The stock falls 6% despite the sales record in the third quarter

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A gamer uses a PS4 controller while playing the new Ubisoft video game Watch Dogs Legion on October 28, 2020.

Kenzo Tribouillard | AFP via Getty Images

LONDON – Ubisoft shares fell 6% Wednesday morning despite French video game giant posting record sales for the quarter. The company has also narrowed its guidance for the full year.

Ubisoft posted revenue of € 1 billion ($ 1.2 billion) in the third quarter of fiscal year, exceeding its own target and more than the company’s revenue of € 455.5 million in the same period last year doubled.

The company benefited from a host of new titles, including Just Dance 2021, Assassin’s Creed Valhalla, and Watch Dogs: Legion. The strong performance was also helped by the momentum of the next-generation consoles from Sony and Microsoft, which were launched in November.

Ubisoft said its Assassin’s Creed Valhalla game had record sales for the franchise and was the second best game on the PlayStation 5 and Xbox Series X and S machines. Watch Dog: Legions was the fourth largest title on next-generation platforms, Ubisoft said.

But it’s not just big new releases that drive Ubisoft’s sales. Yves Guillemot, CEO of Ubisoft, said on the company’s call for profits that it sees “strong engagement” in its back catalog of games as well, adding that the trend continued into January.

Rainbow Six Siege, a first-person shooter game released by Ubisoft in 2013, now has 70 million players, said CFO Frederick Duguet. That is an increase of 15 million users compared to the previous year. Rainbow Six Siege is a popular title in esports tournaments.

“Given the increasing engagement and the very supportive industry trends, the first nine months of the year have confirmed that we continue to work towards an increasingly pronounced repeat of our sales,” said Guillemot in Ubisoft’s earnings release for the third quarter on Tuesday evening.

“We therefore expect that our highly profitable back catalog will make up an even larger proportion of our business in the future.”

This is a sign of how the video game industry is shifting towards games with a longer lifespan and recurring revenue, rather than just relying on big blockbuster hits.

Video game companies have benefited greatly from the coronavirus pandemic as people spend more time at home due to public health restrictions around the world.

Ubisoft narrowed its forecast for full year sales and earnings on Tuesday. The company now expects net sales between 2.22 and 2.28 billion euros for 2020/21 compared to the previously expected 2.2 to 2.35 billion euros. and an operating profit of 450 to 500 million euros, which is closer than the previous target of 420 to 500 million euros.

Ubisoft added that it is in the “early stages” development of a new Star Wars game after it announced a deal with Disney’s Lucasfilm Games division. The move marks the beginning of the end of a long-term exclusivity agreement between Lucasfilm Games and Electronic Arts.

EA announced on Monday that it is buying mobile game developer Glu Mobile for $ 2.4 billion. When asked if Ubisoft would look into mergers and acquisitions to drive future growth, Guillemot said the company’s approach is primarily to buy new technology instead of content.

Ubisoft has not yet made a decision on whether to raise prices for its video games to a new standard of $ 70, Guillemot said Tuesday. Big publishers like Take-Two Interactive are raising the prices of games for next generation consoles by $ 10. It’s the first time since 2005 that blockbuster games have seen a significant price hike, and many figures in the industry say that is long overdue.