Why Ubisoft Is Obsessed With 'Games As A Service'

Tom Clancy's The Division is one of Ubisoft's most successful service games.

Wondering why big video game publishers are so enamoured of games as a service? The answer may not shock you: It makes them way more money. Wayyyyyyyyyy more money.

This morning as part of a quarterly earnings report, Ubisoft put out a slideshow full of interesting nuggets for anyone who's curious about the future of video games. This slide might be the wildest — the right side of it, that is:

What Ubisoft is saying there is that while a standard game might over its second year make 13% of the revenue it generated in its first year, a live game can reach 52%, which is an astounding leap. Games like The Division and Rainbow Six: Siege continue to stay in the public eye long after they launch, which leads to a longer tail and, if all goes well, happier players.

Or, as is far more relevant to Ubisoft's shareholders, bigger profits.

This slide is also worth examining:

Ubisoft's strategy for the past two to three years has been simple: Release fewer games, but stick with them longer, hooking players for months if not years after launch. From Ghost Recon Wildlands to Assassin's Creed Origins, Ubisoft's whole lineup is full of these service games, designed to be supported with a regular stream of updates and downloadable content.

On top of that, Ubisoft really, really hopes you'll buy digitally:

This slide is particularly interesting because it shows just how much more money publishers like Ubisoft are bringing in when you buy from the eShop or Xbox Live instead of going to GameStop. With physical games, Ubisoft has to give 25% of your $US60 ($77) to the store and then 20% of the remainder to the hardware manufacturer. With digital games, Ubisoft just has to give 30% to the distributor.

In other words, Ubisoft's ideal customer is the guy or gal who buys service games digitally and then just keeps playing them. In fact, the company says that 56% of its total revenue now comes from digital sales of games and content (as opposed to last year's 47%).

And then there's this slide, which is just a fun dig at Square Enix, Sega, Capcom, and Bandai Namco:


Comments

    They are obsessed because Siege is proof that a well designed game not only creates massive community engagement, but also reinforces said community to weather just about any storm.

    Before Siege released I remember reading an article where Ubisoft' s golden boy Its_Epi explained that Siege was an attempt by Ubisoft to see if long term service was possible for them, he said the higher ups were interested in seeing if titles like CSGO were possible for them and by the looks of it it was even if smaller in scale.

    ....and the pioneering case-study that all these guys have been studying - GTA Online.

    Sometimes I'd be happier to buy online, but then I see a $20-40 price difference on the eStore with the cheapest price at JB Hi-Fi... so I know which I will choose :)

      Yeah. It's really inexcusable for the prices on digital to be so high relative to retail when their margins are smaller on retail.

      It seems like it would be worth it for publishers to take a slight hit on the margins to keep their digital prices lower to incentivize buyers to choose digital.

      Of course, in the past that has resulted in threats from retailers to stop stocking entirely, which is a huge hit to anyone's total sales, regardless of how big the shift to digital.

        It's that last bit that's the issue - they can't afford to piss of the bricks and mortar retailers. Even with software sales trending more and more towards digital, they still sell the hardware through retail, be it bricks and mortar or online. Nobody makes much money off that hardware, though, so if they can't make money off games then the retailers don't have much incentive to sell the hardware, either.

        The theory of games as a service should be good for gamers too. But lately has become a dirty word because large companies can't stop themselves from exploiting the systems it uses.
        The problems with the idea only really rise up when it is implemented poorly, ala loot crates where the customer is put at the mercy of chance when they make a purchase, or where the core gaming experience gets greatly watered down and cut up then sold to the customer peicemeal.
        We've all played those games b4.
        Game companies will plead poor for reasons to have bad game practices and business models as long as they are lucrative. Remember guys it's all about profit maximization.
        It just seems that publishers keep forgetting the basic rule of games. A game MUST be fun.

        It's not just shipping units, retailers offer massive amounts of free advertising to a publisher just by virtue of stocking and promoting their product.

      Yep. I've been buying most of my Switch and PS4 games physically for the past couple of years now because they're usually $70-$80 at JB compared with $100 on the eStore/PSN. The only notable recent exception is Monster Hunter World, because it was sold out everywhere.

      That $20 difference is worth the inconvenience of physical media.

        That $20 difference is worth the inconvenience of physical media.
        I'd argue that a $20 difference is worth the money of NOT having the physical media.

          Same. I can’t put a price on the convenience of having all digital, i jumped on the bandwagon as soon as it became a thing. I was in a minority back then but definitely think it’s a more even split now?

      Digital copies allow you to game share.
      If you're going to get a game for co op, it's much cheaper to buy digital and game share than two physical discs

        I've thought about this before, do you get a digital copy for the co-op game share or do you buy a physically copy with some re-sale value?

    How many of these 'games as service' can people fit in their lives though? Can the market support every publisher following this route?

      That's the big question isn't it
      Right now I am playing PUBG on the Xbone and Bloodborne on the PS4 and little else

      How are new long term games expected to break through in a crowded market?

      Let's ask the folks behind Paragon or Lawbreakers or Gigantic!

      Last edited 13/02/18 12:42 pm

    The last graphic is a little depressing to me.

    Those publishers make some good games, but rarely the great and unique games that stay with me forever.

    I'm definitely not fond of ubisoft. Their games are often filled with cookie cutter nonsense or are built to a formula. Those formulas are often lacking in sheer fun factor. Assassin's Creed Origins was good, but man I found the early sidequests pretty insipid. "Hey hero, go solve this problem for me."

    Interesting to see that as they’ve switched focus to ‘GaaS’ how few of their titles I actually buy now?

    I’m not even remotely arrogant enough to be suggesting me & a few like minded people not buying their titles should bother them, not when they’re obviously making more money etc. It’s just lamentable because a lot of the Ubi titles - splinter cell, ghost recon, rainbow six, far cry, ass creed - are all titles i’ve bought & played to death over the years, but haven’t bought one of their latest titles for years now (mario rabbids & south park aside).

    The new focus may leave me cold with most of these games now, but if others are buying, playing & enjoying them then more power to them I guess?

    I like the part where it says "lifetime value" for games as a service.
    That is until they switch the servers off.

      "Lifetime Value" isn't a reference to your lifetime, nor even how long you might play a game - the lifetime of a game, in this context (business model) is how long the game contributes meaningful revenue.

      The table is comparing two business models for software sales: "traditional", where revenue was dependent on number of units shipped, and "current", where revenue is dependent on the value the game generates over it's lifetime.

      Don't read these tables as a fan of games, read them as a "why should I invest money into your company" person would be.

        That's why I don't put any weight in the heavily PR driven statements and communication these companies direct toward the players/consumers these days, it's always nothing like what the investors are being told.

    I get that they'd like for me to buy games digitally, but I went to buy The Division on steam over the weekend, it was USD59. EB has a sale at the moment selling the physical copy for $19.

    Until digital marketplaces provide. Competitive pricing all of the time, they won't see me taking part in the online rort.

      Activision was good at that, especially with how they had 3-4 year old Call of Duty games still full price online when they were in the bargain bins in the stores. It gave absolutely no incentive whatsoever to buy it online.

      With Digital vs Physical, at least on PC its a little easier to work with. If a game requires steam to play the physical version then turns into a digital one. While the downside to that is that the game key is locked to a steam account, at least my PC collection is now almost 100% digital. I can't justify the price markups on the XB and PS stores.

    It's interesting because they're just following suit with the tech/software industry in general. Big players like Microsoft are already neck-deep in offering their products as a service (and loving it), and many other software platforms that used to be based on traditional licenses are either pushing their subscription model first or outright dumping the single-purchase model.

    Whether or not that's good is totally contextual (Office 365 as a platform is great for businesses and more closely aligns with what they want and need, whereas a company like Adobe is trying to commit daylight robbery) but at the end of the day, it's really not surprising that the games industry is trying to do it as well. It's just a bit harder here because chains like Gamestop/EB are so heavily invested in it, and because the games industry goes through rapid devaluation for most releases. Neither of those mesh well with the idea of games as a service, which is why they segue so quickly to ongoing support wrapped up in microtransactions as an alternative.

    For every Fornite or Overwatch there's plenty of Battleborn's.

    And then there's people like me, who play through a campaign once, then forget about the game and don't notice DLC when it gets released cos by then we've moved on. I don't want 10 games with the same style of endgame content drip-fed ad nauseum - not only do I not have time in my life for that, it sounds extremely boring.

    Call me nostalgic, but I prefer the old ways. Get a free demo, if you like it pay for the full game, then a few months/year later maybe an expansion is released that you pay for. (also shareware episodic stuff)

    Having said that its clearly logical why the system has evolved to this: Games now take teams of hundreds of highly paid professionals months or years to develop, (as opposed to one programmer taking a few months back in the early 90s) and even more money is spent on marketing, so there would be more incentive to 'milk it for all its worth' Add to that the ease of drip feeding content (compared to having to mint a new CD every time) and it all makes sense.

    You know, I’m actually not so sure sure this “huge” boost in revenue from a particular game is actually that good in the long run.

    Say a game makes $500M in the first year. Second year is a little over $250M for service games, vs $65M for non-service games. That’s a big difference, but there are 2 factors to consider. 1, what’s the drop off on the 3rd year, and then the 4th? I can’t imagine it keeping pace at >50% revenue. And 2, almost more importantly, a live game still requires a good chunk of developers on it. Take bungee for example - they required a “live team” for destiny 1 (for which that content wasn’t overly great, or substantial enough for the player base to be happy) which ultimately takes resources away from making future games. This leads to the fact that, as they say, new releases are further and fewer between, as more development resources are focused on maintaining games instead of creating new ones.

    What happens in 4 or 5 years when the current live games dwindle to unsustainable levels, and Ubisoft has maybe 1 full new release to put out? What happens if that 1 game flops? The reality is service games are still a hit driven business - 1 bad product can tank you, which is even more a likely scenario when you’re only releasing 1 game a year vs 6. Gigantic is the perfect example - not as big of a studio, but the fact that that game didn’t catch on meant the end for them.

    Gonna be interesting to see this bear out through the early 2020s.

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