Ubisoft 2014 Annual Report Download - page 54

Management Report
2014
49
1.7.3 OPERATIONAL RISKS
1.7.3.1 RISK OF DEPENDENCY ON CUSTOMERS
Because it has many large retailer customers in numerous countries, the Company believes it has no
significant dependency on any customer that is likely to affect its growth plan.
Share of the main customers in the Group’s sales ex-VAT:
Share in %
2013/2014
2012/2013
2011/2012
Top customer
10%
13%
10%
Top 5 customers
32%
35%
39%
Top 10 customers
47%
47%
50%
Moreover, in order to protect themselves against the risk of default, the Group’s main subsidiaries,
which account for approximately 68% of consolidated sales, are all covered by credit insurance.
1.7.3.2 RISK OF DEPENDENCY ON SUPPLIERS AND SUBCONTRACTORS
The Company has no significant financial dependency on subcontractors or suppliers that is likely to
affect its growth plan.
Ubisoft and its subsidiaries mainly use services or products from suppliers such as systems
integrators (printers to produce manuals and product packaging, disk suppliers to subcontract the
supply and duplication of DVD-ROMs and Blu-ray discs, other systems integrators), technology
providers and suppliers of licenses, and maintenance in connection with the Company’s operations.
However, there is a dependency on manufacturers. Ubisoft, like all console-game publishers,
purchases CDs and gaming media from console manufacturers (Sony, Nintendo and Microsoft-
approved duplication factories). Supply is thus subject to prior approval of the manufacturers, the
production of these media in sufficient quantities and the establishment of royalty rates. Any change in
the terms of sale by manufacturers could have a material impact on the Company’s results. For PC
games, there is no specific dependency.
Despite the priority given to games developed internally, which account for 90% of sales, the
Company may call on outside studios in the context of its development activities to work on traditional
subcontracting projects by supplying additional and/or specialized production capacity or to take on
original projects in which they have specific expertise. These independent development studios may
sometimes have a limited capital base, which may put the completion of a project at risk.
To limit such risks, Ubisoft has introduced internal monitoring procedures, limited the number of
games entrusted to a single studio, and ensured that it assimilates all or a portion of the technology
that these studios use.