Ubisoft 2000 Annual Report Download - page 34

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UBI SOFT / REFERENCE DOCUMENT
American market. In Japan (according to the IDG), the consoles mar-
ket should come to about 4.5 million new units, with 22 million new
games.
Video games are generally broken down into seven main categories:
strategy and role-playing, action, combat and shooting, sports,
racing, family games, children’s games and miscellaneous games.
Action/combat and shooting games topped sales in the United
States in 2000, with 37% of the market, followed by strategy and
role-playing games (21%), sports games (21%) and racing (13%)4.
These four categories account for more than 91% of sales3.
The video game market is highly influenced by technological deve-
lopments. The policy of console manufacturers also has an influen-
ce on product launches. The year 2000/2001 was marked by the
market’s movement towards new-generation machines and the wait-
and-see attitude generated by the new Sony PlayStation®2 plat-
form.
This wait-and-see attitude is not a new phenomenon. The business
of video game publishers has already experienced this kind of jolt
with the arrival of a new generation of consoles. In 1992, annual
sales of 16-bit consoles rose to more than 20 million units before
dropping to 8 million in 1995. Console sales took off again in 1996,
and above all in 1997 to 1999, as 32 and 64-bit consoles took over
from the 16-bit devices.
This dynamic was repeated in 2000, with a fall in sales of 32/64-bit
consoles to 10 million units as the new 128-bit PS®2 was launched
in March 2000.
2001 saw a recovery from 2000, which was a year of transition. The
new PS®2 is selling fast, and Sony anticipates sales of 20 million
units worldwide. By March 2002, this figure should reach 34 million
units. The launching of the Nintendo Game Cube™ and the
Microsoft X-Box in the United States at the end of 2001 will also help
to buoy up console sales, which are expected to peak in 2003/2004.
Publishers have already felt the impact of these new-generation
consoles on sales of video games. In France, for example, video
game sales rose slowly until October 2000, then picked up briskly in
November and December due to the combined impact of the PS2
launch and Christmas. PS2 games immediately took a 7 to 8% mar-
ket share, and accounted for 10% of Ubi Soft’s total sales.
The Nintendo handheld console, Game Boy® Advance (GBA), should
also help sustain the market in 2001. After its launch in Japan in
March (1,100,000 units sold in the first three weeks5) and then in
June in the United States and Europe, sales of 24 million units are
expected for the year as a whole.
b) Seasonal business fluctuations
Sales of interactive entertainment products are generally seasonal
to some extent. The period from September to December traditio-
nally sees more products released than the rest of the year.
However, Ubi Soft’s policy is to stagger product launches over the
year, while taking advantage of the rise in consumer interest at the
end of the year, so as to maximize sales of products with the grea-
test potential. Spreading product launches over several countries
also helps smooth activity.
Business from the first half-year (April-September) usually accounts
for 30% of annual sales.
c) Overview of the competition in the interactive games industry
There has been considerable concentration in the video game sector
during the last ten years. Game publishers now compete in a global
environment.
Following numerous mergers and acquisitions, only a few of the
main video game publishers6have been in business for more than
10 years: Activision, Electronic Arts, Infogrames, THQ, Titus and Ubi
Soft. Indeed, several major companies have disappeared or been
taken over, including Broderbund, Sierra, Cendant, GT Interactive,
TLC, Time-Warner Interactive and BMG Interactive. Many of the smal-
ler production studios have also been taken over (Mindscape,
Crystal Dynamics, Westwood, Wizzards, etc.).
The market is still highly fragmented. In the United States, the eight
largest publishers control only 63% of the market. There is likely to
be increasing concentration in this market in coming years.
33
1Financial Times, “Analysis: Playing to Win”, May 19, 2001.
2Survey conducted on more than 1,600 US households.
3Arcadia Investment Corp. survey “2000-2001: Home Entertainment Market
Update” – April 2001 (USA, Japan, Europe).
4Datamonitor, Electronics Games in Europe and US, 2000-2005. 4th edition
5Source: Nintendo.
6Excluding console manufacturers.