Ubisoft misses third quarter projections as Watch Dogs 2 underperforms

Ubisoft didn’t have as big a holiday season as it was hoping for.

The game publisher reported sales of $564.85 million for the third quarter of fiscal year 2016-2017 (which took place during the holiday season), less than the $596.93 million it was projecting for the period. It is also down from the $598.85 million in sales Ubisoft earned during the same quarter last year. The earnings come at a time when Ubisoft is battling a hostile takeover threat from Vivendi.

Ubisoft had two major releases during the quarter: the open-world Watch Dogs 2 and the extreme sports game Steep. According to Ubisoft, the Watch Dogs 2 launch was “not as dynamic as expected, but momentum [is] now positive.” It stated that Steep performed slightly better than expected.

Meanwhile, the publisher has seen growth in monthly active users (MAU) and digital revenue thanks to continued success from online titles such as The Division, the online multiplayer shooter that released in March 2016.

“We are successfully pursuing our transformation into a more recurring and more profitable profile,” Yves Guillemot, cofounder and chief executive officer, said in a press release sent to GamesBeat. “The positive effects of this transformation are remarkable. They illustrate how far ahead of schedule we are in our digital development, which is one key element of our three-year targets. Our overall player community is growing rapidly. We hit record engagement levels during the period, with 33 percent more MAU year on year. The number of daily players of Rainbow Six: Siege is at its highest ever, an exceptional performance given that the game was released 14 months ago. Meanwhile, The Division has continued its successful come-back, with engagement up by more than 150 percent by the end of December. This resulted in record back-catalog sales and digital revenue for the third quarter, and we saw another sharp rise in player recurring investment.”

Back catalog sales accounted for 57.1 percent of total sales, up from 36.5 percent last year. The company did have much of a presence on mobile during the quarter, with mobile and other “ancillaries” only making up 5 percent of the revenues. PlayStation 4 sales were in the front, making up 46 percent of the total.

“In light of the positive impacts of our transformation, combined with our overall solid performance and tight cost control, we are standing by our objective of achieving record operating income and operating margin for fiscal 2016-2017, despite lower-than-expected sales,” Guillemot continued.

For the fourth quarter, Ubisoft projects sales between $686.47 million and $729.11 million. It earned $666.11 million during the fourth quarter of 2016-2017. During that time, Ubisoft will release the multiplayer combat game For Honor for PlayStation 4, Xbox One, and PC, the open-world tactical shooter Tom Clancy’s Ghost Recon: Wildlands for PlayStation 4, Xbox One, and PC, and Just Dance 2017 as a launch title for Nintendo’s home console/portable hybrid system, the Switch.