Ubisoft Has Little Choice in Potential Tencent Acquisition

After more than a year of extensive layoffs across the global gaming industry, French publisher Ubisoft has stood out as one entity unlikely to sustain the pressure of cost cutting and missed sales targets for high-profile games. 

While not confirmed by either party, early October reports that Chinese gaming giant Tencent is considering a buyout of Ubisoft have been interpreted as a likely development, prompting Ubisoft to release a statement Monday that the company “regularly reviews all its strategic options in the interest of its stakeholders.”

Ubisoft’s biggest stakeholder after its founding Guillemot family is, of course, Tencent, which owns about 10% of the company after the Guillemots’ 20%.

Known for specializing in multiple mammoth open-world franchises such as “Assassin’s Creed,” “Far Cry” and “The Division,” Ubisoft has maintained a vast AAA presence that has grown cumbersome as development cycles for the biggest, most graphically intense games have increased significantly throughout the current console generation.

Ubisoft publicly announced to investors in September that upcoming “Assassin’s Creed Shadows” would miss its November release date and instead bow in February 2025. This rang as a significant strategy upheaval, as the mainline entries for “Assassin’s Creed” have always received Q4 release windows since the first game debuted to instant acclaim in 2007.

Ubisoft cited poor sales for August release “Star Wars Outlaws” as a factor driving the decision to delay the next “Assassin’s Creed” title and said the company would adjust its earnings outlook for the third quarter, prompting a decade-low stock decline that swiftly reversed when reports of the potential Tencent acquisition surfaced.

Aside from Tencent’s existing stake in Ubisoft, one reason to take the reports seriously is there frankly isn’t any other company equipped to take over Ubisoft’s gargantuan workforce of 19,000.

Ubisoft’s studios and development teams supporting frequent entries in key franchises are so extensive that the company has a workforce nearly as big as Microsoft Gaming, which presides over three major publishers in Xbox, Bethesda and now Activision Blizzard.

However, compliancy with French labor laws means Ubisoft has not cut roles at the scale of publishing giants Microsoft, EA, Embracer and Sony Interactive. A running tally of game industry layoffs shows Ubisoft has only eliminated close to 400 roles roughly over the last two years versus close to 3,000 across Microsoft Gaming and nearly 2,000 at EA.

As for Tencent, whole owner of “League of Legends” and “Valorant” entity Riot Games, which itself eliminated more than 500 roles alone in 2024, the sum of its studio and publishing efforts remains the biggest in the industry.

Per Newzoo’s tracking of gaming-related revenue at publicly traded companies, Tencent earned $30 billion in the last holiday quarter, significantly more than console leaders Sony at $18.3 billion and Microsoft at $15 billion. Ubisoft was 17th on the list at $1.9 billion, about the same as its current valuation.

In terms of investment presence, the only company acquiring stakes and full studios at nearly the scale of Tencent is Saudi Arabia’s Savvy Games Group, which is backed by the Public Investment Fund and has only spent a fraction of the reported $38 billion at its disposal, $4.9 billion of which was allotted to buying mobile giant Scopely last year.

That uncharacteristically big expense on the “Monopoly Go!” maker makes Savvy unlikely to shell out the same for a publisher like Ubisoft anytime soon, especially since the Saudi entity is largely focusing on mobile companies with observable scale for the time being.

Publishers in the AAA space have been trying to achieve more scalable enterprises through aggressive pushes into live services that have proven more fraught than lucrative. Ubisoft’s “Skull and Bones” spent as much as a decade in development before finally debuting to lackluster sales in February, the same month Sony achieved a surprise hit in “Helldivers 2.”

Even then, Sony has canceled many of its prospective live-service titles, including an online game for “The Last of Us,” and its August launch for “Concord” was so disastrous the company took the game off the market less than two weeks later.

As for Tencent, a Ubisoft takeover would flush the mega-giant with a variety of high-quality AAA titles as it works to get its own slate of big games out the door through various studios. The company has a minority stake in Chinese developer Game Science, which debuted action RPG “Black Myth: Wukong” to substantial sales in August, selling 10 million units across PlayStation 5 and Windows in a matter of days.

Given how mostly single-player games such as “Hogwarts Legacy” and “Baldur’s Gate 3” defined last year in gaming, Tencent is in a position to support development and sustain the headwinds of AAA games of this caliber far more than other companies, especially when Microsoft and Sony have had to restructure their own internal studio operations after acquiring Activision Blizzard and Bungie, respectively.