E3 is just around the corner. Well, I guess it’s already here since things leak pretty early these days. It’s incredibly easy to get swept up in the excitement surrounding new video games, but the hype train has allowed a pretty substantial piece of news to slip through the cracks, and it’s something gamers should really pay attention to.
Last week, Vivendi gained majority control over mobile publisher Gameloft, and the Guillemot family – founders of Gameloft and AAA publisher Ubisoft – have decided to sell what remains of their stake to the media giant.
One might say, “That’s not interesting. Gimme the vidyagames!” And I’d understand where you’re coming from, too. Gaming is fun, relieving, and therapeutic, so naturally, nobody wants to stress themselves over how the business is handled. That said, if you’re a fan of any of Ubisoft’s gaming properties, this piece of news is worth following, and to understand why, we first have to understand what Vivendi’s track record in this industry is.
Vivendi pretty much has their hands in a little bit of everything. Music, television, movies, telecommunications, online video hosting, you name it. From the perspective of gaming however, things get interesting in 1998 when Vivendi had acquired Havas, shortly after they had acquired CUC Software. CUC isn’t a name that’s tossed around much these days, but they owned Sierra, Blizzard, and Berkeley Systems. A couple of years later, Vivendi acquired Seagram Company Ltd., owner of Universal Studios, and merged all their game studios to create Vivendi Universal Games. Infamous franchises were born under that umbrella, such as Half-Life, Diablo, Warcraft, Crash Bandicoot, Spyro the Dragon, and more.
This all sounds fine on paper, but reading up on the details spins a troubling tale of an overly ambitious company that had to scramble just to gasp for air. It wasn’t long before Vivendi Universal had disclosed a corporate loss of 23.3 billion Euros. So, they began selling off shares in spin-off companies, shoring up media holdings, and reorganizing what remained in order to stave off the threat of bankruptcy. In 2004, beloved developer, publisher and distributer Sierra was shut down as part of the aftermath. The CEO of VU Games (at the time) is on record spouting some corporate drivel about “reducing our cost base” and how this “aimed to better position the company for growth.” I know this sort of thing happens all the time, but that brand had been a staple of PC gaming, and the announcement of their demise had been quite the shock.
And besides, all might not have been as it seemed.
Fast forward to late 2007, a time when Electronic Arts was not only showing a dominant hand, but pounding it on the table with pride. Activision seemingly weren’t sure how they could compete against EA’s momentum, but the chief executive of the company, Robert A. Kotick, felt he found the answer. “We looked every which way to figure out how to participate in what Blizzard had created… We couldn’t find a way to duplicate it, but we could acquire the expertise.” And thus after merging, Activision Blizzard had been born.
From a business perspective, it was a marriage made in heaven, yet once again, Vivendi found themselves desperately needing money. Their response to this issue was an attempt to worm their way into Activision’s reserved funds to make up the difference. This, undoubtedly, would have been the beginning of the end for Activision. I’m not a financial analyst, but I believe once a fair chunk of their reserves were gone, just one flop of a game would have ‘forced’ Vivendi to shut them down, or at least sell the company’s empty husk to someone looking to capitalize on the name.
However, in late 2013, Activision Blizzard made an $8.2 billion dollar deal to buy back their independence ($5.83 billion from Activision, the rest from a group of investors led by Bobby Kotick and co-chairman Brian Kelly). The split from Vivendi was considered good news amongst many in the gaming community, while others wished Blizzard would take similar steps to break away from Activision. Why? Because Blizzard began incorporating microtransactions in newly developed games, up to and including Diablo 3’s shameful ‘Real Money Auction House’, and considering how much Activision loves that business model… well, it’s hard to deny the puzzle pieces fit.
And with that, Vivendi were once again on the outs with gaming… at least, temporarily. It may have taken them a couple years to get back in the swing of things, but I imagine they were taking their time to carefully examine the veritable orchard of gaming devs and publishers doing business today. Their sights seemingly landed on everything the Guillemot family owned, which brings us back full-circle to the story of the hour.
I know that the popular opinion of Ubisoft in the gaming community isn’t very positive, but truth be told, the company has been doing fairly well. In 2014, Watch Dogs was the most pre-ordered new IP in the company’s history, and moved on to sell over 10 million units. South Park: The Stick of Truth sold over 1.6 million copies in its first couple months on retailer shelves. By the end of that year, Assassin’s Creed: Unity and Assassin’s Creed: Rogue together had sold over 10 million units. Far Cry 4, 7 million units.
The last year and a half hasn’t been too shabby, either. While it’s true Assassin’s Creed: Syndicate suffered in sales due to Unity’s technical floundering, nearly everything since has amounted to a pretty nice payday. NPD analyst Liam Callahan made it clear that “Ubisoft’s Far Cry: Primal was the top game of February 2016 with greater sales than Far Cry 4 when adjusted for the number of days the games sold within their respective launch months.” The Division allegedly sold more copies in its first 24 hours than any game in Ubisoft’s history. Looking ahead, there’s already quite a bit of buzz around Watch Dogs 2, and South Park: The Fractured But Whole is also slated for year’s end. Like it or lump it, it doesn’t look like Ubisoft is going anywhere.
Or are they?
Clearly, Vivendi want in. Eletronic Arts is too big to tackle, and they’ve already had their shot at having Activision under their wing. Sooooo, Ubisoft it is… and let’s be clear: Vivendi aren’t playing by usual conglomerate takeover rules. No, their approach is direct from the ‘hostile takeover’ playbook, and the Guillemot’s have voiced their concerns publicly.
Just last October, Yves Guillmot said, “Either you’re an activist investor and you buy a stake in a company to shake things up, or you’re an industrial partner and you contact us to reach an accord… What Vivendi is doing, it shows a lack of respect for what Ubisoft is today and for all our shareholders.” He also went on to say, “There’s no room for old-school methods like Vivendi’s creeping takeover in today’s world of Facebook and Google.” Obviously, this did not deter the offender one bit. Gameloft was forced to change hands, obviously, but Vivendi have also increased their stake in Ubisoft to 17.7 percent, which is roughly a 7 percent increase over the course of just as many months.
Now, Vivendi have said they don’t want to own Ubisoft, but certainly want a spot on the board.
But are they telling the truth about that? And, if they DO want ownership over Ubisoft, what’s their plan? What does the endgame look like, and what would it mean for gamers?
For the sake of argument, let’s assume they succeed in their takeover. Maybe they’ll make some changes. Maybe they won’t. I know that if people were actually paying attention to this story (E3 is just too irresistible, I know), that would be their primary concern. And hell, it’s a valid one. But an even bigger concern would be if Ubisoft eventually croaked as a result of Vivendi’s acquisition, and that’s a very real possibility.
Let’s summarize what we’ve learned about Vivendi thus far, shall we?
They get involved with a company or perhaps even multiple companies, and before long, they’re on the brink of financial collapse. It’s become something of a cyclical theme. In the early 2000’s, Vivendi’s financial woes is what forced Sierra, a talented studio, to close. Years later, Activision were at risk because Vivendi STILL couldn’t get their act together. Who knows where Activision Blizzard would be today if they hadn’t found a way out?
So, what’s going on? Why does such a massive company keep finding itself swirling down the drain?
Well, earlier this year, Vivendi SA were made to pay John Malone’s Liberty Media Corp. $775 million to settle a lawsuit. To my understanding – there’s a LOT of back-and-forth about this subject on the net – the charge was that in 2002-2003, Vivendi knowingly hid a liquidity crisis while negotiating a swap of their stock for Liberty’s stake in USA Networks Inc. In 2010, Vivendi boss Jean-Marie Messier faced trial for fraud, misappropriating funds, manipulating share prices, misleading the stock market, and bailing with a golden parachute when things got rough. He denied everything, but admitted – albeit vaguely – that he’s made ‘mistakes’. He was eventually sentenced to three years, but in time was reduced to a suspended ten months.
I’d wager that this isn’t the only time Vivendi have skirted the law to get what they want, either. This is just the only story we KNOW about. How much more corruption has there been?
Connecting the dots, the story I’ve gathered is that the major players in this company live to serve themselves (shocker, I know). They soak up anything and everything they can get their hands on, misappropriate most their funds, and when things dip in the red, they use the companies they’ve acquired as personal piggy banks to keep the party going.
Based on my research, my personal assessment is that Vivendi are the worst kind of corporate vampire known to man. Call it hyperbole, or even hysteria if you want, but if you’re a fan of Ubisoft, just know that they’re the focus in Vivendi’s latest cycle. Does that make you feel comfortable? And ask yourself this: Why would Vivendi divest themselves of Call of Duty, Warcraft and Diablo, just to eventually make a move on Assassin’s Creed and Far Cry? There’s definitely more to this than meets the eye.
Now, Ubisoft aren’t just sitting in an easy chair, waiting for someone to arrive and say, “You’ve been taken over, boys! You’re done! Through! Finished! Fin! Finito! So, adios! Au revoir! Sayonara! Hasta luego! Auf wiedersehen! BUH-BYE!” Instead, they’ve turned to Canadian shareholders, asking they increase their investment to help curb the hostile takeover.
Also, Vivendi’s aggressive maneuvering could backfire. I’d assume they want to keep the company profitable until they decide to turn it into a financial ‘insurance policy’, but a single miscalculation could cause the talent within Ubisoft to walk. If Vivendi get the vibe the studio as a whole won’t conform, they may decide to back off entirely…
…Or, as they’ve said, settle for a seat on the board. This, I believe, is the greatest threat to Ubisoft overall. It’ll take some time, but Vivendi could get in the ears of other board members, and little by little, bribe their way to (nearly) total control.
“Meh, Ubisoft deserves to fail.”
That’s the attitude I’ve seen quite a few haphazardly toss about in regards to the AAA publisher. And to a certain extent, I get it. With the exception of third party stuff they publish and the Tom Clancy license, most Ubisoft games share the same formula. They’re all some iteration of ‘Unlock Your Local Proximity By Climbing A Tower: The Game’, and that sadly includes The Crew, their attempt at an open world driving title. But Ubisoft games are still pretty fun. Even if you’re feeling burned out by too much Assassin’s Creed or Far Cry, it’s OK. I myself had to walk away from Assassin’s Creed: Rogue and Far Cry 4 because I finally had my fill. But just because I’ve had enough doesn’t mean others shouldn’t get to play them. At the end of the day, the latest installments are still solid entry points for newcomers.
What is fair, however, is taking Ubisoft to task for their not-so-friendly business practices (which pale when compared to Vivendi’s history, but still). They always show technically impressive iterations of games in development, but deliver severe downgrades on day of release. They’ve also been willing to ship games they knew weren’t technically sound. Frankly, their games just aren’t as well optimized as they should be, even the better performing ones. Last but certainly not least, Ubisoft have become friendly with needless microtransactions and ‘time saver packs’, which save the gamer time from playing the games they just bought to… you know, PLAY (odd for a company that calls its gaming platform UPlay but, whatever).
But does that mean they deserve to fall victim to a hostile takeover? To have Vivendi squeeze their business dry when they mysteriously run out of money again? I don’t think that’s the answer.
Even if you hate Ubisoft with all your heart, think about what it would do to the industry if their presence just disappeared. Who are the largest third party contenders that compete with Ubisoft today? Electronic Arts and Activision. Ubisoft trails behind a bit, but they’re always looking for new ways to capitalize on their established brands. Getting into the world of filmmaking is one such example (there was that Prince of Persia movie, Assassin’s Creed is on its way, and Tom Clancy titles are likely to be next, now that Jake Gyllenhaal has been attached to a treatment of The Division). Point is, they’re nipping at the heels of their competitors, and this, from time to time, causes them to react. Competition is usually beneficial to the consumer, because if a company isn’t trying hard enough, people will take their money and spend it elsewhere. Do you, even as a person who hates Ubisoft, really want Electronic Arts and Activision to be the only major third party players on the block? I know I don’t.
After all is said and done, I think the fate of this company really rests at the hands of Ubisoft’s continued success. If they want to make their investors feel secure enough to not sell their shares to Vivendi, they’ll need to churn out hit after hit. And without rushing of course, because consumers have already had it up to here with technically flawed games. Buuuuut… Watch Dogs 2 is next on Ubisoft’s slate. Yeah, the original sold oodles and boodles of copies, but a LOT of people were disappointed they spent $60 on it. Will the changes in Watch Dogs 2 be enough to keep sales figures high?
To be continued…