Ubisoft CEO Sees Number of 3D Games Expanding Significantly

Ten or maybe even 15 to 20 percent of games released next year for current-generation videogame consoles will be in stereoscopic 3D, and that percentage will soar to “at least 50 percent” the following year, Ubisoft CEO Yves Guillemot predicted in a Tuesday earnings call. The publisher is hoping 3D, as well as the new Sony PlayStation Move and Microsoft “Project Natal” motion control systems, will help sales rebound after a difficult 2009.

Stereoscopic “3D games are going to come more and more” on the PS3, Xbox 360 and “also maybe on portable machines” as the number of compatible TVs shipped increases, Guillemot said. Ubisoft released the game Avatar, based on the hit movie, in stereoscopic 3D for the PS3 and Xbox 360 last year, and “the game experience was actually a lot enhanced by the 3D experience,” he said. The technology makes games “more immersive,” and it “will be, I think, a good way for the industry to give even more emotions to the gamers,” he said.

But when stereoscopic 3D games will become a material contributor to industry growth is still not clear, Guillemot said. It will depend on “the number of TVs sold and the price of those TVs,” he said. After speaking to various TV manufacturers, it’s clear “they are going to push very strongly” to promote 3D TVs, he said. But what the 3D games released initially “will bring to the industry in terms of extra sales is difficult to say,” he said.

It’s also not clear how many stereoscopic videogames can reasonably be expected to be released for the Wii and Xbox 360 in light of the lack of enthusiasm for the technology that’s been shown by Nintendo for stereoscopic 3D on home consoles and Microsoft for the technology in general. Nintendo’s lack of enthusiasm has been based largely on the need for special glasses with home consoles when playing stereoscopic 3D games, not 3D itself. It will be shipping the 3DS handheld system that achieves 3D effects without special glasses (CED March 24 p1), but glasses-free 3D on big-screen TVs remains too costly. Some speakers at the recent 3D Gaming Conference in Universal City, Calif., also claimed that the PS3 and Xbox 360 aren’t powerful enough to support state-of-the-art stereoscopic 3D games and that the Wii can’t support it at all (CED April 23 p2). David Coombes, Sony Computer Entertainment America’s platform research manager for developer support, disputed such claims of the PS3. His company will soon release a PS3 firmware update that will enable the console to support stereoscopic 3D.

After a weak start, the game Avatar “performed ahead of” Ubisoft’s expectations in Q4, especially on the Wii version that doesn’t offer stereoscopic 3D, Guillemot said. The company sold close to 2.7 million units of the game in the year. It “continues to sell well, notably thanks to” the movie’s release on DVD and Blu-ray, he said.

Casual game sales were “much lower” in Ubisoft’s fiscal year ended March 31 compared to the prior year, but have been “better than expected” recently, Guillemot said. Ubisoft sold 3 million units of the Wii game Just Dance in the fiscal year and it will expand that casual franchise “in the near future” with new releases, Guillemot said.

Sales of the company’s Assassin’s Creed franchise slowed due to strong competition, but Ubisoft sold close to 9 million copies in the fiscal year, Guillemot said.

Gross margins on PS3 and Xbox 360 games “improved” and “stabilized on the Wii” last year, Chief Financial Officer Alain Martinez said. Q4 sales improved 1.9 percent from Q4 the prior year to $257.5 million. But Ubisoft sales for the year fell to $1.1 billion from $1.3 billion due in part to the ongoing economic crisis, Guillemot said. Ubisoft also swung to a $53.3 million loss from an $83.9 million profit the prior year.

Ubisoft expects to “return to profitable growth” this fiscal year, Guillemot said. It’s already seeing strong sales from the Q1 release Tom Clancy’s Splinter Cell Conviction, moving more than 1.8 million copies, he said. U.S. sales in the first four weeks have been 40 percent better than prior Splinter Cell titles, he said. Ubisoft is releasing Prince of Persia The Forgotten Sands this week on six platforms and “should benefit” from the theatrical release of a Prince of Persia movie next week, he said. The company also expects to see “the first concrete results from our investments in online games and services” this year, he said.

The coming launches of Natal and PlayStation Move “should enable” Ubisoft “to capitalize on the technology investments that we have undertaken in recent years and re-energize the casual games segment,” Guillemot said. The publisher is “investing quite a lot” in games using those motion control systems, he said. Ubisoft offered no specifics on what games it will ship using those systems, but he said the company will show its initial slate at E3 in Los Angeles, June 14-17. It was “a bit early to say” what kind of turnover Ubisoft will achieve on games for the platforms, but it expects to “have a good market share,” Guillemot said. It isn’t clear what kind of “penetration” the control systems will have, but Microsoft and Sony will be promoting them heavily, he said.

In the first four months of calendar 2010, Ubisoft was the No. 3 independent publisher in the U.S., with a 6.8 percent market share, up from No. 4 and a 5.3 percent share in the same period last year, it said. In the same period, it was No. 2 in Europe with a 9.9 percent share, up from No. 3 and 8.5 percent last year. It was No. 3 in France, just like a year ago, but its share improved to 9.7 percent from 8.3 percent, it said. It was No. 2 in the U.K. with a 12.1 percent share, up from No. 3 and 9.3 percent last year. It was No. 2 in Germany with a 9.4 percent share, up from No. 3 and 7.7 percent.

Mass market games including those based on movies and sports are “continuing to sell quite well” for the Wii, Guillemot said. The publisher expects to report stronger revenue for PS3 and 360 games this year than last year, he said.