Ubisoft Faces Demands for Reorganization and Downsizing

Following several setbacks and underwhelming performance of its recent releases, Ubisoft has been urged to install a new management team, as well as cut down on the number of its staff, by its investor.

Ubisoft Minority Investor Urges to Restructure CompanyLast Year's 10% Workforce Reduction Not Sufficient According to Aj Investment

Ubisoft minority investor "Aj Investment" has called on the company's Board of Directors, including CEO Yves Guillemot and Tencent, for Ubisoft to go private and seat a new management team. "As a significant minority shareholder in Ubisoft Entertainment via Aj Investment and our partners, we are writing to express our deep dissatisfaction with the current performance and strategic direction of the company," the investors stated in an open letter.

They further cited the postponement of "key games" such as Rainbow Six Siege and The Division to the end of March 2025, as well as Ubisoft's lowered revenue outlook for Q2 2024 and overall poor performance, as having "heightened [their] concerns" about the management's "ability to deliver value to shareholders over the long term." Aj Investment had even suggested installing a new CEO in place of Guillemot, remarking in the letter one of its proposals: "Change of the current management. Start hiring process of NEW CEO who will optimise the cost and studio structure for more agile and competitive company as Ubisoft should be."

Consequently, Ubisoft's share price declined earlier in the week, reportedly tumbling "more than 50% over the past 12 months," according to The Wall Street Journal. A spokesman of the company had told WSJ that Ubisoft had "no comment on the letter at this time."

"The main reason why the valuation is so low compared to the peers is that Ubisoft at current state is mismanaged and shareholders are hostages of Guillemot family members and Tencent who take advantage of them," AJ Investment further remarked in the letter. "Management is focused on pleasing investors with beating quarterly results and not focusing on long-term strategy to provide exceptional experience for the gamers."

AJ Investments's Juraj Krupa further tore into the company, noting their disappointment of the cancellation of Division Heartland which was "very much expected from the gamers." Additionally, Krupa criticized the releases of Skull and Bones and Prince of Persia Lost Crow, which he deemed as unimpressive and underwhelming.

"Rainbow Siege is doing great, nevertheless franchises such Rayman, Splinter Cell, For Honor, Watch Dogs are sleeping for years despite these games are loved by millions of players all around the world," he further noted. "Latest release of Star Wars Outlaws is expected to bring good numbers, but recent reviews shows that game was not 100% ready to release, despite the fact that whole world was waiting for open-world game under the Star Wars franchise."

Ubisoft had been heavily banking on Star Wars Outlaws to turn things around for them, but the game's sales trajectory has reportedly underperformed, which led to a decline in the company's share price last week. This decline in the company's share price was noted to be "at their lowest levels since 2015 and adding to their over 30% drop since the start of the year."

Elsewhere in the letter, Krupa suggested significantly trimming down the company's staff numbers. "Companies such as Electronic Arts (EA), Take-Two Interactive, and Activision Blizzard have considerably higher revenues and profitability with smaller staff and studio talent," he illustrated, adding that "Despite having relatively fewer blockbuster titles, Ubisoft employs over 17,000 staff compared to EA’s 11,000, Take-Two’s 7,500, and Activision Blizzard's 9,500."

Krupa went on to say that Ubisoft "needs to implement substantial cost reductions and staff optimization" to improve the company's "operational efficiency." He further urged Ubisoft to consider selling studios "that are unnecessary for development of main IP's" in Ubisoft's game portfolio. "Ubisoft has over 30 studios, it's obvious to every investor that this structure is excessive for Ubisoft and its profitability going forward," Krupa said.

"We are aware of the layoffs that Ubisoft has made in the recent years which accounted to approximately a 10% cut of workforce but that is simply not adequate," he further asserted. "We are aware that Ubisoft announced strategy to cut fixed costs by a 150m EUR by 2024 and an 200m EUR by 2025, but we still think this is not sufficient enough to stay competitive in the global landscape where Ubisoft operates."