Ubisoft 2013 Annual Report Download - page 46

Management Report
2013
41
RISK FACTORS
1.7
The Company conducted a review of risks which may have a significant negative effect on its activity,
financial position and 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.
RISKS LINKED TO THE BUSINESS AND THE VIDEO GAMES 1.7.1
MARKET
RISKS ASSOCIATED WITH PRODUCT STRATEGY, POSITIONING AND BRAND 1.7.1.1
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:
x Regularly strengthening its existing franchises in the high-definition segment;
x Launching innovative products in order to seize opportunities in the Casual segment;
x 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 and GFK) provides the Group with a
high-performance distribution platform for its products.
RISKS ASSOCIATED WITH MARKET CHANGES 1.7.1.2
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), the second-hand market, piracy, online
games and emerging competitors in Asia.
The sector overall, should grow in 2013, led by the online games sector which is experiencing rapid
growth while the consoles market may continue to decline in a context of transition to new generation
consoles and due to the less impressive than expected launch of the Wii U, which should continue to
affect sales of casual games.
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 revenue and
profitability.
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.
In Canada and in Singapore, Ubisoft depends on substantial grants and any change in government
policy could have a significant impact on production costs and the Company’s profitability. Ubisoft
ensures that it renegotiates these agreements on a regular basis and does not foresee any risk over
the next few years.