, again, I hope you found this conversationto be interesting.
If you did, please consider supporting virtuallegality on places like PlayYour and Patreon,
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(24:20):
Every little bit helps.
If none of that works for you, if you're notjust in a position to do that or you don't want
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Just subscribing, becoming a memberpotentially, telling your friends, letting
folks know we're having these conversations inthis space, every little bit helps.
Thank you so much, and I will catch you on thenext episode of Virtual Legality.
(24:41):
Virtual Legality is a YouTube video series withaudio podcast versions presented as commentary
and for education and and entertainmentpurposes only.
It does not constitute legal advice and doesnot create an attorney client relationship.
If you have legal questions about the topicsdiscussed, please consult your own legal
counsel.
Hello, and welcome to another episode ofvirtual legality.
I'm your host, Richard Hogue, managing memberof the Hogue Law Business Law Firm of
Northville, Michigan.
And once upon a time, there was a video gameseries called Assassin's Creed and an entry in
that series called Assassin's Creed shadows, orit would be if the game ever released.
Now you might not think that a business lawyerwould have a lot to say about a video game
(00:35):
consistently being delayed by a video gamecompany, but in this particular instance, that
turns out to not be the case.
Why?
Well, let's take a look.
First, let's look at some of the announcementsfor the delay.
Originally, assassin's creed shadows was set tocome out November 15, 2024, but it was delayed
last fall in this first announcement.
(00:55):
Dear players, assassin's creed shadows is adream project for us, finally bringing the
series to feudal Japan with many featuresdeveloped with our community in mind such as
parkour or the renewed stealth brought by newtechnology, all set in a beautiful and
immersive world.
And those that know me or know my appearanceson other channels know that I'm a big fan of
the assassin's creed series.
This is an ambitious addition to the franchise,a rich experience that can be lived through the
(01:19):
eyes of 2 unique protagonists, but we realizewe need more time to polish and refine the
experience, pushing further some of our keyfeatures.
And all of this makes sense so far.
Right?
We see this all the time in video game delays,especially after the somewhat tortured release
of Cyberpunk 2077, which released in a statethat not a lot of people like that Sony
actually wound up pulling off of theirstorefront because its performance on the
(01:41):
PlayStation 4 series of consoles was sounfortunate.
So we see game companies now a little bit morereticent to release completely unfinished games
or games in an unfinished state.
And so for Assassin's Creed shadows, this is anormal kind of announcement.
As such, we've made the decision to postponethe release date to February 14, 2025.
The game will release on a broad range ofplatforms including steam at launch.
(02:04):
That was a big move for Ubisoft because theyhave their own launcher, and then we're gonna
launch it on both launchers at once.
Additionally, preorders will be refunded, andall future preorders will be granted the first
expansion for free.
We understand this decision will come asdisappointing news, especially to those who've
been waiting patiently for an Assassin's Creedgame inspired by feudal Japan, but we sincerely
believe that this is in the best interest ofthe game and ultimately your experience as a
(02:26):
player.
Rest assured, we are looking forward to themoment you will embark on a memorable adventure
with Nawei and Yasuke.
Until then, we thank you for your ongoingsupport.
So all is pretty much normal in Ubisoft worldas of this announcement, except, of course,
that it wasn't.
And then the announcement came this week thatfurther delayed the game, now releasing on
March 20, 2025 or so we assume.
(02:48):
Dear players, we want to extend our heartfeltthanks to our incredible fans and dedicated
teams for your unwavering support since ourannouncement in September to further refine and
polish assassin's creed shadows.
Since November, we've been thrilled to shareour progress through gameplay overviews, and
the overwhelming excitement has truly inspiredus.
Each week has brought valuable feedback fromour community.
While we've already made remarkable strides, webelieve a few additional weeks are needed to
(03:11):
implement that feedback and ensure an even moreambitious and engaging day 1 experience.
Accordingly, the new release date is March 20,2025.
We remain committed to delivering a highquality immersive experience fostered by
ongoing dialogue between our players anddevelopment teams.
Again, a very kind of standard looking delayannouncement for a video game.
We're gonna try to fix it up.
We're gonna polish it even more.
(03:32):
It's gonna be even better than it would havebeen.
Get excited about that potential players andhopefully engender what we see on social media
from folks that are trying to look reasonable,which is to say, yes.
Take all the time you need to polish it.
We don't want a broken game release likeCyberpunk 2077.
But, of course, Cyberpunk is only one kind oftouch point in video games, and as I tell
(03:53):
Twitter commenter Julius Caesar in his tweethere, I don't believe the official Julius
Caesar has been dead for a long time.
Are we in for another Cyberpunk like situation?
I say, no.
I don't think so.
This is a story that's very different from allof that.
I don't think this means that, I say, but Iobviously can't promise one way or the other.
This reads as far more about their tenuouscapitalization table state to me.
(04:15):
And what I mean by that is that Ubisoft,outside of Assassin's Creed Shadows, outside of
any of this discussion, has been in a state ofkind of limbo with respect to what their
investors want of them, what their company isdoing because of the slate of releases that
happened in 2024.
Or as Bloomberg reported last fall, Tencent,GEMO family said to consider buyout of Ubisoft.
(04:39):
Right?
In this particular case, for this particularcompany who has faced hostile takeover bids and
other potential investment takeovers in thepast, their company was doing so poorly in 2024
that they were looking to potentially havetheir major investor, Tencent, the Chinese
corporation, and more on that in a minute, lookto take over their company.
In fact, I talked about this particular stateof affairs on Lastan Media.
(05:01):
You can check that out.
That is Paywalt, but I have a long conversationwith Colin Moriarty about that, last year, and
I was on a number of episodes with respect tothat point.
Or if you prefer a more freewheeling discussionwhere we talk about a lot of things, I'm on the
season gaming bit cast every weekend talkingabout all things video games, and we did talk
about Ubisoft and their situation a couple oftimes.
(05:22):
You can check out that, and I will link that inthe description to this video or at least the
podcast version of this video if you'rewatching later.
Now all that is to say, Ubisoft was in trouble,and they were delaying this game that was a
major tentpole of their release schedule, notonce now, but twice.
And so the business lawyer in me sees somethinga little bit different from others.
(05:42):
I look at this and say, alright.
Assassin's Creed Shadows is now a huge bet forUbisoft.
It's a huge bet on their future success onwhether this current management structure,
whether the Gimo family, Yves, and everyoneelse can stay in control of this company.
And when you make a bet of that size, sometimesif you're thinking about selling the company or
thinking about trying to encourage otherinvestment, it's more useful to have that asset
(06:05):
value be essentially an unknown question markthan to have it locked in as a failure or maybe
not as big of a success as you might need it tobe.
So I look at this story as that, and that wasbefore I got some of the other announcements
that happened as part of this story as well.
Which is to say Ubisoft didn't just delayAssassin's Creed yesterday, they also put out a
strategic update that read as follows.
(06:28):
Following the strategic and execution reviewsinitiated by the executive committee a few
months ago, for those of you not following thisstory, what happened was Ubisoft was in
potential takeover talks with Tencent asreported by Bloomberg.
But because the Yves Guillemot family trust orthe trust group didn't want to lose control of
the company, one of the things they did is tryto stave off that potential takeover or
(06:50):
investment attempt was to have outside forcesconsult with the company and evaluate their
strategic and execution at the company level.
In other words, evaluate whether the managementof the company, Yves Gamont and Friends, had a
good strategic vision for how to utilize theassets of the company, and then if that vision
was good, whether or not they were executing onthat vision properly.
(07:12):
So they initiated a review of that type to helpstave off potential takeovers in the fall of
last year, and now they say they are takingdecisive steps to reshape the group in order to
deliver best in class player experiences,enhance operational efficiency, and maximize
value creation, which is all a lot of corporatespeak.
Right?
But what it basically says is they reviewed us.
(07:32):
We're not gonna talk about specifically whatthat review said, but we are now taking
decisive steps to reshape the group, to moveorganizations around potentially to, yes, have
layoffs in the video game industry to movepeople into different jurisdictions.
We'll see that in a minute.
And to enhance operational efficiency, toreduce costs and increase revenues, and
(07:52):
maximize value creation for our shareholders,which is why you gave us your money to begin
with.
Ubisoft announced today that it has appointedleading advisers to review and pursue various
transformational strategic and capitalisticoptions to extract the best value for
stakeholders.
Now this is really, really important.
This is the most important thing that they saidyesterday even further than the Assassin's
(08:13):
Creed delay, and that is to say they are nowhaving outside consultants look at the ways
that they might package their company topotential new investors or to sales partners,
including separating their assets up,presumably, to extract the best value for
stakeholders.
So you've invested money in Ubisoft.
You wanna get that money out.
In a perfect world, you're getting that moneyout because they're using that money to make
(08:37):
products that will make more money, and you'llget more money out that way.
But if that isn't happening for whateverreason, whether it's bad management, bad
execution, some other things that are happeningin the marketplace, whatever it might be, you
might look at the assets that the companyalready has and see if you don't just liquidate
entirely.
So now what Ubisoft is saying in so manycorporate easy words is that they are looking
(08:58):
at potential sales partners.
They're looking at potential investors.
They're even potentially looking at, isolatingtheir assets and selling them off in a
different way to extract the best value forstakeholders because they might not be best
positioned to actually run this company as anoperating entity into the future.
This process will be overseen by theindependent members of the board of directors.
(09:19):
This entire statement is very defensivealready.
Right?
We had a strategic and execution level review.
We're reshaping the group.
We're adding value to stakeholders.
Please don't fire us.
Please don't come at us in a hostile takeoverkind of situation.
We are appointing advisers to come and look atways to extract value for you investors, and,
also, that process will be overseen not by thedirectors that have a tangible stake either in
(09:42):
continuing as management or in their investorcapacity, but by the independent members of the
board that don't have that kind of vestedinterest in the company, whether it's in stock
or management roles.
Ubisoft will inform the market in accordancewith applicable regulations if and once a
transaction materializes.
This is also important as we will see in thereporting on this.
(10:02):
You'll see an IGN article go out today oryesterday depending on where you are.
It says Ubisoft Investors Grill CEO, CFO onpotential 10¢ sale delays and financial woes.
They will inform the market if and whenappropriate.
But when is that, says the sub headline.
We also have another article from GameSpot.
They refused to comment on 10¢ rumors, but saythey are exploring options to maximize value.
(10:24):
And 10¢ is the major player here because theyare the most significant investor outside the
family at Ubisoft, and, of course, they have alot of money to potentially throw around for a
transaction like this one.
But they won't say.
And why won't they say?
Well, that's a legal question in of itself, andthat has to do with being a public company.
Right?
So for you for those of you that don't know,the Securities Exchange Commission and other
(10:48):
like bodies around the world essentially takethe role of requiring public companies to
disclose material information about theiroperations to investors on a very specified
time frame so that nobody is left in the lurchby not knowing something or by somebody else
knowing something in advance.
Right?
The entire nature of secondary markets, themarkets that sell shares of companies amongst
(11:12):
each other and not from a primary issuer, thecompany itself, is that everybody has a similar
amount of information.
So So in a situation like this where thecompany is going out there and putting out a,
admittedly, corporate easy statement that sayswe are looking to sell or we're looking at
potential sales venues, then we are not gonnabe allowed as Ubisoft to say that this one we
(11:32):
think is gonna go through or this one we thinkis not gonna go through until something is
actually signed, that there's some obligationbetween the parties because we don't want
anybody outside the company in a public marketcontext to be disadvantaged by what they don't
know.
Right?
And this kind of situation, the shadow of anacquisition as we might call it in the law, is
(11:52):
the kind of thing where you do see potentialfor fraud.
You do see the potential for insider trading.
Right?
Because somebody in the room talking to Tencentor someone else is going to get a feeling for
when the the two sides are close, when the twosides are likely to enter into a letter of
intent or some other binding obligation in thenear future and potentially could go and buy
(12:13):
more stock or sell more stock if thetransaction is the opposite of what we might
think it would be on the premise that they havethis information and no more than the market
itself does.
That's where insiders get into trouble.
But Ubisoft is at least saying the right thingsto the public now and saying, look.
We are entered into talks.
We've got advisors looking at these things.
We are definitely making all the noisespossible that we are looking at a potential
(12:37):
transaction.
But until we have something to actually tellyou on a formal basis, we can't share anything
with you.
And, yes, the IGNs and GameSpot of the worldreport on it as if they're withholding
information, which makes sense from a certainpoint of view.
But I'm here to tell you that from a legalpoint of view, the lawyers at Ubisoft or anyone
else related to transactions like this aretelling them, be very, very careful not to
(13:02):
imply that something is closer to done than itis.
Do not imply that something is definitely offthe table or on the table because we need to
make sure that we don't offend the regulatorshere and more importantly to our other
investors.
Because if there is some kind of footfall here,if there is some kind of technical disclosure
that turns out not to be true or potentiallyworse turns out to be true, but people couldn't
(13:24):
act on it because it wasn't through a formalmechanism, then we're gonna get into a lot of
trouble, potentially lawsuits from theregulators, potentially lawsuits from our own
investors, potentially lawsuits from our salespartner, should it come down to it.
There's a whole host of things that couldhappen in a bad way if information gets out
that shouldn't get out in this context.
So the lawyers are doing their jobs here,telling Ubisoft and their communications teams
(13:46):
not to speak on specifics, to talk only in thiskind of corporate easy sense because we don't
know whether any of these deal possibilitiesare gonna come to complete fruition.
Operationally, continues the Ubisoft statement,the company will continue to drive significant
cost reductions together with a highlyselective approach to investments and now
(14:07):
expects to exceed €200,000,000 in reduction ofits fixed cost base by fiscal year 2025, 26
versus fiscal year 22, 23 on an annualizedbasis.
So they are saying that they can go findanother €200,000,000 in cost savings, probably
layoffs admittedly, to go against what theywere operating at just a few years ago.
(14:29):
In December, xDefiant was discontinued, and 3production studios in high cost geographies
were closed.
Now if you follow these stories with me, eitheron Last Stand or on Season Gaming, you know
that the high cost geographies that were closedwere those development houses in San Francisco
that we're working on XDefiant.
And one of those parts of the story that I havesaid in a number of instances now is that
(14:52):
Ubisoft and other game publishers in thisenvironment where AAA games are not selling the
way that they hoped, where live service gamesare go coming out and then bombing like
Concord, is that they are gonna be looking toreduce costs, not just in headcount, but in
geography.
California might be one of the most expensiveplaces on earth to make video games.
The United States, alone, one of the moreexpensive places on earth to make video games.
(15:14):
So a company like Ubisoft that does operate outof France will have every incentive in the
world to potentially look at other geographiesthat are maybe not so high cost in order to
make their video games or other products.
Additionally, as part of the renewed focus ongameplay quality and engaging day 1
experiences, it has been decided to provide anadditional month of development to assassin's
(15:35):
creed shadows.
Now one thing I will say here, as part of thisvideo, you'll hear me talk about assassin's
creed delay.
Be a part of this sales concept.
Right?
We don't necessarily want this bet that we havemade on ourselves that this game is going to
help show what the future of Ubisoft can be tobe something that is out there and shows that
maybe that future isn't as strong as we hadhoped, and so the delay makes sense in the
(15:58):
context of the sale.
That doesn't mean that I think they are lyinghere.
In fact, I think that this communication and infact all of Ubisoft's communications are very
clearly vetted by regulatory and legal counselto make sure that they aren't lying to their
investors in this capacity, but I do think itmaybe doesn't tell the complete story.
This additional time will allow the team tobetter incorporate the player feedback gathered
(16:20):
over the past 3 months and help create the bestconditions for launch by continuing to engage
closely with increasingly positive Assassin'sCreed community.
The game is now scheduled for March 20th.
So this is a story where Assassin's CreedShadows is one of the most important things
that Ubisoft has ever looked at in their entirehistory, and that's a part of this story even
(16:42):
more than the polish or cyberpunk 2077 issue inthe video game community on the whole.
Quarter 3 fiscal year 24, 25 net bookings arenow expected at around €300,000,000, primarily
reflecting lower than expected holiday sales,mainly for Star Wars Outlaws, as well as the
discontinuation of X Defiant.
(17:02):
So every public company goes out there withprojections about what they think they're gonna
do this year so that people know.
They're saying that X Defiant obviously didn'twork out.
They've canceled the all production on that.
Star Wars Outlaws, which was thought to besomething of a gimme for Ubisoft, a big license
for a big franchise with one of their biggestcompanies making it and a game that they really
believed in, didn't wind up selling as much asthey had hoped.
(17:24):
Obviously, if you follow this channel, you knowI was a big fan of Star Wars Outlaws at the end
of the day even though I didn't like it when Ifirst started playing it, but it didn't connect
with audiences.
Ubisoft doesn't exactly know why.
And part of this story is also that they'reskittish about assassin's creed shadows because
if they didn't know why on basically everythingthat they released in 2024, what's to say that
they know exactly what will sell in theassassin's creed or any other thing that they
(17:45):
try to sell in 2025 and beyond?
And I really liked how Christopher Dring putthis, formerly of Games Industry Biz, now
apparently writing for Video Games Chronicle,VGC, which is a site I really like, although
this is a pretty big sellout of theadvertisement space on this particular article,
and he frames the Ubisoft story, I think,pretty well here.
Practically everything Ubisoft tried to do lastyear underperformed, as new IPs, Skull and
(18:10):
Bones, and XDefiant were always a risk,especially when trying to compete in the
seemingly impenetrable live service space, andthey certainly didn't deliver what was needed.
Meanwhile, Star Wars Outlaws was a hugelydisappointing launch from a commercial point of
view, a seemingly decent game, more thandecent, I would say, from one of Ubisoft's most
acclaimed studios based on a major IP and aftera successful reveal at Summer Games Fest 2023,
(18:31):
it felt like a bankable hit, yet it missedspectacularly.
Across Europe, the game was the 47th bestselling game of the year and sold less than
star wars Jedi survivor, which was released theyear before.
That spooked the company when it came toassassin's creed shadows, which as the firm's
own IP is a lot more commercially significant.
I do think it's very, very significant, and thecompany is now in a situation where they
(18:51):
basically bet on it being the pillar of theirfuture, but I don't think that makes it more
significant than star wars.
Star wars was a very significant outlay.
It's just they had a licensing fee that theywould have had to pay to Disney slash
Lucasfilm.
However, after a string of disappointments, itperhaps speaks to fading confidence in its
overall creative decisions.
And then mister Drin goes on to do someanalysis in this article that you can of course
(19:13):
read.
I highly recommend checking it out that I don'tnecessarily agree with, but it is useful to see
different perspectives on these stories.
And after all this happened, we have anotherBloomberg article talking about Ubisoft shares
sinking after the Assassin's Creed shadowsdelay.
So Ubisoft continues to be in trouble.
Ubisoft continues to be potentially looking ata purchase by 10 Cent Holdings.
(19:36):
Whether they wanna purchase them or not is anopen question, and part of the story here is
also that the Gimo family has apparently saidthat they don't wanna give up control as part
of any purchase, which you can organize in asell sale of a company like this one.
But I really think that the story of thisparticular moment in time is that Ubisoft is
delaying Assassin's Creed probably to give itsome more polish.
(19:58):
You can always get more polish in video gameseven after releases we see with patches
nowadays, but also because they don't actuallywant that target to be known.
They don't want whether Assassin's Creedshadows is as successful as they need it to be
to be known as part of the conversations thatare happening with their consultants and
potential outside purchasers, like 10¢ andanyone else that may come to the table.
(20:21):
Now if you're in the business world, you mightsay, Rick, aren't there contractual ways to
handle it from the 10¢ or other perspective?
And I would say, yes.
There are.
There are things called earnouts.
Right?
And I brought up this Investopedia article totalk about them with you here.
But an earnout is a pretty simple concept.
Right?
You've got a buyer that says this company isworth $10,000,000,000 and a seller that says,
no.
It's definitely not.
It's worth a 1,000,000 maybe.
(20:42):
And the and the the seller says, no.
We've got a product that's gonna come out.
It's gonna light the world on fire, and whyshouldn't we make some of the profits out of
that process?
Why should you get them all just from buying itat the last minute?
Well, an earn out is a contractual provisionthat says, okay.
Well, we'll pay you the $1,000,000 we think youthe the company is worth right now, but how
about we also say we owe you x amount ofadditional dollars if this product that's gonna
(21:04):
light the world on fire hits these markersafter we bought the company.
Right?
We can set up a conditional payment price thathas to be worked through with tax lawyers and
financial advisors and everyone else to makesure nobody gets totally screwed over by
taxation and and the like, but we can do that.
This is described as an earnout.
Often when buyers and sellers wanna complete adeal but can't agree on the price, they employ
(21:25):
a strategy called an earnout.
So you can easily imagine that even withUbisoft saying, well, we're not gonna settle
this Assassin's Creed value proposition rightnow.
We're gonna push it out until we've probablyhad to enter into an LOI or some kind of early
stages of a deal with 10¢ or someone else.
And so that risk is gonna be borne by you, 10¢,or other buyer, and not so much by us that a
(21:46):
contractual provision will be put in that says,okay.
Well, you want x amount of dollars for yourcompany or for your shares or however we
organize this deal.
We're still gonna say, it's only gonna be moreif Assassin's Creed Shadows does x, y, or z out
there.
You can still potentially arbitrage thatopportunity.
You can make a certain amount of money.
You can allocate risk between the parties justby setting those numbers and thresholds in a
(22:07):
way that is more advantageous to one side orthe other.
So I think it's possible that Ubisoft throughits advisors, consultants, or otherwise is
looking at the situation and saying, we don'twanna put a marker in the sand.
We don't want folks to know how successful ornot successful the Assassin's Creed shadows
product is going to be out there in the marketbecause that will have a deleterious effect on
(22:27):
our ability to sell the company at the value wewant to get.
And that's a part of the story.
It's a part of the story they can't say in somany words and said they'll use the typical
video game language, say we're gonna polishthis up.
We're gonna delay it another month, but that's,in my view, what I see happening here.
I don't think anybody's lying.
I don't think anybody's violating laws byputting it in the way that they have put it
here, but I think it's an important part of thestory, and I would have folks see it that way
(22:51):
because I think that Ubisoft is in a lot oftrouble.
I think Ubisoft is looking to sell theircompany.
They've said so said it in so many words intheir own commentary and documentation, and I
think that part of the story maybe isn't beingas covered online as well as I would like to
see it covered.
So that's why I had a virtual gallery today.
I hope you found it useful and and interesting.
(23:12):
The last thing I will say on this topic beforeI send you out is that the buyer in this
question has its own kind of issues happeningat the same time, but that is part of a future
conversation.
So Tencent, potential buyer of Ubisoft.
I do think Ubisoft is very likely to haveorganizational and structural changes of a very
significant kind in the very near future,whether that's just switching geographies of
(23:36):
their studios, whether that's a severereduction in headcount, a severe reduction in
the products that they are making in 2025 andbeyond, or the wholesale sale of their company
to Tencent or someone else, or the bifurcationof their assets to a whole host of companies
like what happened in the THQ bankruptcy somany years ago, I can't say.
But I do think we're looking at a verysignificant kind of inflection point for the
(23:59):
video game industry and for Ubisoft inparticular.
And, again, I hope you found this conversationto be interesting.
If you did, please consider supporting virtuallegality on places like PlayYour and Patreon,
and I will add the links to PlayYour andPatreon to the podcast description as well for
folks that are listening to this in podcastform as recommended by a friend of the channel
or memberships and super chats on YouTube.
(24:20):
Every little bit helps.
If none of that works for you, if you're notjust in a position to do that or you don't want
to, that's totally fine as well.
Just subscribing, becoming a memberpotentially, telling your friends, letting
folks know we're having these conversations inthis space, every little bit helps.
Thank you so much, and I will catch you on thenext episode of Virtual Legality.
(24:41):
Virtual Legality is a YouTube video series withaudio podcast versions presented as commentary
and for education and and entertainmentpurposes only.
It does not constitute legal advice and doesnot create an attorney client relationship.
If you have legal questions about the topicsdiscussed, please consult your own legal
counsel.
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