Yves Guillemot, the chief executive of French game publisher Ubisoft, belives that traditional game companies will be able to meet the challenge of the changing game business, which is being disrupted with new business models and platforms. Ubisoft’s position is to create as many games as it can at the beginning of new platforms, establish a foothold, and then monetize the market with sequels after the new platform becomes established. We caught up with Guillemot on Sunday for an interview. Here’s an edited transcript.

GamesBeat: So what are you predicting about E3 this year?

Yves Guillemot: I think it will be very interesting, because it’s really the convergence of the different models. You have Zynga, GREE, and you have Nintendo with a new machine, and on top you have all sorts of new types of products that will be there. So it’s a good thing that all the industry is back now. I saw some free-to-play companies that are there too. It’s good to see that all the different types of models of games are there at E3 at the same time.

GamesBeat: How do you meet that challenge, that there are so many diverse platforms now and things are changing, we’re at the end of a console cycle, it’s getting harder to sell packaged goods. What is your strategy?

Guillemot: Our strategy is to pick up on the global nature of the business. We started on free-to-play types of games three years ago, and we have more and more business coming from there now. It’s enabling us to cover more territories. Many countries, we were actually distributed before, but there were pirate games, all over. And now those countries are actually bringing in revenue, because with the new monetizing system, it’s easier to actually generate a good revenue from those territories. We can start marketing in those countries as well. It’s a very interesting time for the industry, because the mobile is bringing in more and more casual people, Facebook brought new people too by using a new system to monetize. We’re at the beginning of a transition now, where you have the Wii U and the other machines coming.

GamesBeat: Are you making a big bet on the Wii U? It sounds like you have more titles than any third party…

Guillemot: Yeah, we like the machine, we think it’s a good innovation, and that the controller will enable more people to play again. So we are betting that it can be a good success for the industry. The advantage we have, also, is that it’s a lot easier to create a game on the Wii U when you do it on the Xbox 360 and the PS3. Having Assassin’s Creed on the machine isn’t too difficult. It was extremely difficult before with the Wii, because they were different machines, where now they are closer, so we can do more games.

GamesBeat: Do you feel like it’s a big enough leap forward to be interesting again?

Guillemot: We think it’s… For the casual gamers it’s a good improvement that will allow better graphics for the games we create. Now, on the hardcore, the fact that there’s a new controller, a new system, that you can have asymmetric gameplay, because you can either use the Wiimote or the tablet, will create new types of experiences. So it can be good, it can be strong.

GamesBeat: It seems like there’s a lot of differentiation, now that we have mobile phones and tablets, in game performance. Do you feel that Nintendo has a good chance to have something that you can make new types of games for?

Guillemot: The new machine is bringing new possibilities. The Wii U is really… With this asymmetric gameplay, it’s something new, and the fact that you can have a tablet and two screens now to play with is something attractive. The combination of all those elements can help the machine to succeed.

GamesBeat: And are you frustrated at all that Microsoft and Sony are trying to extend their consoles? Does it make it difficult for you to increase sales of packaged goods with nothing new coming out…?

Guillemot: In fact… Always, the end of a console cycle is difficult for publishers, because there are more brands and it’s more difficult to innovate completely. Because the machines have been on the market for a while, so our engineers have difficulty making, say, a 25 percent improvement every year. They do that in the first four years, but after that they know everything, so it’s difficult to change the world on that front. That’s why we love the new consoles. With less work you can create lots of innovative stuff, just because the machine is different and more powerful and they’re open to new possibilities.

GamesBeat: What do you think of the Unreal engine 4? That seems like a pretty big leap forward.

Guillemot: Yeah, it’s looking good. It’s a good challenge for our engines.

GamesBeat: It looks like they found a way to make engineers more productive as well…

Guillemot: Yes, yes, it’s good.

GamesBeat: You don’t want to hire 600 artists for each game, right?

Guillemot: No, that’s true. We’ll see what it does. We have pretty good engines as well. What’s very important is to see the capacity of the engine, but also the effectiveness of creation there. Sometimes it works on one machine, but it doesn’t work on the other platform. We had problems with the Unreal engine 3 last time, because it was ready for 360 but not for PS3. This time, I think it’s a pretty neat engine, so we’ll see what it does.

GamesBeat: Are you interested in cloud gaming at all? Pushing more games onto platforms like Gaikai and others?

Guillemot: Yeah, we think cloud gaming will have some success. It’s just that the network isn’t adapted completely to that yet. But the more we increase the speeds of transfer and the size of the network, the better we’ll be able to use cloud gaming. I think it will be a combination of having a good machine at home and making sure you can ask a lot from the network. If we combine those two, it can be extremely powerful.

GamesBeat: Do you think that cloud gaming could also enable to new companies to come into gaming? It wouldn’t be crazy for Apple to do, putting games on a TV pretty easily…

Guillemot: Yes, it can help people to come into the industry. What’s important is that if you have enough power, you will need to create different games than the ones you do on mobile or on tablet. The more power you have, the better the graphics have to be, and it gets closer to what we’re doing on the consoles today. So you can use different models to get revenue. And you can create different types of games, also. But I think you have to find a model that also works so that your creatives can be paid for what they to. We will see more and more of the variety of models to generate revenue. And we’re already implementing some of those models in our games…

GamesBeat: I guess some of these games like League of Legends and Hawken are looking pretty good on the free-to-play side.

Guillemot: They are, actually.

GamesBeat: Do you think they’re a threat to 60-dollar console games?

Guillemot: I think they took a part of the business, for sure. The fact that on PC you have millions of people that can play is helping that type of games. And we’re also having good success with a few games on free-to-play. But it’s a different model, it’s a different type of experience. What we will see is more and more different types of with different types of monetization.

GamesBeat: I guess Ghost Recon Online looks like it’s a pretty big entry into that market.

Guillemot: Yes, yes. We expect a lot… We have good hope, the game is coming along very well.

GamesBeat: For Ghost Recon, you did that short film, which isn’t the first one that you’ve done. Are you looking to do more of that? That was on the live-action side, but also on the animation side?

Guillemot: No, we… Our goal now is to go to the next step, which is creating movies. But you will see more and more… Those two worlds will get closer and closer now, because the graphics we are able to do on the high-end PCs are coming closer to what you have… The more we go, the more those two worlds will work in conjunction. So our goal is to go now to the next step of creating movies.

GamesBeat: So with a movie like Assassin’s Creed, would you want to be completely hands-on with that, or let the studio do most of the work?

Guillemot: It’s a good question. You know, those properties now exist… They have characters, they have backgrounds, they have the story. They will continue to live for a long time. The goal is to make sure that if we do a movie, it’s increasing the profile of the franchise, but also that it fits with what you live in the games. If we can’t reach that, we prefer not to do a movie. That’s why we have been negotiating with many partners, because we want to make sure that the movie will bring incremental… Not revenue, but incremental possibilities to the world.

GamesBeat: It seems like you should do that, if you know the characters so well and the property so well, why hand it off to somebody who may not be as aware of it… Who doesn’t have as much at stake, too.

Guillemot: Yeah. If they agree with it, if they are interested to be part of it and want to play a role in the destiny of the property, then it’s okay.

GamesBeat: How is Ghost Recon Commander working on Facebook? It just launched, right?

Guillemot: It’s coming along. It will also be promoted by Facebook, so we think there’s a good chance that game will do well. It’s a good team who did it, so… And we had, also, on Ghost Recon, we have the iPhone and Android game that we’re connecting to the global experience. So all this will help to expand the reach of the brand. People can play at home, but also when they’re outside.

GamesBeat: And you can earn weapons for the main game? My son plays it all the time…

Guillemot: It’s just the beginning. I think the more it will go, the more we will use different media and different machines to interact with the experience.

GamesBeat: What do you think about all the different global players in games now? There are so many more out there, like Tencent, the Chinese publicly-traded game companies, there’s Nexon, there’s Zynga. So much investment is going into the business now.

Guillemot: Yeah. I think it’s good, because it’s always been very good to have more investment in the industry. It helps create new types of content that are taking more and more people into the industry. So yes, we could see that as a risk, but it’s a big opportunity at the same time. You have, in the video game industry, a strength in the number of people investing now. We had too much investment three years ago in the console business, and now it’s diminishing. I think it will go up again in the next two or three years when they’ll see big revenue coming from those consoles. But it’s really cool to have more people bringing… Creating a bigger pie, so that we can live in this industry for a long time. It’s always been a changing, an industry that’s changed a lot in the last few decades. At first we were very much on PC, Commodore 64, Amiga, Atari ST, and then it went to console big time. And the consoles took up a lot of the business. Now the PC is coming back, the phones are coming… It comes with different players and different models, but for the ones that can survive, it’s a really good opportunity.

GamesBeat: It seems like in three years we’ll see the eighth-generation consoles. Will most of your games still be console-based, or will they be more digital, social, PC…?

Guillemot: What the consoles have been doing, each time, in each transition, is to pick up everything that was invented on the PC and make it more stable and easier to use. I think that’s what we will see this time again. The manufacturers will pick up the always-on, the always-connected, many things that the PC has created in the last few years, with the possibility to intervene in the game very often and so on, and create more social games, more social experiences, making sure that the content changes also with the type of people that are playing that game. All those things we will see coming… We see the first step on the Wii U. I think many of the other creators of consoles will do that as well. You will have the combination of a revolution of the consoles, picking up everything that has been invented, and an increase in the PC free-to-play model in many territories. On PC and phones.

GamesBeat: We got this report I think in the Wall Street Journal, Sony thought about having a console without a disc drive. Do you think there’s a need for disc drives still, in the next generation? Or can everything be delivered over the internet?

Guillemot: I think it depends. The capacities of Blu-ray are huge, so it’s a good way to transport data. It’s a good and cheap way to transport data. I think we’ll still see some of those systems before… The cloud is becoming better and the network is increasing in capacity.

GamesBeat: EA mentioned that the rise of their digital business is coming at a good time because of the console transition, it may be that we’ll see a dip in sales because of the rise of digital. Is that a realistic hope for the industry?

Guillemot: You saw already, a decrease linked to the fact that consumers are waiting for something new. We saw the Wii going down because they announced it last year, it went down a bit faster because people are waiting for the next machine before buying them. Before buying a new one. I think that we need those new consoles to come quickly and the Wii U is welcome this year to change that trend. But I think also that it’s true that digital distribution and the fact that we can sell in a lot more territories is going to help this transition for sure.

GamesBeat: It seems like… Dean was saying about so many more companies from around the world coming in, GREE has a big presence here this year. Would you feel that because of the emerging markets, you can exploit that…? Would you look to partner or compete with those companies?

Guillemot: No, we did a deal here with GREE where we… We did a kind of collaboration, co-publishing on Assassin’s Creed, with a very strong investment on their part. So we think it can help to increase the size of the brand on that segment. But for sure, they are more players, so there will be more business done between those different people.

GamesBeat: So do you feel that you can be a force in China by yourselves, or would you have to partner with Tencent or somebody like that?

Guillemot: We don’t know yet. It’s too early to answer that question. I think it’s interesting, the globalizing as well… All this business model of free-to-play and social, I think it will have an impact on movies in the future. Because with the engines we will create to create games, they will be very high-definition, we’ll be able to change the content depending on people’s reactions. And so I think that more we go, the more movies will be impacted by the people that watch them. They’ll interact, ask for changes, or want a different ending. There have been a few things done already in the past, but here… I think there’s a good future also in the movie industry in picking up all the tools that are available for the free-to-play model. And the social interactions. In a way, those two worlds will also get closer because of that. People will be so used to influencing gameplay with their actions, that they will step-by-step ask for more from their movies. Not all the types of movies, because some movies are very… With a strong story and so on. But others are more like horror movies, types of movies like that, they can react differently.

GamesBeat: I feel like it’ll take a company like yours to do that, though, to create that movie. Studios are so slow to make any changes themselves.

Guillemot: Maybe they will react if they have the right offers…

GamesBeat: Yeah, if they have a partner. But they’re not going to .. Maybe Disney…? On 3D, you mentioned movies and Avatar, is that an area you’re still interested in? It doesn’t seem to have taken off in a big way.

Guillemot: I think with next-gen consoles it will be different from what we’ve seen recently in the last generation. The movie industry also has to understand that we need time to actually create good games. When we get information on it 18 minutes before the release, we have no chance to do a good job with it. So that’s why I’m speaking about collaboration, but it has to be a collaboration that starts a lot earlier than what is happening today. There will be more and more interactions between those two worlds. The directors will be more and more involved, because the directors are also younger. They play video games, they are interested in making those worlds get closer.

GamesBeat: And you can’t do just a traditional conversion, like they do for film…

Guillemot: No, no, not anymore.

GamesBeat: Can you say something about Assassin’s Creed and Far Cry 3? Are your hopes for those… For those games…

Guillemot: We have big expectations for those two. We don’t know yet which competitors we’ll have at the end of the year, but the more we go, the less we have, and the bigger the game becomes as well. So we hope they will be major sellers this year, both of them.

GamesBeat: I think that cloud gaming will bring yet another new player into platforms. What do you think of that? 

Guillemot: I think it’s very important to have enough platforms and enough TVs on the market, because it’s going to expand the size of it. Others coming into the industry is good news, because it’s going to expand the market very much.

GamesBeat: Do you expect to support that?

Guillemot: We will support all the platforms that will bring enough capacity for the player to have a really good experience. So I look forward to seeing what they do.

GamesBeat: It sounds like Apple could do something similar. Do you think an Apple television in the living room could also have the same kind of opportunity for you guys?

Guillemot: We’ll see. Actually, Apple is already in the video game industry, they’re already doing mobile products, so we’ll see what will be next. It’s interesting to look at the evolution of the market. In fact, you have different types of models, business models. What we are doing more and more is making sure that we create games that will be adapted to all those different models. Either it’s free-to-play or it’s on console with a premium price and so on. What’s very important for us, it’s a shift that we’ve done in the last few years, is to make sure we can be adaptive to those different models with different types of experiences.

GamesBeat: OnLive, do you see that as an attractive platform at this point?

Guillemot: It’s a good platform as well. Gaikai is moving fast, so I think OnLive has to also accelerate a little bit. I think the more platforms, the better it is for the industry. It increases the reach. It’s just that the business models have to be adapted so creators can generate enough revenue.

GamesBeat: And then Assassin’s Creed, is that more than 500 people now?

Guillemot: It’s quite a few. It’s more than 500 yes. But it’s difficult to say about 500 or 700 now. It depends on how many people you have at one point on the game. We probably have less people on Assassin’s III than we did on the previous ones, because we have more time. You don’t have as big a peak, because you take longer.

GamesBeat: THQ hasn’t been doing so well, I guess that’s one of the competitors that you may have to worry less about. Do you think that is happening in their future, too, that you’ll have more concentration in the console side of the business?

Guillemot: With THQ we’ll see, because it seems like they’ll have a lot of announcements of new games at E3. So maybe… A publisher is always dependent on a few games. If they have something great, they can come back strong. But what we’re seeing is, all the time at the end of the cycles, there are a few publishers that don’t continue in the interim. They go into other types of products. It’s really good to have less competition for the beginning of the next platforms, because it gives more space to all the ones that stay.