Ubisoft (UBSFY -1.26%) published fourth-quarter earnings and discussed its results and outlook in a conference call on Tuesday. The video game publisher's net bookings climbed 46% annually to reach roughly 2.24 billion euros ($2.72 billion) in the period, but business performance has been uneven recently, and management is looking to shift strategies.
CFO Frederick Duguet stated that the company is moving away from the big-budget, triple-A games model that has typically meant aiming to deliver three or four major releases each year. Instead, Ubisoft will focus more on the free-to-play (F2P) market, a move that mirrors initiatives from industry rival Activision Blizzard (ATVI -0.38%).
The big-budget, triple-A retail release can still produce big hits, but the space is more competitive than ever. As production and marketing budgets have risen, underperforming projects have become even more costly. Ubisoft has suffered from some high-profile misfires in recent years, which explains why the company's stock gains have lagged behind competitors, including Activision Blizzard.
Activision has scored big hits by transitioning the Call of Duty franchise to the F2P model across platforms. The company's Call of Duty: Mobile has been enormously successful on smartphone and tablet platforms, and Call of Duty: Warzone has also been a big hit on consoles and PCs. It's not hard to see why Ubisoft wants in on the F2P action.
Free-to-play games that attract a large audience and have long product life cycles can be enormously profitable. These titles typically generate revenue through the sale of in-game items and currencies and can deliver big revenue even though most player spending comes from a small pool of users. The F2P space is still highly competitive, but production budgets are sometimes more manageable, and even a single big F2P hit could boost Ubisoft's stock.