Tencent Reportedly Considering Acquisition of Ubisoft: Here’s Why (It’s a Sad Shame)

There’s some big news happening at Ubisoft today. The French video game giant is considering abandoning public trading and family ownership as it seeks to escape recent share price lows under Tencent, according to a report by Bloomberg. This should worry those who have been paying attention to major gaming news over the past few years.

It’s no secret that Ubisoft has been underperforming lately. The company’s shares have fallen 54% this year, and investors have reportedly been pressuring the company to take it private to help reverse that decline. Tencent already owns about 9% of Ubisoft through previous investments (which has helped fend off Vivendi in the past), and the 2022 report suggests that Tencent hopes to significantly increase its stake in the company.

It’s easy to see how Ubisoft got to this point. The most recent releases haven’t been particularly impressive and haven’t performed very well. Everyone can (and will) point to “Skull and Bones” and laugh, but recent releases like “Star Wars: Desperados,” “XDefiant” and “Avatar: Pandora’s Frontier” haven’t really made any money. Combined with the lack of big releases (remember Beyond Good and Evil 2, where was it?), the lows it’s experiencing make sense in this tough market.

But even so, we’re still living in a world post-Hugger disaster and Microsoft x Activision Blizzard takeover. In recent years, such large-scale commercial relocation has left many people looking for work, and the situation is not optimistic. Now, I don’t think Tencent should be immediately slammed for being guilty of the Embracer and Microsoft lawsuits, but there’s a good reason why the acquisition is giving off a bad taste now.

Plus, let’s face it, if this comes to fruition, it could be good for Ubisoft in the long run. Generally speaking, going public does encourage corporate behavior that stimulates short-term gains rather than long-term performance. There’s a reason Ubisoft keeps making Assassin’s Creed games as often as possible, but the sequels often inherit mistakes and lack significant experimentation or risk-taking. You gotta release the hottest song, man! We must make people happy! If Tencent wants to, it can steer the ship toward a better climate. Yes, this is a Skull and Bones prank.

Additionally, despite Tencent’s recent investments, it’s not known for mass layoffs like Microsoft’s embracers. However, it is worth noting that Tencent-owned Riot Games recently laid off about 11% of its employees. However, one might point out that a large portion of these layoffs are aimed at esports employees, developers working on games like MMOs, and general developers at Riot Forge and Legends of Runeterra. I would say that cuts are cuts and 11% is not something to ignore. But even so, many newly established Tencent studios still exist to a large extent No cutting required.

These are potential pros. The negatives remain. Taking a company private means it takes power away from shareholders, for better or worse. A dominant Tencent can steer the company in the hottest direction by launching more real-time services. As much as I love For Honor, losing a company primarily dedicated to AAA single-player experiences would be a huge blow. This also means less visibility. As a public company, Ubisoft is now required to disclose its performance information. Under Tencent, we may see information published as part of wider corporate annual reports, but the wealth of knowledge will certainly diminish.

There are broader issues as well. More and more industries are being gobbled up by large companies. Tencent is one of them, as are Microsoft and Sony. Fewer independent pillars in a space means less variety and choice. Oligopoly means less competition, and while we’re lucky to have a busy indie space launching great games, large companies are incentivized to deal with competition and prioritize profit and wealth creation. By the way, this is not a video game-specific thing. Check out Pepsi and Coca-Cola at your local store.

Yves Guillemot has wanted to keep ownership in the Ubisoft family for years, and for good reason. He evidently believed, or had believed, that the best hands were his own. While there are some good reasons (not just limited to bad video games) to be skeptical of this belief, a strong, independent video game giant can only be good for the health of the industry. The problem, of course, is that Ubisoft isn’t that strong anymore. Hence the current predicament.

As for why Tencent might want to acquire Ubisoft, the industry is currently experiencing something of a land grab. Tencent, which generates billions of dollars in revenue each year, is looking to expand its network to European and U.S. studios in order to control not just big financial wins in video game releases next year, but revenue in five years, 10 years and so on. , this is for money. It has a lot of cash to spend, and many companies happen to be cheap right now. But Tencent doesn’t want to own the next big video gaming trend because of its love for games (or games), but because it can cash in on the profits from such releases. You can bet it will lead the company in the direction it believes it is capable of doing.

Nothing is set in stone yet, and Ubisoft may remain on the market, but this is another big step toward buying and selling. It’s easy to get hyped up about this and, hey, it could end up being good for Ubisoft developers and players if it happens. But for now, caution is wise as we wait and see how things unfold.