Ubisoft Uses Talent Exodus Threat to Thwart Hostile Vivendiby
Game maker banks on creative types to thwart hostile bid
Investor Vivendi risks talent flight and `empty shell'
When fighting off a corporate raider, companies usually hire bankers, lawyers and a bunch of other corporate types in suits. Sometimes an artsy guy in purple sweatpants is all they really need.
French video-game maker Ubisoft Entertainment is counting on a handful of creative employees who’ve made blockbuster titles -- and billions of dollars for the company -- to thwart an unwelcome approach by a billionaire and his media conglomerate. The message to Vincent Bollore and Vivendi SA: Back off or the talent will leave and you’ll end up buying an empty shell.
“This company lets the creatives get on with their work,” said Tommy Francois, who has bushy red hair and was dressed one recent day in purple camouflage sweatpants and shoes adorned with Mickey Mouse. “We take time to dig, to go out on the field. That’s not something our rivals do and that’s why our games are known for attention to detail and complex worlds.”
The importance of a small handful of individuals in a successful game is such that no hostile takeover has ever been pursued to the end in the video-game industry. That argument played a key role in preventing an unsolicited takeover of Ubisoft by Electronic Arts a decade ago, and EA backed off from buying Take-Two Interactive Software Inc. in an initially hostile approach.
“There’s a Ubisoft way that was true when EA made an approach in 2004 and is still true today, based on teamwork, on crossing paths with people and growing together,” said Editorial Chief Olivier Dauba, who joined in 1998 and sits in what looks more like an action-figure collector’s dream than an office. Company founder Yves Guillemot has been a big part of building that culture, Dauba said.
Ubisoft, the third biggest independent game maker, is behind some of the most popular games of today including “Assassin’s Creed” and “The Division.” Guillemot and his four brothers, who own about 9 percent of the company, are on the defensive after Vivendi, the media conglomerate headed by Bollore, started buying into Ubisoft last October. Vivendi’s initial 10 percent stake is up to just over 15 percent now. The company said this month it plans to keep buying shares and seek board representation. Potentially more worrisome, it began a hostile bid for Gameloft SE, another game company founded by the Guillemot brothers.
For 30 years, Guillemot has been running Ubisoft, based in the Paris suburb of Montreuil, as a family business where creatives are given time, space and a little extra budget when they need it. That’s a far cry from the iron fist culture of Bollore, who took control of advertising agency Havas SA and installed his son as chief executive officer.
Vivendi risks turning Ubisoft into an “empty shell” unless it can keep its approach friendly and retain Guillemot as a top executive, said Richard Maxime Beaudoux, an analyst at Bryan Garnier & Co. “This industry’s all about star developers and creatives -- they create the added-value. And at Ubisoft, Guillemot has their support.”
"If there’s a hostile takeover by Vivendi and Guillemot leaves, every person who is good at Ubisoft would be recruited by EA, Activision and Take Two," said Michael Pachter, an analyst at Wedbush.
While Ubisoft has done its due diligence -- courting investors and hiring bankers to sound out alternatives -- Guillemot, 55, knows that his best weapon is his talent. He’s said that a hostile takeover by Vivendi would “kill creativity.”
Of Ubisoft’s 10,000 employees, there are at most a few hundred with star status. They’re typically in their late 30s or early 40s, with artistic or technical credentials, and the confidence they could land another job in a snap. Yet, most have stuck around for a decade or more, and have resisted approaches from headhunters and rivals.
Francois, a 42-year-old former TV producer from New Jersey, is in charge of developing Ubisoft’s intellectual property and has been at the company for 9 years. For him, doing the work sometimes involves seemingly crazy initiatives like sending a team of 7 people half-way around the globe to research the “Christmas spirit” in New York and make sure it’s reflected in “The Division.” The game this month broke the industry record for sales of new franchise in an opening week by grossing more than $330 million.
Ultimately, creative types like Francois can make or break a release. Some 15 or so people constitute the core team on any given game, and influence another 800 or so other people involved in developing a title over the course of three to five years, with an end cost of about $80 million.
Money’s Not Everything
Guillemot says 80 percent of the time he spends with his creative director is dedicated to discussing people and how to retain them. His human resources chief at the Montreal unit, Cedric Orvoine, said turnover is less than 10 percent, helped by fostering creativity as well as competitive compensation that includes stock options.
“Money’s not everything -- you need more than that to get people to come to work,” said Chief Creative Officer Serge Hascoet, a Frenchman who’s been at Ubisoft for 28 years. He says it all starts with how employees are treated, which sometimes means having the guts to stand by a team even if it fails on a couple of projects before hitting the jackpot.
Finding the right balance in a world where art and technology are intertwined can sometimes take time. The creatives behind “Assassin’s Creed” worked together on three unprofitable projects before they made the hit game which has since become a multi-episode franchise that’s sold more than a hundred million units. “The Division” ran over initial plans and took five years to make.
“We had ups and downs on this game but we persevered,” Guillemot told a few hundred employees as they gathered at the headquarters near Paris on a mid-March afternoon to toast the first batch of “The Division” sales figures with champagne. “This is the kind of energy we need to show our strength, our values. It’s up to us to perform, to boost our company value and to make it harder for anyone to take us over.”