Ubisoft 2004 Annual Report Download - page 42

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UBISOFT > 2005 FINANCIAL REPORT
Risk related to
recruiting problems
The group’s success is based on the performance and training
of its technical teams.
The development of new technology and the desire to
produce more effective and innovative games require
increasingly specific expertise.
Each phase of production may call for several hundred
persons over the course of several years.
Ubisoft may then face genuine difficulties in recruiting to its
studios experienced personnel with specialized technical
expertise who can ensure the company’s growth.
This could lead to delays in the release of games.
Given its presence in countries where few industry firms are
located, Ubisoft is largely free to hire qualified applicants
without concern for competitors. Moreover, thanks to the
reputation of its studios and active recruiting efforts at
colleges and universities, Ubisoft has consistently managed
to attract the best talent to enhance its development teams.
The group has just established a Campus in Montreal
designed to offer a series of vocational and university-level
training programs in key aspects of video game development.
Through this commitment to training tomorrow’s industry
leaders, Ubisoft will meet its objective of doubling its
Montreal workforce over the next five years.
Risk related to the
departure of key
personnel
The company is organized today in such a way as to
minimize risk relatedto the departure or extended
unavailability of key employees or managers. For example,
aprogram for safeguarding and sharing know-how is
currently being implemented at the company with a view to
spreading and circulating knowledge within the
organization. Moreover, the human resources policy, which
is applicable to the entire group, is grounded in the ability
to attract, train, retain and motivate employees with strong
technical and managerial skills. Various programs have
been implemented for this purpose (stock option plans,
group savings plans, wage policies, business plans and more).
Risk arising from the
termination of
alicensing partnership
Each year, Ubisoft signs various partnership contracts,
often with prestigious partners such as Disney, Sony
Pictures Consumer Products, LucasArts and Universal
Studios Consumer Products Group.
This has enabled the company to increase its sales
significantlyand, at the same time, to broaden the scope of
its sales catalog. In this way, Ubisoft can use the high
profile it has already achieved to ensure that each game
has excellent sales potential.
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1.6.4
1.6.3
All of these new consoles promise to offer top-ranked
performance and high-definition graphics.
The increase in costs is attributable to the number of
personnel needed to master the new technology for use in
games being developed. The goal for a publisher is to
anticipate and select the proper format in which to develop
agame. This strategic decision is highly important, given
the level of investment required. An inappropriate choice,
or a delay in the release of a console for which a game was
developed, could have a negative impact on projected
sales.
Similarly, marketing and promotional expenses for games
are constantly increasing.
Ubisoft views this as a period of opportunity in which to
expand its market share by entering market segments in
which the group has not yet developed a presence.
Ubisoft has a first-rate creative staff operating in
development studios in Canada, China and Romania, where
production costs are lower. As a result, and thanks to the
performance of its teams, the group can enhance its
standing in the face of competitive pressures that are
constantly increasing.
Ubisoft is gaining a firm command of the necessary
technology and boasts the resources to adapt to future
advances in technology. Thanks to its mastery of
technology, the group’s initial sizable investment yields
profits over the medium term.
Risk related to delays
or a poor launch when
releasing a top game
In an intensely competitiveand highly seasonal industry
that is increasinglydriven by the need to release “hit”
products, any announcement of a delay in the launch of an
anticipatedproduct can have a negative impact on the
group’s share price, revenue and future earnings.
The difficulty of anticipating precisely how much time will
be needed to develop a game may delay its release.
In a market made cyclical by the emergence of new
technologies and penalized by a short product lifespan, it is
essential that games be given a proper launch. The term
“target” is appropriate in many senses.
Some games may not immediately achieve their
anticipated success. Some may make only a minor impact
upon their release, and then find success later on. By the
same token, once a title has gained recognition, the
company can release follow-up products whose success can
be predicted.
By revising the focus of its product catalog, Ubisoft can
continue its success in producing innovative, captivating
games. The company pays particular attention to the
quality of its own brands and maintains control over the
design/development/duplication/manufacturing/delivery
chain in order to guard against inaccurate projections
regarding a product’s releasedate.
Like all publisher-distributors, Ubisoft is prey to any
slowdown in economic growth. However, the company has
acquiredthe marketing and sales resources it needs to
boost the profile of its products.
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