Ubisoft defies market

Making games means building audiences

The SuperJoost Playlist is a weekly take on gaming, tech, and entertainment by business professor and author, Joost van Dreunen.

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“Come on, dad. Let’s play!”

Whenever the 11-year-old hands me a controller, it is his signal that he wants to spend time. Especially during this time of year when it’s just too cold and too dark to do much else, we’ve been huddled in the family room in front of the big TV.

We recently completed It Takes Two, a two-player co-op game where a pair of divorcing parents have to work together to save their daughter. After completing its story, the emotional load had clearly taken its toll and we decided on something lighter. And so I now suffer through the deliberately wonky controls of Gang Beasts, a goofy fighting game.

One benefit is, apparently, that spending time playing with a parent has a positive influence on children’s ability to manage negative emotions. A recent study of 452 adolescents found that a parent’s involvement in video game play reduces the tendency to use games as a form of escapism and, by extension, lowers the chances of problematic online gaming. Over a third of participants (37%) play video games only after they’ve completed all other activities for the day and indicate having no specific time (48%). The console is the most popular device for playing online (46%) which perfectly rhymes with our situation.

The onset of digital devices in the household has been a popular topic of criticism among academic peers. For instance, my NYU colleague Jonathan Haidt feels that interactive entertainment unduly shields children from learning to negotiate in social settings and nullifies the chance of physical injury, which he regards as an important part of how play prepares children for the real world.

We’ll see about that. I expect that my child’s carefully cultivated ability to manage negative emotions will come in handy when I drop the hammer the moment he’s old enough for Call of Duty.

On to this week’s update.

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BIG READ: Ubisoft defies market

Ubisoft is shutting down XDefiant and laying off 277 employees.

Launched on May 21st, the free-to-play shooter initially appeared promising, garnering over 11 million players within its first month and achieving a peak of over 204,000 concurrent viewers on Twitch, according to Stream Hatchet. However, this momentum quickly evaporated, with Twitch viewership plummeting to approximately 2,700 by November, signaling a steep drop in player engagement. Frederick Duguet, Ubisoft's Chief Financial Officer, had already flagged XDefiant as underperforming relative to expectations during the company’s Q2 earnings call, casting doubt on its long-term viability even before today’s announcement.

“In terms of the second quarter, it mostly reflects the softer-than-expected sales for Star Wars Outlaws. We also had behind expectations for XDefiant, but we'll give you a bit more detail at the end of October." — Frederick Duguet, CFO, Ubisoft

And detail we got. Sure enough, Ubisoft isn’t the only legacy firm having a hard time. Even juggernauts like Microsoft and Sony have had to admit defeat this year in the face of disappointing releases, resulting in layoffs and studio shutdowns. But unlike these large platform holders which rely on a variety of revenue streams and have the necessary deep pockets that afford them such losses, Ubisoft’s future seems much less secure. The XDefiant shutdown follows a lackluster release of Star Wars: Outlaws and the recent delay of its highly-anticipated Assassin’s Creed: Shadow.

In this week’s press announcement, Ubisoft also stated that it would take the lessons surrounding XDefiant’s failure to heart and learn from it. However, the title’s rapid decline reflects deeper structural and cultural issues within the firm.

Rumors suggest that internal leadership may have suppressed critical analytics, prioritizing the development of new content over addressing fundamental player concerns. It’s an obvious mistake: rather than establishing the necessary social fabric that keeps players engaged, the emphasis, I’m told, was on shoveling out more content.

Games-as-a-service succeeds by adapting to player feedback and evolving the gaming experience accordingly. Simply creating content—especially a Call of Duty clone—and expecting players to grind through it misses the point entirely. Ubisoft failed to recognize that play in 2024 thrives on community engagement, not just content consumption. By developing their game without user input and treating players as passive consumers rather than active participants, they squandered the chance to build a loyal following. In a commodified shooter game market, even established publishers can no longer succeed by ignoring their community's desire to contribute and participate in meaningful ways.

The approach likely alienated its core player base, exacerbating the game’s inability to sustain engagement. Compounding the issue, Ubisoft has de-emphasized the financial contributions of its free-to-play portfolio in its fiscal guidance, framing these titles as engagement drivers rather than immediate revenue generators.

The strategic implications for Ubisoft are significant. With XDefiant joining a string of recent missteps, the company's reliance on Assassin's Creed Shadows to restore its reputation and financial footing is increasingly precarious. While the company has delayed Shadows in polishing the product and ensuring a smoother release, such adjustments will not mitigate the broader challenge: the erosion of player trust.

My take: Ubisoft is headed for privatization and dismantling in 2025. With its share price plummeting from $28.19 to $12.30 year-over-year, the company has become an attractive takeover target. Its valuable assets—particularly Rainbow Six Siege and the Assassin's Creed franchise—could be worth more separately than together. The upcoming Assassin's Creed: Shadows faces stiff competition from PlayStation's Ghost of Yotei, and recent failures suggest deeper organizational issues beyond individual game performance.

Ubisoft's development approach remains stubbornly outdated in an era demanding player engagement and community building. Without a fundamental shift in how they develop and maintain games, they risk further alienating both investors and players. The XDefiant shutdown isn't just another failed launch—it's a symptom of a company that insists on catering to a passive audience while failing to recognize the urgency to rethink distribution.

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NEWS

Ofcom releases Online Nation 2024 report

Each year, Ofcom, the regulatory body for the UK’s communications, broadcasting, and postal industries releases a report called Online Nation. It details what the Brits do online across different categories and offers a wealth of information. You should go take a look.

Here, I’ll highlight a few observations that deserve attention. The first is that game subscriptions are quite popular. In 2024, 36% of UK gamers (those who play online, download games, or use gaming apps) have gaming subscriptions.

Next, younger audiences tend to be time-rich and cash-poor, which makes a buffet-style subscription a more economical solution. This is represented in the age differences with 45% of 16-24 year olds subscribing compared to 12% of those 55+.

And given that male gamers spend, on average, about 8 hours a week playing video games compared to 6 for females, a clear gender gap exists, too. A fixed-price subscription is better at satiating the clear difference in appetite, which explains why 41% of male gamers subscribe versus 30% of female gamers.

Finally, while it makes sense that offerings from platforms are more popular than publisher-based ones, I was surprised to see that more people in the UK subscribe to Netflix Games than Apple Arcade. Even so, Ubisoft came in dead last despite gaining exclusive worldwide cloud gaming rights to all Activision titles outside the European Economic Area, which I described in detail here.

CD Projekt reports revenue decline

A 49 percent decline in revenue, totaling $55 million, suggests Polish publisher CD Projekt is grappling with the natural tapering off of sales from Cyberpunk 2077 and its expansion, Phantom Liberty. Wall Street isn’t convinced just yet that the game maker will make good on its promises, with analysts calling it a “show-me story.”

Investors are nevertheless hanging on because the firm’s profitability held stronger than expected, with a net profit of $19 million and a gross margin of 67%. The firm has managed to outperform both its European peers and the Euronext 100.

Key drivers included robust sales of back-catalog titles like The Witcher 3, demonstrating the enduring value of its flagship franchises. Additionally, the company’s substantial 391% increase in R&D spending underlines its forward-looking approach, with investments in projects like The Witcher 4, codenamed Polaris, and new IPs aimed at ensuring long-term sustainability. These figures, alongside disciplined cost management, underscore a transition from reliance on blockbuster launches to a more consistent and diversified model of engagement.

I recently hosted CD Projekt’s chief marketing officer, Jeremiah Cohn, in my class to discuss how the firm embraced a franchise “flywheel” strategy, integrating high-quality transmedia projects like Cyberpunk: Edgerunners and cross-platform development protocols to strengthen its ecosystem. The approach marks a deliberate pivot from the firm’s earlier content-first philosophy, which led to the overly ambitious, troubled launch of Cyberpunk 2077. By reorienting toward more sustainable engagement touchpoints, such as strategic updates and brand-expanding partnerships, CD Projekt is positioning itself as a resilient leader in the European games market, capitalizing on the industry’s current swing toward distribution innovation by exploring a variety of channels and revenue models.

Since its release, Cyberpunk 2077 and its expansion, Phantom Liberty, have sold 30 million and 8 million copies, respectively.

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PLAY/PASS

Pass. The absence of online vitriol is missed by some, evidently. Or maybe they haven’t heard of Discord yet.

Play. Happy 30th birthday, PlayStation!

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NEXT UP

As soon as my (second) PlayStation Portal arrives, I’ll be taking a look as to why LEGO Horizon Adventures wasn’t the sure-fire hit people expected. Generally, IP-based releases perform much better during transition periods or when abundant content alienates consumers. I’m curious to see what went wrong.