Le Internet - Episode #4

And we're live. Okay, great. Hello everyone and welcome to Le Internet, episode four. This week we talk about the French video game company Ubisoft, known for hits like Assassin's Creed, Far Cry, Tom Clancy and Watch Dogs. The reason we chose this company, you know, already in 2018, Ubisoft was the fifth largest publicly traded gaming company in the Americas and Europe, both in terms of revenue and market cap. I think, you know, Electronic Arts, Activision Blizzard, these are names that it will consistently come up against. And we really wanted to just take a deep dive into the history of Ubisoft, the, you know, how they got to where they are today, how they compare with those companies in the industry, and then take a few minutes at the end to make some predictions. So I am joined today by Grant and Nandini. And before we get into the episode, we will quickly plug our survey, bit.ly forward slash leInternet four. Again, that is bit.ly dot slash leInternet four. And the reason we are plugging this is if you want to have a voice in the next episode, you can go there and fill it out. And we have a number of topics for your attention. All right, so getting started with the history of the company. Grant, would you like to kick it off? Just your general thoughts on Ubisoft? Absolutely. Just a quick intro. You know, my name is Grant. I've been at Cloudflare now for a year and a half. And I would argue that maybe on this panel, I might be the most experienced to talk about from a gaming perspective. I think I've played most of, if not all of the Ubisoft titles. And I want to say real quick, you know, those titles you mentioned, Carl, you cannot forget Rayman. Rayman, Ubisoft, not a lot of people know that. Playing that back in the late 90s and early 2000s, Rayman 2, Escape, a special place in my heart for nostalgia and everything. But that's probably most of the French that you'll get. Besides my dog, he speaks French. Okay, good. He has watched me play some of the most recent ones. And the biggest complaint that has come up in the gaming community has been Ubisoft has great ideas, but the execution is a bit flawed. You'll hear the term games that are miles wide, but only centimeters deep. And it's funny because how did you go from this large gaming company that pumps out these games, multi -million dollar titles, is acutely watched at every E3 and gaming convention. People forget like Rayman, the title, that they started as selling kind of computers and softwares back in the 80s. So the Gimo family of five brothers essentially discovered early, early on in the 80s that buying software and computer parts from the UK and then selling them within France was much cheaper than procuring and buying and distributing software from French distributors in the country. So from there, they started leaning more on the software side, and they got into selling software that helped improve the nascent kind of gaming programming back in the 80s and 90s. And with the release of a game called Zombie, which was like the kind of first big gaming success, that's when things started. They had this chateau where that was like in the outskirts, almost like French Riviera area. And they thought, hey, this will attract game designers to come live on this site, create great games. And from that, some of their kind of unique early hires, one of their main developers, his name is escaping me, but he was essentially a at the time and now is like head of their creativity and development. That's where he and a bunch of other game developers created some of these early engines, early ideas that then became great ideas like the Assassin's Creed games. It's quite interesting. They have stayed fully owned by the family this whole time. They have diversified and they have separate instances like Ubisoft Montreal, Ubisoft Australia, Ubisoft China, right? All these, but they all still have that flavor and that culture of the original, I think Ubisoft based in France. And I think a lot of that goes to how protective they are of their ownership, which I think leads us into another topic, Carl, about how they've avoided really any hostile takeovers. And I've seen too, they haven't really acquired that many other studios either compared to the long list that EA does and other gaming companies. Yeah, 100%. And I think you addressed it early on, but the whole name of Ubisoft is a contraction of ubiquitous software, right? So the brothers, Gimu, I think they founded this company with that in mind and with the growth of the Internet, they were able to diversify, right? So Rayman came out in 1995 and Rayman is actually the only Ubisoft game that I've played myself in which Rayman, the lead character has to save the world. I think there's a villain called Mr. Dark who basically wants to make the world super dark and gloomy. And when he hits the exclamation mark, it's kind of like Mario with the flag pole, right? You know, you've completed a level at that point. And the year after that game came out, Ubisoft was basically like renowned on the world stage, right? I mean, they were popular, they filed their IPO in 96. And one of the challenges that they came across early on then was intellectual property, right? In the US, or more like the lack thereof. A lot of their games did well in Europe, but didn't do that well abroad. So they were really concerned, you know, with the growth of the Internet, like, how do we actually internationalize the name of Ubisoft and really make this a global brand? I actually thought that part was really interesting reading their story, because the way that, because Rayman, like you mentioned, was super popular in Europe and outside of the US, but it seems like they really wanted to break into the US market, but were having some challenges. And the way that they came in was by getting Tom Clancy. And we're like, and at that time, especially if you're thinking about it, you had Harrison Ford being like this amazing, like, action figure and like a clear and present danger coming out, Patriot, like, and then later on with Ben Affleck, some of our fears, so like Tom Clancy books, and like those characters were really present in like the US markets mind. So it's kind of pretty smart that they were able to get, I don't know, whatever licensing agreements it is to get Tom Clancy and then build from that and build a pretty decent franchise out of it. Well, they've, they, there are certain trends that you'll see, right? Like you brought France, we have Rayman. Rayman is very more geared towards, I think, more of a fun, almost Nintendo, like, hey, this game is cute, and it's creative, and it's joyful, and it can be played by kids with their parents, right? Then you've got these pseudo historic, you know, very serious games like Assassin's Creed, or you've got these technology dystopian criminal syndicate type games like Watch Dogs 2, based, you know, grounded in real life in San Francisco. So they definitely, to break into the US, acquiring Tom Clancy, and then I think it was pretty synced with the opening of Ubisoft Montreal, or Montreal, and then another one in Quebec, and they knew, okay, we, this is what we do well. We do games targeted for kind of an older crowd, right? And these are mostly single player games, but have the ability to, you know, online and through Uplay, like kind of really, really starting early with making gaming as a service, connecting with other people. So I think they are very good on having a target market, and all those games kind of relate to that. Like, you play a Ubisoft game for the story, for creative graphics, and great character development, and it makes you think about things, society-wise. They've done a great job of that. Now, unfortunately, as they've started pumping out more titles, and people say they're all in it just for the money, that quality has been kind of sacrificed. People have said that, you know, Assassin's Creed 2, Ezio character, perfect, but now the new characters that are coming in are not as flushed out, and it looks like things are rushed. There's more emphasis on the action, and look at how great the graphics are, but really, did we, we made this whole awesome open new world, but it's very empty. How does that compare to other competitor games? Like, when you are playing a Ubisoft game, is it clear, like, is the experience like, yeah, this is Ubisoft, or is it sort of like, if you're not aware of who the parent company is, or anything like that, would it just feel like you're playing an EA game, or like, how does it, how does that experience differ? No, you definitely know. You know, minus them, right, like any other game, right, always having their advertiser front and center, like, hey, you know, game by studio, then Ubisoft, right, and then having them at the beginning, the end, and, you know, credits, and whatnot. You definitely know, but there, there is, like you said, that expectation. You know, I pick any Ubisoft game, like, from a series, maybe I didn't play that much, like, you know, Rainbow Six is a perfect example of, like, okay, that's not like a, you know, grounded in history, alternative history type of, type of game, like Assassin's Creed. You'll start to feel like, okay, this is going to make me think there's going to be some visceral action here. A lot of my emotions, you know, disgust, exploration, critical thinking, problem solving is going to come to the fore, and I'll be kind of wowed by this, like, even if it's only a few centimeters deep, I'm going to be wowed by this beautiful, well-crafted, animated landscape and world with, you know, hopefully well-thought-out mechanics. Ubisoft for a while wasn't known for being buggy, but unfortunately, I mean, that pendulum is kind of shifting, but yeah, you definitely get, like, oh, you know, new Assassin's Creed game, great, new story, new timeline, not like Call of Duty where, okay, this is just Modern Warfare 3, 4, 5, 6, 7 through 8. The guns are different, and I'm in it for the multiplayer to, you know, work on my kill-to-death ratio. There's an actual story and narrative that you're trying to land. Yeah, exactly. I mean, these games are still bought, I would argue, for the, what we call, like, the story, the campaign, the single-player experience. One of the things I thought was really interesting about this company is the way that the Internet actually had a tangible impact on their business, right? I think with the growth of the Internet in the late 90s, Ubisoft actually started founding a lot of, like, creative game studios aimed at the free-to-play environment, right? Kind of similar to our own freemium model, giving, you know, consumers a chance to play these games free of charge. Gameloft is one of them that was actually founded by one of the brothers, right? And that actually significantly increased the share value of the company, because what's really great about the free-to-play model is that you're constantly with the consumer, right? I think you can spend months refining the gameplay, and then just take that and put it in another title or another environment, you know, and take the kind of the same baseline there, which is really what gave them the chance to kind of grow and prosper more, because the kind of the costs of jumping on board were so low. And I think that's one of the differences between kind of digital games and console games too, is that whereas in console games you kind of create the content and deliver it as a whole beforehand, in digital it's really important to be kind of flexible and react quickly and kind of change the experience there, right? So, like, think of analytics. You want to make sure that you know when a player is logging off of a game. Like, what is the moment in the game when players seem to be kind of falling off in terms of interest, and then how do you fix that? How do you, like, retroactively go back and make that a better gameplay experience, right? Or make it more addictive, however you want to put it. I think those things are kind of what led them, kind of, in spite of that lack of, I don't want to say creativity, but lack of kind of adapting with actual content of their games, they were able to use this free-to-play model to really grow and differentiate. Well, yeah, I mean, I like, again, I like to say what really captivated, I think, me and a lot of other folks, you know, like me with gaming with these, you know, first time you play an Assassin's Creed game, or a Far Cry game, or even Rayman, right? There's, the work behind it is evident, and because of that the bar is set very high. I mean, this was the first game I played that I was like, this is like a movie. These cut scenes, these character developments, the way they interact, the twists and turns, I am like almost a director, you know, Ubisoft is the producer of this game, but I almost feel like the director as I control this character, you know, and have that freedom within limits of this big, you know, massive, explorable world, and you just keep going. You keep playing it, and it worked very well. Where that falls off, right, is where your customers and your loyal fan base expects a certain level, and you don't perform, you know, very, the crowd is fickle, right? And, you know, unfortunately, it seems to have been, people like to say, like, you know, post -2016, post-2015, it looks like you can look at the history of how they released titles as well. When you release five main titles that you definitely were currently working on within the same year, quality is going to suffer, right? Certain things aren't going to be made perfect and well -cooked, like a Red Dead Redemption that took five or six years to make a sequel. Lo and behold, it's really good, and they've taken the time to test it and everything, but Ubisoft, unfortunately, it seems, you know, they can still change it, and they still make great games, is going towards that EA kind of mode of just pump out games, pump them out. I hope they don't turn into EA like, oh, it's acquire every gaming studio, and then make them, you know, again, not saying anything bad about EA, just people will say, you know, creativity and diversity, which is why Blizzard and Activision, I think, have a very big, wow, like, that's great, I want to work there, and then you start getting into, like, EA, it's like, oh, well, you know, it's a different expectation, you know, it's going to be more like working on a lot of different projects that, you know, maybe quality is a different type of balance between quantity. You mentioned acquisition, and actually, that's something that when I was doing my reading, I thought was really interesting, and I have a lot of questions, and I think maybe, Karl-Henrik, you might be able to answer them a little bit better, where, how does, so when you're reading, like, Ubisoft's history, there's been a couple instances where other companies have been, like, trying, have, like, bought out a number of shares. I think, right now, Tencent has, like, five percent. Before that, it was, like, another company, and it seems really convoluted to figure out. It seems, it sounds like there might be a very French reason for that. Yeah, no, it's a great question. I think one of the things you notice about the French environment is whenever a, you know, under French law, if one, if anyone were to gain over 30 percent of a stake in any company, then it would require that company to submit a public tender offer, right? So, a hostile takeover in situations like that is not unlikely, and it's happened many times in the past, right? With Ubisoft, you had a couple, actually, instances where potentially a takeover was going to happen. I think Electronic Arts or EA, which we know very well for the, for their sports games and other games like that, you know, they had acquired something like 19.9 percent back in the early 2000s, and then they said, no, no, we didn't mean to, you know, do anything with that. We just believed in the company, and then nothing came of it. The second one, which actually came a lot closer to actually acquiring Ubisoft, was Vivendi, right? And they made it to, like, 25.5 or 26 percent stake in the company, and I think they had been reportedly, like, the following month, if they had purchased more or if they were getting to that 30 percent threshold, they were pretty much going to acquire Ubisoft. But what happened was, the brothers, the Guillemots, were actually able to convince other members, you know, other voting members to actually hold back from granting a board seat to Vivendi, and kind of in the week before it was supposed to happen, Vivendi said, you know, it's not worth it. At some point when you're engaging in a hostile takeover, it's not exactly like you have the best interests of the company in mind and the culture in mind, right? So, I think that was one of the things that really put them on the map as well, is just, like, all these sagas that happened, and they kind of managed to persevere throughout them, was really interesting. And then one other thing is just their broader strategy. I think going back to what Grant was saying earlier, is, like, their differentiation strategy, and also kind of the harm with them, is that they really seem to have latched on to a couple of their most popular titles, right? I think Assassin's Creed is now on its 11th inning next year, and Grant, correct me if I'm wrong, but I think the next game is going to be about, you know, you play a Viking raider fighting the Saxons, and it's called Valhalla, or something like that. I mean, I'm a historian at heart, so I'm not happy with how things tend to stray more into historical fiction, but yeah, that is Assassin's Creed Valhalla, yes. Yeah, and so, things like that, where you see they're just iterating on previously built games, like, at some point you have to look at that and say, is there still creativity, and then if not, why are they not developing new plot lines, new games from there? Yeah, well, I am very, a big thing that I think is, is there's still all of that there. I still think their main creative teams and internal departments within Ubisoft are there to make great games, still. And again, this is just my opinion, but, you know, I, like, I think a lot of other people is like, well, hey, you know, do I need another filler Assassin's Creed when you could make a amazing, perfect, more thought out Far Cry, for example. There's, there's a lot of talk about how maybe they're getting ready for a new act. I mean, it's about time, right? Where, you know, there's that talk about, okay, we are computers, then we switch to software, then we are software more for games, then we're games for kids. And now we've done, like, Assassin's Creed. Okay, now it's going to be this multiplayer thing plugged into our, like, you know, open world. Like, maybe they're overdue for, like, another big, almost cutting edge avant -garde kind of change in the gaming industry, where they release a title that has some features and capabilities and a spirit behind it that's just back to that creativity and critical thinking type of experience that you expect from a Ubisoft game. One thing, actually, I wanted to kind of posit, and this is normal for most gaming studios, I see so much more and more as technology is better and gaming is better parallels between cinema and gaming. And I think it's no surprise to me that a French company that, you know, Brandt's inventing cinema and being part of that in all levels of development has a gaming company that is very good at gaming type of cinematography for their cut scenes. And just what I described to you guys about making the player feel like part of this motion picture, almost epic experience. I actually thought that piece was, it was kind of funny because, like, oh, yes, Ubisoft also joins the ranks of video game to movie, not great successes. Like, Assassin's Creed was definitely on my list of really being excited for it and then being kind of disappointed, but really being amazed by, like, wow, what great cinematography. And then same thing with Prince of Persia, although the cinematography was a little, the CGI effects were lame, but, like, yeah, again, like, a lot of anticipation for these movie releases and then sort of, like, at the end of the whole thing. I think it's hard because you control a character that is themselves, but you kind of infuse your own, you put your own stamp on this person. Someone's like, I don't want to see Ezio from Assassin's Creed 2 on the big screen because he wouldn't do that because the way I've played Ezio is very different than the way you've played it. It's very hard to do that. They don't have a lot of nameless, faceless heroes like Halo does at Bungie, for example. You know, making a movie out of Halos, I think, would be a little easier, right? But when you take, you know, Fleshed Out, that can be, that are in open worlds with open scenarios and the freedom that you have in these games, it becomes very hard to, one, make a movie out of it, two, produce it, and three, even remotely have it be a success. I mean, there are people that when the Assassin's Creed movie came out, it was released, announced, they're like, nope, it's gonna suck, we already know. Yeah, and this is extremely anecdotal, but, you know, Grant, going back to your point about just the cinematography behind it, I watch sometimes people react to trailers on YouTube and I'm seeing more and more of, like, people reacting to trailers of video games, not movies and TV shows, and I'm thinking, like, there has to be some element of, like, actual production value cinematography involved there for people to watch, like, a Far Cry trailer with Giancarlo Esposito about a kind of dictator in Venezuela and think, well, this is, like, movie quality, right? And I think they really depend on that production value for the actual gameplay rather than, you know, oh, how is the player experience, you know, what does it look like? I think it's become even more important. Well, people are, actors are discovering that motion capture for certain, you know, things is big money for them, right? First, they were lending voices, right? You know, likenesses were lent to, because when they make movies, I mean, games from movies, right? But I wonder if that's going to shift where eventually some of the best video or cinema or TV show experiences will be based off of the lore and the hard work for character development and scenario building from games. Yeah. We've already seen The Witcher on Netflix. I wouldn't be surprised if, like, a Marvel Comics equivalent type of thing comes out of, like, the video game universe, 100%. Yeah. Absolutely. I think it's only a matter of time. I think it's only a matter of time before those two industries start cross -pollinating a lot more. Oh, you're, you know, a, I mean, it's already happening, I think, with animators, but you'll get people that are like, oh yeah, you wrote the storyboard for Assassin's Creed. Well, we want another, you know, holiday era dramatic set piece period drama for a blockbuster. And they make it work, right? I think that's only a matter of time, but I would argue that, again, with Ubisoft and just more the nascent French thing, I think, I would predict that a Ubisoft person would be that person to bridge that gap first. Because, again, despite what I've said, like, the creativity is there. I think the culture of make this an amazing story and movie with character developments, and then boom, it's a playable movie. That's how I've always felt with an Assassin's Creed game. I'm in a playable movie, which is awesome. With five minutes left, I figured we would take the last five to talk about predictions and maybe make a prediction each on where we see the future of Ubisoft and the future of the company. I think, Grant, you touched on it pretty organically, but do you feel good about going first there? Yeah, I do. I think, in all, if there are people joking, if they're about money, then yeah, they make it about money. But that's not really that bad, because when it's about money and sales don't do well, I believe that, again, they've been owned by the same family. They've got some of the same people still there. They can pivot and say, hey, let's get back to Assassin's Creed 1. Let's get back to maybe the creativity and joy of Rayman. I think that they've set themselves up really well, and they've proven to be willing to innovate. They've got three basically saves right there. Same people that can redo the old stuff we did, do new stuff online, and then also make it free and open source it and stuff. They're good at that. I think it's pretty bright, but we might just be in a little bit of a slump now. Who knows? Yes. I don't think we really touched on it, but I think the virtual reality VR space, I mean, just in general, I mean, I half expect next year anyone, I feel like there's so many, whether it's Ubisoft or all these different gaming companies and social media companies are all trying to break in to these virtual reality spaces and platforms, and one of these will come to the top. I do kind of see a future where Ready Player One kind of reality is not exactly like that, but sort of like the immersive experience side of things. It could be happening pretty soon. I think that's where I think things are going. I think the first step towards that, and I think a lot of the movements in this industry are moving towards this, is increasing the number of demographics that are accessing their games, because the more that sort of diversifies, then the sooner you get into those immersive experiences, those movie experiences, and all those other things. Yeah, I fully agree with that, Nandini. I think the VR AR play is going to be an interesting one and probably a huge focus next year, given that everybody's remote, so maybe there's going to be a portion of that to look at. I think there likely will be a short-term upswing next year. I mean, they have a lot of big titles coming out, so their name is going to be on the map, but down the line, I think going back to what Grant was saying earlier, that differentiation element, they're going to have to focus on that more, and then potentially leverage. They have a partnership with Tencent in mainland China, I think, to kind of grow and acquire more users there, and that was one of the things that I didn't mention from the kind of hostile takeover piece, but a lot of Vivendi's shares and their stake was actually bought out by Tencent, right? So that partnership is going to be a kind of a big thing, especially given Tencent is, you know, I think the largest gaming provider in mainland China, so that will be kind of an interesting thing to look at. Also, Ubisoft has something like 16,000 developers, so just the way in which they continue to grow that community and then, you know, treat it as well, I think it's just kind of a pervasive thing in the gaming community. Anyone who hasn't seen Hasan Minhaj's Patriot Act, he does it pretty good, and not many pointed me to this one. 20-minute video on the dark side of the video gaming industry, so I can highly recommend that. And actually, we'll also plug this one more time, but if you want to have a say in our next episode, gotta go to bit.ly forward slash leInternet for more. Parting thoughts, bye -bye. Au revoir. So cute. Au revoir. Thank you both. Bye.