Gaming has grown to become one of the biggest entertainment industries, surpassing both movies and music in revenue. At the same time, the business model behind gaming has changed. Microtransactions are now a normal part of the gaming experience, and if you were hoping that would change, you will be in for a disappointment. There is too much money at stake, as evidenced by Ubisoft raking in more real-world loot from microstransactions than from the actual games.
Ubisoft reported strong-than-expected sales for its fiscal first and second quarters. For the six-month period ended September 30, 2017, Ubisoft saw a 65.7 percent jump in sales to €466.2 million (~$540.6 million), with second quarter sales reaching €264.2 million (~$306.5 million), versus a target of approximately €190 million (~$220.4 million). The company says growth was driven by Mario + Rabbids: Kingdom Battle, Rainbow Six Siege, Ghost Recon: Wildlands, and For Honor.
Where things get interesting is looking at digital sales, which is where microtransactions come from. Ubisoft's digital revenue skyrocketed 69.1 percent year-over-year to €342.6 million (~$397.5 million). Microtransactions, including DLC, season passes, in-game items, subscription fees, and advertising revenue accounted for over half of that at €175 million (~$203 million), while digitally distributed game sales tallied €168 (~$194.9 million).
Ubisoft has been flirting with a digital split that favors microtransactions over game sales for some time now, but this is the first time that it actually happened. It is not surprising, either—earlier this year, a user on Reddit did the math and discovered that it would take around 2.5 years to unlock all the content in For Honor if you played the game casually for 1-2 hours per day, or $700 in microtransactions.
"Our commitment to providing high-quality game experiences and supporting them for the long term is driven by the importance we place on our player communities. This winning content strategy drove a 66% surge in our sales for the first half of 2017-18 – largely exceeding our targets – as well as a sharp increase in our earnings," said Yves Guillemot, co-founder and CEO of Ubisoft. "The quality of our new releases is the result of our effort to transform our model and make our business more profitable and recurring."
Indeed, recurring income is a big part of Ubisoft's business model. As such, the company's popular Assassin's Creed franchise enjoyed a record amount of post launch content, helping to drive Season Pass sales.
Looking ahead, Ubisoft expects to earn around €2.1 billion (~$2.44 billion) in revenues for its full-year fiscal 2019.