The Rise of Ubisoft
Founded back in 1986 by the five Guillemot brothers (we like to think of them as "Les Guillemot Cinq"—like the Jackson Five but French!), as both an educational software and video game publishing and distribution company, Ubisoft has come a long, long way in 20 years. While people in the early '90s might have known the company simply as "those guys who make Rayman," today Ubisoft has a whole host of strong brands that have garnered both critical and commercial success.
In 2006 Ubisoft was the #2 independent publisher in Europe and the #5 publisher in the U.S. But how did the company arrive at the position it's in today and how does Ubisoft plan to reach the next level? Following Ubisoft's strong holiday results, we had the pleasure of chatting with Ubisoft North America President Laurent Detoc, who's been with the company since 1991 (and even a little before then as an intern). Detoc outlined Ubisoft's rise to prominence and what strategies are in place for the publisher to grow even larger.
From Detoc's perspective Ubisoft went through several "life-changing events." The first and most obvious one is when the company was born. Soon after that (1993 to be precise), Ubisoft transitioned from a company that simply distributed content to one that makes its own. The real leap forward for Ubisoft, however, came in 1995 when Rayman (from famed designer Michel Ancel) was released. "It was the first really successful title we had," noted Detoc. To this day the Rayman franchise has sold upwards of 20 million units worldwide.
Following the successful introduction of the limbless Rayman character, Ubisoft went into a studio and product building mode. The publisher had opened in-house production studios in France and Romania and established distribution subsidiaries in Japan, Italy, and Australia. The next big step came in 1996 when Ubisoft took the company public on the Paris Stock Exchange and made partnerships with entertainment powerhouses such as Warner Brothers Interactive Entertainment and Disney. And pushing forward, Ubisoft opened production studios in China, Canada, Spain, Italy, Morocco, Montpellier and Annecy.
The next major life-changing event, said Detoc, was the purchase of Red Storm Entertainment (in 2000), which was famous for developing Tom Clancy games, most notably the Rainbow Six franchise. While Rayman was kind of a "game for everyone," Red Storm and Rainbow Six gave Ubisoft the sort of IP needed to attract the coveted 18-34 male demographic. "It was much more targeted," said Detoc. "We built Ghost Recon and Splinter Cell under that umbrella because we wanted to cater to that audience, that gamer audience."
With strong brands such as Splinter Cell, Rainbow Six, Ghost Recon, Prince of Persia, Far Cry and more under its belt, it was time for Ubisoft to finally step into the licensing ring. The publisher proudly thumped its chest when it secured the license for Peter Jackson's King Kong, and yes, Ubisoft made a movie-based game that didn't suck. "We wanted to expand our horizons, and the next horizon was licenses or sports, and sports is a little complicated market for us to get into... so we went with licenses," explained Detoc.
By the time King Kong hit the market at the end of 2005, Ubisoft had finally reached the #5 spot for publishers in America, which Detoc said represents the most recent life-changing event. "We matched our top five by 2005 goal that we had set back in 1996, which was at the time very visionary and people were smiling behind our backs, but ten years later it was real," he said.
Ubisoft has been on a steady growth path for the last 15-20 years, but it wasn't really until the last 5 or 6 years that we saw accelerated growth for the publisher. And a lot of that, according to Detoc, has to do with the company making a name for itself on the original Xbox with the very first Splinter Cell. "
We were able to demonstrate when Splinter Cell was awarded Game of the Year that our studio strategy was paying off, because by then although we were probably like the #10 publisher in the business if that, we were already the second largest internal studio in the industry," Detoc said. "And so we had all these people making games and we were hiring like crazy, and we had been doing that for several years already... It had become a lot more visible [following Splinter Cell] that we were on the right path."
Of course having great brands is all well and good, but there's a fine line between releasing game after game in a strong franchise and turning a franchise into a cash cow that's nearly run dry. Detoc doesn't appear to be worried about running Ubisoft's cherished brands into the ground, however. "There's no such thing as too many game sequels," he said. "The real question is: Is it good? And if it's good, you'll want to play it again. I don't know if you've played Rainbow Six lately, but we could give you another [iteration of] Rainbow Six right now... As long as you give me my money's worth, I remain a happy customer. Everyone always wants more and we make a very serious effort in upholding [the quality] of our games from one version to the next."
He added, "Splinter Cell in particular, I think every single one of them has had in the 90s review scores. I don't think we have disappointed customers with the quality of the content. I think the thing we can do better is to make it more accessible, if anything. And remember, even if you sell one million units of Splinter Cell on 360, there's still [about] 80% of the base that hasn't played it. So how many of those guys are going to be the guys buying the next one?"
So with publishers like THQ, Activision and EA ahead of Ubisoft, how can the company climb the ladder, and is a #1 position even possible with a juggernaut like EA out there? "Nothing is impossible," said Detoc. "Technically everybody in the publishing business right now wants to be #1... The natural intent for all of us is to try to be the largest publisher. And so what does it take? How long is impossible to answer; it's an if/ever answer. But 'what does it take?' is the more interesting question, and I think what it takes is to continue to create the best products. I know it's a basic, simple answer and it's an easy answer, but if we continue to make great products, people will continue to buy them. 'What is a good product?' is a more difficult question to answer because it's not just about critical acclaim; it's about critical commercial success. We want to have brands with broader appeal. We want to continue to make games that are really high-end... but also incorporate more of what we have not done enough of before, which is the user friendliness. Make Splinter Cell a game that can be played by everybody, as opposed to [hardcore] gamers."
And speaking of EA, the leading publisher still has a nearly 20 percent stake in Ubisoft. It's been well publicized that CEO Yves Guillemot considers EA's stake a hostile move and that he's committed to keeping Ubisoft independent. Detoc reinforced this notion: "We prefer our independence because we like to run the company the way we intend, so yes it's been a hostile acquisition of our shares (that has been diluted a little bit over time... I think it's at 17 percent now). But do we have a friendly relationship with EA? As a large shareholder we do, but our objective is to continue to grow and hopefully one day we'll even outpace them, if that's in the cards."
One of Ubisoft's better bets so far has been on the Wii. The publisher fully supported Nintendo's new system at launch and is a big believer in its ability to broaden the market. "That's one thing that's fascinating to me right now in the industry is Nintendo and how those guys have been able to open the market and sell to other people. If their hardware can do that, then we have to find software that does that too."
Detoc doesn't think that the Wii's motion-sensing gameplay necessarily has to replace traditional gaming either; they can peacefully co-exist and be successful. "I personally believe Nintendo is going to continue to be wildly successful with the Wii... You give a Wii to a 5-year-old or a 55-year-old and they both can play even though they've never played before... And I don't think [the Wii] is incompatible with the traditional game market (Xbox 360, PS3). I think both markets will exist with a new segment of people entering the space," he said. "So we're going to continue to have the gamers and to make 'AAA' quality, big-tech advances, and obviously this is easier to do on the more powerful machines, but we'll also be able to have other games optimized for a different style of play and in the process make those games accessible to more people... I think it's a real beautiful time in the industry."
Naturally, Ubisoft's growth strategy involves creating and maintaining strong brands. The company is hopeful that Assassin's Creed will be yet another hit in 2007 that it can add to its stable. As a publisher, Ubisoft likes to keep its portfolio fresh with a few new properties added every couple of years. "Internally we talk about 3 new IPs every 2 years... I think it's important to understand those new IPs are part of our studio mentality. We're a company with a very high number of people in our studios who are working on trying to make the 90% [rated] kinds of games, because that's what we believe is the long-term reason for success. So we also want them to remain engaged and involved and creative."
With the likes of Xbox Live Arcade, PS Network and Virtual Console gaining more and more popularity Ubisoft also plans to join the downloadable games revolution in the near future, even if it's not their primary focus. "It's part of the industry... so you will see downloadable games from Ubisoft for Xbox Live or PS Network for $5 or $10. It's not a foundation of our business strategy but it is a component," Detoc explained.
Another component that Ubisoft hopes to expand on is the more niche sports. For example, Detoc has very high hopes for Ubisoft's Shaun White endorsed games. Ubisoft signed the gold medal-winning snowboarder early in 2006; Detoc believes that they can turn him into the "next Tony Hawk." In essence, Detoc thinks that White can do for snowboarding and snowboarding video games what Hawk did for the whole skateboarding scene, or even more to the point, that Ubisoft's games can elevate the snowboarder and his sport. "How big was Tony Hawk before the video game?" Detoc queried, "because once you apply Ubisoft's quality to the Shaun White property... let's say we make an amazing Shaun White product just like Activision made an amazing Tony Hawk product, it sort of changes the whole perspective."
If Ubisoft's recent performance is any indication, the company is really feeling its oats. Detoc is filled with nothing but optimism for the publisher's future. "From a company performance point of view, we think that by 2010 we will be able to double our revenues and triple our net profit by realizing economies of scale; so that's three years out and that's pretty realistic... Our studio efficiency continues to payoff and the value of our brands continues to [gain strength]," he said. "By 2010 we have a fair amount of visibility because a lot of our products that are in play right now are going to be released in two years."
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