Ubisoft's expertise in packaged games publishing shone through in the quarter. Assassin's Creed: Brotherhood outstripped all expectations to ship 6.5m units to retail by the end of 2010, matching the superlative performance of Assassin's Creed 2 the previous year and generating in excess of $300m. Ubisoft confirmed that sales are continuing strongly into January and expect to enjoy significant catalogue sales through 2011. Management confirmed that a packaged Assassin's Creed release is planned for the current fiscal year though further details are scarce. Assassin's Creed: Brotherhood was one of the biggest selling games of 2010 and rightfully sits at the top table of bankable games IP.

Following on from breakout and surprise 2009 hit, Just Dance, Ubisoft shipped over 10m units of dance games in C4Q 2010 across the original Just Dance, newly releaed Just Dance 2, Just Dance Kids and a dance game based on Michael Jackson's music. The music category drove the lion's share of growth in casual games publishing for Ubisoft: the publisher guided expectations for the segment to €420m in the fiscal year which is up from €220m. Ubisoft has aggressively targeted Nintendo's Wii for the dance segment and has been remarkably successful given the plethora of lukewarm Wii initiatives from third parties on Nintendo's home console.

IHS Screen Digest nonetheless believes that Ubisoft, as with all publishers forged in packaged games publishing, continues to face significant challenges in the medium term.

• Sustaining C4Q's impressice performance: Ubisoft's success in the quarter was overwhelmingly driven by two packaged games. If (some would argue "when") the appeal of the IPs begins to diminish to games consumers Ubisoft will have some very significant revenue gaps to address. IHS Screen Digest believes that Assassin's Creed: Brotherhood and the dance games accounted for over 75 per cent of Ubisoft's revenue in the quarter. No IP is immune from consumer fatigue as Guitar Hero would testify. Another worrying aspect of Ubisoft's reliance on dance is in licensing costs for popular music which is an integral part of the genre's appeal: because licensing music is expensive games which rely on this need to sell in significant volumes in order to justify the outlay. There is no such thing as a viable budget title based on Michael Jackson's music. Ubisoft's management is obviously aware of how IPs can lose their hold on the public's imagination as suddenly as they initially captured the market's attention and point to potential growth on HD consoles via the motion based controllers Move and Kinect. There is some potential here but the opportunity is significantly smaller than that offered by Wii's installed base. There is also the issue of whether the genre will appeal to installed bases with a much higher proportion of core games buyers. And, as with any games concept which resonates with the non-core market, initial success is usually followed by a host of imitations increasing competition for sequels. Just Dance is currently well entrenched but how long it will remain so is an issue which requires resolution in the medium term.
• Core IP: outside of Assassin's Creed Ubisoft has notably failed to drive growth in games based on core IPs, including IPs which once would have qualified for ?banker' status such as Splinter Cell and Prince of Persia. On the one hand it is understandable that Ubisoft should apply more focus to fewer titles in keeping with wider industry trends however all creative businesses need to generate new IP and strengthen existing IP. Ubisoft, alongside much of the industry, appears to be focussed on removing all possible commercial risk in the short term by retreating behind its strongest IPs. The risk is that these IPs will begin to lose their appeal in the marketplace before the publisher has had a chance to cultivate other IPs.
• Revenue diversification: in the context of a packaged games market in long term decline, Ubisoft's attempts to launch and grow digital and online businesses have yet to bear any fruit. Numerous initiatives are being pursued but none show signs of scaling to the point where it would affect the Group's financial performance. Ubisoft is behind Activision and EA in diversifying away from packaged games and in cultivating the expertise to execute in these emerging segments. Without a credible story outside packaged games, the next home console hardware transition will present significant challenges to Ubisoft.

Amongst third party publishers Ubisoft distinguishes itself by being the largest which lacks a coherent strategy outside packaged games publishing. There are numerous experiments: social games, DLC, downloadable games via PC and console online platforms, F2P online PC gaming and even some smartphone endeavours. However these are currently too small and lacking the growth rates which would force observers to consider the company in a different light. Until there are scalable, sustainable revenues being generated outside boxed games Ubisoft enters every quarter overwhelmingly reliant on a limited (and possibly shrinking) collection of packaged games IPs, whilst seemingly lacking the appetite to invest in new IP generation.