For decades, conventional wisdom about game development has stated that the launch of a new hardware generation would bring with it a step change in costs.
New platforms brought with them higher fidelity assets, the need for new solutions to technical problems, and consumer expectations of larger, more detailed, and more interactive game worlds – all of which meant that starting to work on a new console generation was expensive, and didn’t get much less expensive as time went on.
In fact, hardware transitions frequently served to thin the herd, with the cost increase being the final blow that saw many struggling publishers and developers shut their doors; the first couple of years of a new console generation could be generally expected to see such a cull.
It's tempting to think of this understanding regarding costs when reading Ubisoft’s announcement this week about its cancellation of three unnamed games and downgrading of financial forecasts, all of which it frames in terms of a generally tough operating environment.
Ubisoft is grappling with is a transition of another sort; a business transition that also demands an immense cultural transition
Ubisoft clearly isn’t the kind of struggling publisher that gets laid low by a bump in development costs, but the messaging here does seem familiar; a couple of years into the new hardware generation, a publisher is finding it hard to square its costs with the reality of its sales numbers, and is trying to course-correct by clearing out its product slate.
On this occasion, though, the hardware transition doesn’t seem to be the culprit. The move up to PS5 and Xbox Series X has certainly imposed some new costs, but it’s not remotely the leap in complexity and cost that we saw in transitions such as the jump from the PS2 generation to the Xbox 360 generation, which ended up causing a fairly ruthless cull of low-tier publishers.
Sticking to broadly the same architecture as the last generation has helped, as have a modern generation of creative tools which make handling assets of various different fidelity levels more manageable throughout the development pipeline.
One of the biggest gripes in terms of costs, in fact, stems from the need to keep supporting the previous generation for a very long time – in part due to supply chain issues with the new consoles, and in part due to strong sales of the lower-powered Switch and Xbox Series S, there’s no horizon in sight for when that support can be dropped from most major games.
A smaller company might find that a headache, but it should hardly trouble a company of Ubisoft’s scale – and indeed, it largely doesn’t. Instead, what Ubisoft is grappling with is a transition of another sort; a business transition that also demands an immense cultural transition, as the company attempts to shift from being a creator and seller of monolithic software releases, to being an operator of sprawling, endlessly cycling live service games.
That’s the dream for many companies in the industry. Consequently, many companies in the industry have spent a few years finding out just how difficult it is to make that dream a reality.
Ubisoft isn’t alone in facing some tough decisions about its path ahead, in other words, although its course-correction is arguably a bit more dramatic and public than has been seen from many of its publishing rivals.
The three games Ubisoft cancelled this week brings its total in the past 12 months to seven cancelled titles – it announced another four in July of last year, though as with this announcement, it’s not clear whether all of these were full-scale console and PC titles, or if there might be some smaller scale mobile games or other such projects included.
On top of these seven cancelled projects (that we know of), the company has also experienced lengthening delays for some other major titles, including Avatar licensed games that ought to have tied in with the blockbuster release of the new movie last month, and the frequently delayed Skull and Bones, which slipped again in this latest press release, dropping into early in the next financial year (meaning probably this spring or summer, possibly, maybe, who knows?).
Games that should have a credit roll after 50 to 80 hours instead keep trying to get [players] to come back to do weird and pointless in-game events for Christmas or Valentine’s Day or Halloween
All of this hints at some fairly major upheaval within Ubisoft itself, which honestly seems more like it’s a cultural and creative upheaval than a financial one. The actual financial impact on the bottom line isn’t really as dire as it looks.
The biggest impact is from the write-off of half a billion euro of capitalised R&D, which is basically completed R&D work which they’d slapped a balance sheet value onto that they now don’t think is justifiable, not least since some of it was for now-cancelled games. The actual impact of lower sales is minimal – the dogs in the street knew that 2022 was going to face tough comparisons with the pandemic years of 2020, and 2021, and Ubisoft’s 2022 sales really aren’t that bad once you take that into account. Certainly not bad enough to stand as a justification for such a major spate of project cancellations and delays.
Rather, it’s the ambition around live services that’s really driving problems for the publisher – and for many other publishers around the industry, who are almost all facing similar challenges as they try to shift their business away from doing one thing that they’ve done very well for years, and towards doing another thing that looks deceptively similar, but is actually almost entirely different to the first thing.
As much as live services might make cartoonish dollar (or euro, or yen) signs pop into the eyes of publisher executives, moving an existing business or franchise over to that model is hard – really hard. It’s not just a question of bringing over the player base (although that’s a whole can of worms all on its own).
Live services require a dramatically different approach to design, development, operation, and support, which essentially means that they involve a whole ton of new competencies that are unlikely to be found in the teams which made existing franchises so popular in the first place.
Consequently, a lot of companies have wound up treating live service components as a bolt-on to the existing game, at least for the first few years of nurturing the live service ambition. Re-engineering not only the game itself but the team creating it and the entire management approach of that studio and business division is extremely hard, while slapping some live service style bits onto the side of an existing game is relatively easy.
This approach, however, rapidly turns into bloat, both in terms of game design and in terms of development resources, and that only gets worse as you start trying to enhance the focus on live service aspects of the game.
Tons of games in recent years have suffered from the outwards effects of this problem, and Ubisoft titles have been among the worst offenders (though they’re far from alone in claiming that dubious honour). New instalments in franchises have launched with new systems and concepts strapped haphazardly onto them for the sake of claiming to be a live service game now.
Games that should have a credit roll and a sense of satisfaction for the player after 50 to 80 hours instead keep trying to get them to come back to do weird and pointless in-game events for Christmas or Valentine’s Day or Halloween, while straightforward XP systems everywhere get replaced with a confusing array of tokens and currencies that would give a professional FX trader a headache.
Bluntly, this sucks for the majority of players – and there’s definitely some truth to the commonly stated claim that Achievement/Trophy data for many recent games shows player engagement dropping off rapidly in the face of these bloated, unwieldy systems and features – but it also sucks for the development process as a whole. None of these features come for free.
Often, development costs rise to cover the effort needed to create these tacked on, jumbled together features (and seriously, this bloat has been a much bigger factor in rising costs in recent years than any hardware transition has been).
In other cases, Peter has to be robbed to pay Paul, meaning features elsewhere don’t get the attention they need because the team is ordered to spend a ton of time engineering a way for an inherently single-player story experience to have a time-limited Easter egg hunting event with an online scoreboard for… reasons.
Ubisoft wants its business to be primarily about live services, with franchises like Assassin’s Creed transformed into a multi-platform live service offering spanning a selection of ever-evolving games, but that’s intrinsically not what its franchises are about right now
This problem doesn’t fully explain Ubisoft’s current transition pains, which also owe a great deal to internal cultural issues at the company and its studios, but it’s clearly a part of it.
Ubisoft wants its business to be primarily about live services, with franchises like Assassin’s Creed transformed into a multi-platform live service offering spanning a selection of ever-evolving games, but that’s intrinsically not what its franchises are about right now, and getting to that point is hard, slow, and expensive, requiring picking up a ton of new competencies and unlearning a lot of other things too. Moreover, it's risky.
The assumption is that there's an audience for such offerings, and that the right sprinkling of magic live service dust will turn an existing IP into the next Fortnite or Genshin Impact, but it's equally possible that it'll just piss off existing fans without managing to attract any new ones.
I can only speak to personal experience, but I know that Assassin’s Creed Valhalla was a deeply unusual experience for me; simultaneously an amazing and engrossing game in most regards, and also probably my last Assassin’s Creed for a long while, because I hit a point somewhere about 30 hours into the game where I realised that it desperately wanted me to treat it as an MMORPG-style time sink, yet another one of which is the last bloody thing I need in my life.
Just how palatable audiences will find it as live services become the rule rather than the exception is a big experiment
I’m only one consumer, but the point is simply that not every fan of the franchise is going to come along for the ride as it turns into something quite different.
The coming years are going to see more of this. Live services are de rigueur right now, and publishers will be expected by their investors to be focused on that business model.
Sony has wisely picked up external expertise in the form of Bungie, but nerves over what it's planning to do with its IPs and live services would be more than warranted; it doesn’t have any franchises that intrinsically look like a great fit for live services, and while a deft touch could fix much of that problem, the risk of something like Horizon or The Last of Us being turned into a service nobody asked for and nobody wants remains a real one.
Other publishers and developers are all also considering live service elements to their games in one form or another. Just how palatable audiences will find it as live services become the rule rather than the exception is a big experiment whose data will start to come in this year; while in the background, an arguably even bigger question with no satisfactory answer right now is just how sustainable it is in development resource and cost terms for every game to go down this path.