Ubisoft 2005 Annual Report Download - page 50

the reputation of its studios and active recruiting efforts at
colleges and universities, Ubisoft has consistently mana-
ged to attract the best talent to enhance its development
teams. For the last recent years, the firm has been recrui-
ting nearly 1,200 people: a 70% increase of its production
workforce.
The group is nonetheless intensifying its training efforts to
facilitate recruitment. In this regard, the campus created
in Montreal – in cooperation with the CEGEP in Matane
and the University of Sherbrooke – offers a curriculum that
includes a series of training programs at the college and
university level in key fields for video game development.
Student numbers increased from 50 in 2005 to 200 in
2006. The Ubisoft campus has two objectives: to train
young recruits in video game occupations and to offer
additional training courses to Ubisoft’s existing, experien-
ced employees.
All of these operations will enable Ubisoft to reach its
objective of doubling its Canadian workforce between now
and 2010 and to meet its annual objective of recruiting 500
to 600 people. This process was already well underway last
year, when employee numbers at the Montreal studio
increased from 1,080 to 1,303. The Quebec studio, which
was created in 2005, already has 117 employees
Risk related to the
departure of key
personnel
The company is currently organized so as to minimize risk
related to the departure or extended unavailability of key
employees or managers through such measures as the
development of tools designed to promote the preserva-
tion and transmission of expertise, including databases,
collaborative sites and so on. Moreover, the primary
objective of all the programs set up by Human Resources
at the group level is to attract, train, retain and motivate
employees with strong technical and managerial skills via
stock option plans, group savings plans, salary policy,
development plans and more.
Risk arising from
the termination of a
licensing partnership
Ubisoft signs numerous partnership agreements each year
with such prestigious partners as Disney, Sony Pictures
Consumer Products, LucasArts, Universal Studios
Consumer Products Group and Touchstone Television,
which enable it to expand its game catalogue and increase
its sales. Ubisoft benefits from the brand awareness of its
partners to optimize a game’s sales potential.
The possible interruption of certain partnership agree-
ments for any reason, at the initiative of Ubisoft or its
partners, could have a negative effect on the company’s
future income and operating results to the extent that
such interruptions are not offset by other new licenses.
Licences accounted for 29% of the company’s sales as of
March 31, 2006.
Risk related to
intellectual property
Ubisoft Entertainment’s games and trademarks are cove-
red by intellectual property rights both in Europe and
internationally (for France: Institut National de la
Propriété Industrielle [French Patent Office], Paris; for
Europe: Office for the Harmonization of the Internal
Market; internationally: the World Intellectual Property
Organization; and for the North American market, the
Patent and Trademark Office in Washington, D.C.).
In addition, games designed by Ubisoft are covered by
international copyright laws. AAA games are also registe-
red with the U.S. Copyright Office.
Ubisoft Entertainment has not filed any patents and does
not depend on any particular patent.
Like all game publishers, Ubisoft faces the problem of
piracy. The company is a member of the Syndicat des
Editeurs de Logiciels de Loisirs (the French trade associa-
tion of entertainment software publishers) and pursues all
known cases of software piracy both in France and abroad
(through criminal prosecution, if applicable, or by means
of any other existing penal or civil remedy).
Moreover, with regard to piracy over the Internet, the
company systematically takes legal action against hackers
in order to force the withdrawal of games that have been
illegally placed online.
Risk related to
computer security
In spite of the numerous integrated security systems
deployed, Ubisoft is not totally protected from malicious
intent, intrusion, problems with network user identifica-
tion, and so on. Changes in legislation, the deployment of
new mobility technology, the spread of virus attacks and
increased use of the Internet have all been factors in the
adoption of comprehensive security solutions.
Information is a strategic resource of considerable value,
and must therefore be protected in an appropriate manner.
Security measures for information systems protect infor-
mation from a wide array of threats to ensure business
continuity.
These measures are aimed at guaranteeing the confiden-
tiality, integrity and availability of information.
Risk related to
customer dependence
The company has no significant dependence on customers
that could affect its development plan.
Ubisoft’s distribution network is increasingly centralized.
In fact, in most European countries as well as in the United
States and Japan, distribution is centralized, and Ubisoft deli-
vers its products directly to local retail chains, which
in turn redistribute products to their stores. Only the smal-
lest independent retailers are supplied through distributor
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