Embracer vs. Ubisoft: A Deep Dive into Two Struggling Gaming Giants (Pixels & Profits)
Apr 20, 2024
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Comparison between Embracer and Ubisoft in terms of business performance, valuation, and future outlook. Analysis of Embracer's financials, debt situation, tabletop gaming business, and potential growth. Discussion on Ubisoft's financials, upcoming titles, revenue per employee issues, and mobile gaming efforts. Explore concerns and investment potential for both companies, highlighting their strategies and challenges in the gaming industry.
Embracer Group faces financial challenges due to high R&D costs and SG&A expenses impacting profitability.
Ubisoft focuses on expanding big brand games and building a recurring revenue model through live games for growth.
Ubisoft's strategic concerns include game delays, quality issues, and the need for more focused investments in successful franchises.
Deep dives
Embracer Group Overview
Embracer Group is a large organization with global reach, encompassing various game studios across PC, console, mobile, and tabletop games. The company owns 850 franchises, 138 internal game studios, and has 16,600 employees worldwide. They operate in four segments: PC and console games, mobile games, tabletop games, and entertainment services. Embracer has undergone shifts in its business with studio closures, asset sales like Gearbox and Saber Interactive, and internal restructuring.
Embracer Group Financial Insights
Embracer Group's financials reflect challenges stemming from high R&D costs and SG&A expenses, leading to a half-billion euro loss in the last fiscal year. Their revenue comes down to 1.74 billion euros, a key factor being the reduction in revenue resulting from delayed games. They have been making investments in R&D and SG&A, but it remains higher than historical norms, impacting their profitability.
Ubisoft Strategy Overview
Ubisoft's strategy focuses on two main aspects: expanding big brand games and building a recurring revenue model through live games like Rainbow Six Siege. They aim to drive growth through franchises like Assassin's Creed and live operations, aligning with their strategy to penetrate deeper into big titles and bolster recurring revenue streams.
Ubisoft Financial Performance
Ubisoft's financial performance saw a decline in net bookings to 1.74 billion euros in the last fiscal year, attributed to game delays impacting revenue. Their R&D expenses were substantial at almost 80% of net bookings, with SG&A costs also high. Despite challenges, Ubisoft has shown resilience, with Q3 showcasing continued strength in back catalog and live operation successes like Rainbow Six Siege.
Ubisoft's Strategic Challenges and Game Development Concerns
Ubisoft faces challenges with game delays and quality issues, particularly exemplified by past struggles with titles like Skull & Bones. Strategic concerns include the balance between successful franchises like Assassin's Creed and less impactful games like The Crew, impacting the company's scalability and operational efficiency. The discussion highlights the need for a more focused approach and investments in games with strong live ops potential.
Comparison with Embracer Group and Future Outlook
In comparison with Embracer Group, Ubisoft's long-standing presence in the industry and premium IPs suggest potential for significant outcomes. However, concerns exist around structural resets, operational inefficiencies, and strategic clarity. Embracer's adaptable leadership under Lars Wingefors presents a different trajectory, leveraging learnings from current challenges to potentially drive future growth, capitalizing on management optionality and a dynamic approach to navigating the gaming landscape.
We compare two major gaming companies, Embracer and Ubisoft, on this episode of Pixels and Profits.
✅ Business performance
✅ Valuation
✅ Future outlook of both companies
We analyze their strategies, financials, and potential for growth.
Timeline Summary:
00:00 - Introduction to the topic and overview of Embracer's business
03:00 - Discussion of Embracer's financials and debt situation
10:15 - Embracer's restructuring efforts and asset sales
13:45 - Embracer's tabletop gaming business and profitability
16:20 - Outlook for Embracer's PC and console division
21:20 - Embracer's mobile gaming business and challenges
24:25 - Valuation and investment potential for Embracer
26:45 - Introduction to Ubisoft's business and strategy
29:55 - Ubisoft's financials and revenue per employee issues
37:10 - Ubisoft's upcoming titles for fiscal year 2024
42:40 - Ubisoft's future outlook and titles for fiscal year 2025
49:50 - Valuation and investment potential for Ubisoft
52:05 - Concerns about Ubisoft's development strategies and efficiency
56:10 - Ubisoft's mobile gaming efforts and challenges
58:30 - Closing thoughts on Embracer and Ubisoft's future prospects
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