Ubisoft 2012 Annual Report Download - page 37

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Management Report
2012
32
1.7 RISK FACTORS
The Company conducted a risk review of a risks which may have a significant negative effect on it
activity, its financial position and its result (or on its capacity to reach objectives). The Company does
not believe that there are any other significant risks than those listed.
Identified risks are categorized by type.
1.7.1 RISKS LINKED TO THE BUSINESS AND THE VIDEO GAMES
MARKET
1.7.1.1 RISKS ASSOCIATED WITH PRODUCT STRATEGY, POSITIONING AND BRAND
MANAGEMENT
Ubisoft, like all publishers, is dependent on the success of its product catalogue and the suitability of
its offering with regard to consumer demand.
In order to meet market demand, Ubisoft takes particular care in building its product catalogue by
concentrating on:
Regularly strengthening its existing franchises in the high-definition segment,
Launching innovative products in order to seize opportunities in the Casual segment,
Developing its online and digital activity.
In order to diversify and enrich its brand portfolio and thus ensure steady income in the long term,
Ubisoft favors a strategy of creating its own brands and producing internally, underpinned by a
targeted acquisition strategy.
The Company allocates the necessary marketing and sales resources to showcase its products
through a distribution network covering over 55 countries. Its position as the third-largest independent
publisher in Europe and the United States (NPD, Chart-Track, GFK) provides the Group with a high-
performance distribution platform for its products.
1.7.1.2 RISKS ASSOCIATED WITH MARKET CHANGES
Ubisoft operates on a market that is becoming increasingly competitive and selective and is subject to
concentration and economic fluctuations, marked by rapid technological changes requiring significant
R&D investment.
Ubisoft also faces new challenges such as the dematerialization of physical media (which is set to
gradually replace games boxes at some point in the future), a growing second-hand market, piracy,
online games and emerging competitors in Asia.
The sector overall, therefore, should be a growing one in 2012, led by the online games sector which
is experiencing rapid growth while the consoles market may remain down due to the continued decline
of the Wii, despite an anticipated marginal rise in the sales of Xbox 360® and PLAYSTATION®3 games
and the positive impact generated by the introduction of the Wii U™.
In order to remain competitive, it is essential for a publisher to choose the development format for a
game wisely; an inappropriate choice could have a negative impact on the expected sales and
profitability.
While continuing to invest in new technology, Ubisoft managed to capitalize on the success of its Just
Dance® franchise although sales on the Wii™ market continued to fall sharply in 2011.
The Company is also striving to promote collaboration between its various development studios in
order to ensure the optimization of its development power and to benefit fully from its presence in low-
cost zones.