Ubisoft delays game to refine it, taking a financial blow

That was evidenced Wednesday when shares of French video game maker Ubisoft fell more than 26 percent after the company announced it was postponing a major new game to improve its quality.

The game, "Watch Dogs," has had early comparisons to the successful "Grand Theft Auto" franchise from one of Ubisoft's rivals, Take-Two Interactive. The game had been expected to be introduced by the end of the year, when next-generation consoles from Microsoft and Sony are due.

But because of delays in completing the game's immersive, interactive environment, Ubisoft, which makes the popular "Assassin's Creed" franchise, said late Tuesday that it would delay the introduction of "Watch Dogs" until June.

The plunge in the company's shares underscored the importance in the global video game industry of keeping on schedule with games that, when they hit it big, attract millions of users worldwide and generate billions of dollars in sales. Those stakes were reinforced recently by the latest edition of the "Grand Theft Auto" franchise, which generated more than $1 billion in revenue during its first three days on sale.

"The success of 'Grand Theft Auto V' has put a lot of pressure on 'Watch Dogs,'" said Mike Hickey, an analyst at the Benchmark Co. in Denver. "They want it to be their next big franchise."

The need to strike it big has become increasingly crucial for the world's largest video game companies. Ubisoft, a rare French company that has succeeded in the technology field, ranks fourth in the industry, behind Activision Blizzard, Electronic Arts and Nintendo, based on its sales last year of about $1.8 billion, largely on the strength of its "Assassin's Creed" games.

The global industry is projected to generate a 5 percent increase in its combined revenue, to $66 billion, by the end of the year, according to the data provider DFC Intelligence.

"You only get one chance to make a first impression with gamers," said Edward Williams, an analyst at BMO Capital Markets in New York. "The delays bring into question the original timeline put forward by Ubisoft, but they want to give it the best opportunity for sustained success."

For Ubisoft, based in the outskirts of Paris, the postponement of its latest game will hurt. The company said that it expected to post an annual loss of as much as $95 million, compared with a previous profit forecast for as much as $170 million.

Ubisoft also has delayed the release of another new game, "The Crew," a car racing franchise, until September 2014. While an important addition to its stable of games, analysts said, "The Crew" was not expected to become as big a hit.

"The tough decisions we are taking today to fully realize the major potential of our new creations have an impact on our short-term performance," Ubisoft's chief executive, Yves Guillemot, said in a statement. "The additional time given to the development of our titles will allow them to fulfill their huge ambitions."

Founded in 1986, the company employs more than 8,000 people worldwide, including around 2,500 at a production studio in Montreal.

While the company's stock price plummeted Wednesday, analysts said that the market might have overreacted to the news. Delays ahead of official releases are not uncommon in the gaming industry.

Analysts added that Ubisoft's delay also would allow its new games to take advantage of the next-generation consoles that will be released by the end of the year.

Microsoft, Sony and Nintendo all have invested billions of dollars on their latest gaming machines, which improve computer hardware to give gamers a more realistic experience.

In the short term, Ubisoft will have to rely on its existing "Assassin's Creed" franchise, the latest version of which will be released at the end of the month. The game was created in 2007 and is expected to be turned into a Hollywood movie in 2015.

The success of that blockbuster has increased the pressure of Ubisoft to score similar successes with its new games. Analysts say the reaction to the company's latest delays illustrates the pressure that the company faces in the increasingly competitive video game industry, even if it was a smart move for the company's long-term health.

"The company made the right decision," said Hickey. "They could have put out a lower-quality game, but it's best to wait to get it right."

© 2013, The New York Times News Service