The France-based company said it is hiring in its San Francisco office, and that more than 15 percent of Ubisoft’s Bay Area workforce will be focused on its social gaming business this year.

Currently, there’s roughly 300 employees, but that number is expected to grow.

To be sure, that’s a lot smaller than other social game makers, like Zynga, which employs 1,500, or even other major game publishers, like Electronic Arts and Disney, which have acquired social game companies Playfish and Playdom respectively.

But Ubisoft’s incremental investments in social demonstrate a broader appetite in the videogame industry for emerging platforms.

It’s part of a strategy Ubisoft calls “companion gaming,” said Chris Early, vice president of Digital Publishing.

We caught up with Early last week in San Francisco to hear more about the company’s increasing digital efforts.

Early defines companion gaming as having a single brand that crosses multiple platforms, including console, social and mobile.

An analogy he uses is how a baseball fan attends professional games, but also likes to read about the games in newspapers or on the Internet–a fan wants to engage across all platforms.

So far, Ubisoft has created 10 Facebook titles and has several more titles planned for the year, he said.

One of the more successful games is CSI Crime City, which Ubisoft made in collaboration with CBS.

It currently has a modest 1.9 million monthly users on Facebook, according to appdata.com. From there, Ubisoft’s titles drastically taper off, with its next title, Castle & Co., generating only 620,000 monthly users.

However, Ubisoft is using the platform to experiment with cross promotion.

For instance, it worked with CBS to create direct ties between the Facebook game and the TV show. During sweeps week last month, the TV show writers added clues in the show that could be used to unlock in-game bonuses on Facebook.

Early says the strategy is about putting the core intellectual property at the center of the experience and then building games based on that, whether it’s on Facebook, console or mobile.

Ubisoft’s mobile game efforts so far have consisted of mostly partnering with Gameloft, which builds the games. While Ubisoft used to own stock in Gameloft, its ties to the company are now limited to family relations. Ubisoft’s CEO Yves Guillemot is the brother of Gameloft’s CEO Michel Guillemot.

While questions arise in the industry on how much focus on social and mobile there should be right now, Early is cautious because he doesn’t see digital overtaking physical games anytime soon.

“Digital will not kill physical,” he said. “There will always be support for a certain percent.”

One primary reason for that is because digital platforms have infinite shelf space, which make discovery extremely difficult for the consumer, he said.

On Facebook, consumers must sift through thousands of titles to decide what to play. Same goes for Microsoft’s Xbox Live or Sony’s PlayStation Network. “You have to look at the top 10 sellers, or rely on a friend,” he said. “There’s a significant hurdle to digital.” The same has been said about mobile, where getting visibility on Apple’s App Store or the Android Market has been difficult.

He said with physical sales, stores have limited shelf space and customers can more easily browse through titles in a store and get recommendations from employees.

For now, there’s not a lot of pressure on Ubisoft from Wall Street to make a ton of money in digital. It hasn’t purchased a social-gaming studio for millions of dollars and therefore doesn’t have an urgency to see a return.

At least not yet.

It is forecasting revenues of $1.4 billion this year, which is about 17 percent higher than in 2010. It also expects that 2011 will mark a return to profitability and positive cash flow.

In addition to investments in Facebook, Ubisoft plans to support the launch of the Nintendo 3DS portable with more than six titles. It also is investing heavily in Microsoft’s well-selling Kinect platform. So far, it has sold more than two million games for the platform, giving it an 18 percent market share in the U.S.

Today, it announced it has acquired New York City-based Area/Code, which is a game maker for both Facebook and mobile platforms. Most recently, it built CSI: Crime City with partner Ubisoft for Facebook, and Parking Wars and Drop7 for the iPhone.

Terms of the deal were not disclosed, but clearly the acquisition is for talent since it also marks Zynga’s New York office opening. Frank Lantz will continue to serve as creative director, and Demetri Detsaridis will continue to hold the role of general manager. However, co-founder Kevin Slavin will move on to new ventures.

Zynga has a presence in several locations–in addition to its bursting headquarters in San Francisco, it has offices in Boston and Beijing, as well as a tiny office just getting off the ground in Seattle.

In an Area/Code blog post, the six-year-old company said that it’s willing to throw everything it’s got into social-gaming frenzy: “Zynga is smart. They know you can’t just optimize on what stands, that you also have to push forward and explore new ideas….Six years after we started from nothing, we are just as ready to roll up our sleeves, step into the center of the storm, and discover how to make great games for the most people on the biggest platform in the world.”

This is Zynga’s second acquisition this month. It acquired Flock, which was building a social web browser, earlier in January, and bought Newtoy–a McKinney, Texas, mobile-game maker–in December.

But the deal could also give Les Moonves and company the ability to strike less conventional distribution deals, too. Now that Comcast is out of the way, CBS could move forward with a Hulu deal, and perhaps the likes of an Apple TV product as well.

Make no mistake: The real focus of today’s deal is the money Comcast will fork over for the right to distribute CBS’ broadcast programming to its cable subscribers’ TV sets. Comcast and other cable guys have resisted paying the so-called retransmission fee for TV that’s available free over the airwaves. But one by one, they’re conceding and paying up, which means their customers will, too.

Barclays analyst Anthony DiClemente guesses Comcast’s CBS fee will start at 50 cents a month per subscriber and move well past $1 by the end of the deal, though I’ve heard grunts and murmurs from Black Rock that those numbers are low. Perhaps we’ll hear more during tomorrow’s earnings call.

And while the release announcing the deal notes that Comcast (CMCSA) gets online rights as part of the pact, the near-term impact for Web viewers will be very limited.

Specifically, if you’re a Comcast cable subscriber who pays for Showtime and/or The Movie Channel, you’ll soon be able to watch programming from those channels online, too. Good news for “Weeds” and “Dexter” fans, but that’s about it.

That said, down the road, CBS may start moving to a model where it pulls more of its broadcast TV shows like “CSI” off of the free Web and makes them available only to “authenticated” customers–Comcast subscribers and anyone else whose pipe provider has a deal with the broadcaster.

And that, in turn, gives the network the go-ahead to move forward with Hulu, Apple and every other player who also wants to sell online access to TV programming.

CBS had previously chatted with other outlets like Apple and Hulu–in part because it was interested, and in part because it was good for Comcast to know that it was interested. But now it has a framework for those deals: Comcast is paying us this much money for this much access to our shows. You’ll need to pay that amount or more.

So it shouldn’t be a surprise to see Moonves acknowledge his interest today in joining Hulu’s paid subscription service, which would mean patching things up with former online rivals News Corp.’s (NWS) Fox, Disney’s (DIS) ABC and GE’s (GE) NBC.

And I wouldn’t be shocked to see him murmur positive things about supplying online programming to Apple (AAPL), or Google (GOOG) for that matter, during tomorrow’s call. Stay tuned.

The network is the only one of the four broadcasters offering much programming on Apple’s device at launch Saturday. As previously reported, the Disney (DIS) unit is offering about 20 of its shows, including “Lost” and “Grey’s Anatomy,” for free via a new app.

But that’s about it. Come Saturday, CBS (CBS) will only be streaming full episodes of “Survivor” at its iPad-friendly site. And News Corp.’s (NWS) Fox and GE’s (GE) NBC aren’t streaming any full-length shows at all. If you want to watch “CSI,” “The Simpsons” or “30 Rock” on your Web browser this weekend, you’ll need to use something other than an iPad.

CBS says it will offer more shows over time, but NBC and Fox aren’t even promising that. When the Hulu app arrives, those two networks’ shows will be available there, but under current plans, they’ll be available only to paying subscribers.

The holdouts’ logic is that the iPad is a mobile device. And while the networks are basically okay with streaming their stuff for free on the Web, they think that mobile is a different ballgame, and one they can charge for (though even that’s confusing — NBC does stream full-length shows for free to the iPhone, but won’t do the same for the iPad).

But if that’s the reasoning, why is ABC, which joined up with Hulu a year ago, putting up its stuff for free on the iPad? The fact that Apple (AAPL) boss Steve Jobs is Disney’s largest single shareholder can’t be the only reason.

ABC may be able to thread the needle here because it is only making its shows available via Wi-Fi streaming, not over AT&T’s (T) network. But that kind of “windowing” is going to seem awfully arbitrary to most casual users, and those are the ones both Apple and the networks are supposed to be targeting here. So something’s going to have to give. Stay tuned.

The short version is that unlike its broadcast peers, CBS (CBS) has been reluctant to make many of its shows available on the Web because it worries that doing so cuts into its core TV business.

So while GE’s (GE) NBC Universal and News Corp.’s (NWS) Fox put Hulu together, CBS stayed away. And when Disney (DIS) decided to join the joint venture earlier this year, CBS executives argued strenuously against the deal. Instead, CBS has been content to use the Web as a promotional tool for TV via outlets like Google’s (GOOG) YouTube.

The longer version is below, via the transcript of a brief chat I had with Smith this afternoon to discuss his plans and the network’s. This is stuff he’s talked about before–to reporters, in industry forums, and even via emails he wishes he hadn’t written–but I’m running it at length here.

Because 1) I think Smith does a good job of explaining the push-and-pull of Web viewership vs. Web economics that everyone in big media is grappling with, and 2) I want people to see just how difficult it is to keep up when Smith talks. He can get out a lot of words in a relatively short time.

I also had a quick chat with CBS CEO Les Moonves, who made many of the points Smith did, but with less verbiage: I’ll get you that transcript shortly, too.

Peter Kafka: Since you’re going to be advising CBS’s Web video strategy, why don’t you lay out, for the record, where things stand?

Quincy Smith:

We recognize that the Web is two things. It’s both a new medium…and there my example has always been, look at fantasy football: When you’re nice enough to watch the Jets just pound the snot out of the Raiders on Sunday, on a CBS channel…on fantasy football on CBSSports.com, you start on the Tuesday before and end the Wednesday after.

And what are you doing? You’re personalizing it, you’re becoming more of a fan of the game [Smith goes on to praise CBSSports.com's feature set]. All of those things are additive, so when Sunday comes in, you’re actually more of a fan, and you’ve even more convinced you’re going to watch that broadcast show.

Now, I realize that sports is reasonably bulletproof, and a good case study to begin with versus some of the other programming, but the fact is, the Web is a new medium. So what do I also mean? Tech reviews on CNET, Money Watch being watched on BNET. GameSpot videogame reviews.

Access to content that CBS didn’t already have, that are additive–both in their own right online, with the margins that the CNET business is used to, and where we’re getting just stronger and stronger from a margin perspective–and potential content that can also be applied to our [local TV stations owned by CBS], our affiliates, our broadcast news, as well as the radio. So that’s the side of our business that is $600 million revenue and $50 million-plus profit on the bottom line.

The other side of the Web, the side that is most thought of by many journalists, is the threat of an IP-deliverer of video. And how you turn that threat into an opportunity.

And so, from that perspective, as  you know, we didn’t go ahead and say, “Okay, we’re going to lock down and stream, with all of our other peers in broadcast, and come up with the same rules, and embed and right-click this and go away.” I’ve never had a beef with Hulu. Hulu’s always worked as a great service. That’s part of the problem.

As a network, we need to make sure that our content is being seen where the dollars matter. And right now that’s on air. Opportunities like TV Everywhere–we’re not putting all of our eggs in that basket, though we are big advocates of it–are ones where you can actually take and expand and extend the television market online, so it doesn’t matter what screen you watch “CSI” on; what matters is that you watched it, it counts and you saw the ads.

But until that happens, it’s crazy to just stream the shows for zero economics. When in fact you can make a lot more money doing things that are additive and complementary to the rest of the CBS line. That’s where CBS interactive comes in now.

Kafka: But TV viewers are showing an increasing interest in watching their programs on the Web, whether from legal services like the Web or illegal torrents and pirate sites. Don’t you need to reach them where they are?

Smith:

Now, if you really look at those numbers, what they’ll say is [online and offline video are] both growing, right? We’re having the best year ever as America’s largest broadcast network, and I think that 99.9 percent of that–this is the quote I’ve never been able to get in there–is that’s [because] of the great content that we have. There’s some infinitesimal basis point that’s relevant [to CBS ratings because] we are making sure that when people watch it, they’re more inclined to watch it on television. For now.

Once that solution moves, once those economics move–whether that’s more ads, [higher] CPMs, more ad buyers….You and I can say all day long, “We’re sold out on Web video. That’s going really well. It’s sold out.” Well, no kidding, it’s sold out. It’s a $700 million market. The television market is $120 billion. And of that, $700 million, half of those [ad buyers] are spending  90 percent of their time doing Google keywords, not buying online video.

The key is, how do you turn television buyers into video buyers? And that’s where a solution like TV Everywhere comes into play.

And by the way, looking at [Hulu CEO Jason] Kilar’s comments the other day, in Colorado [at an industry convention], he sees that too. He’s more sophisticated on this stuff than most anybody. From the perspective of, he understands that’s where the big dollars are. And so he probably went at it as, “I’m going to aggregate all the people first, so hopefully things like TV everywhere come to us.” From our perspective at CBS, we’ve got to go to them.

I don’t hate Hulu. Hulu’s world-class video viewing. What I don’t understand is, why license all that content to something that works that well, that seamlessly, yet–without the economic model around it?

Shapiro says the company, which has been primarily focused on playing video and selling ads on its own site, will now be concentrating on a new “Video Compass” player that users will have to download onto their Web browsers.

Shapiro says the company is laying off 25 people and will have a staff in “the mid-40s” when the restructuring is over. That’s less than half its size in June of last year, when the company raised another $30 million, bringing the total capital it has raised to $70 million. At the time, Veoh’s investors–which included Goldman Sachs (GS), Intel (INTC), Time Warner (TWX) and Spark Capital–valued the company at about $125 million, pre-money. VentureBeat first reported the layoffs and restructuring last night.

But Veoh’s video Web browser is one of several players in a field dominated by Google’s (GOOG) YouTube, and now Hulu seems to have established itself as a clear second place.

Comscore (SCOR) says Veoh’s audience peaked in March of last year, when four million viewers watched 33.7 million videos on the site. It says that by February of this year, Veoh’s audience had shrunk to two million viewers watching 16.5 million videos. Every Web publisher disputes third-party measurements, but in this case, Veoh says Comscore’s data are way off: It says it has 23 million unique users watching 200 million videos.

Shapiro insists that the company will continue to support its original video site, but argues that there are more opportunities with its new browser plug-in, which suggests videos to users who are searching for things on other sites. So if a Compass user was searching for, say, “CSI” on Google, it’s possible that the Compass plug-in would offer up a clip or episode of the CBS (CBS) show, via a player that would launch on top of the site.

“The website is extremely mature. It’s been around for 3 and a half years. It’s extremely successful,” Shapiro said. But “quite frankly, there are a lot of things like that. We love it and will continue to invest in it. It’s just that we also see that we have something that no one else has in Compass, and we’re saying we are going to be investing in and supporting that.”

Mitgang came to Veoh in July 2007 from Yahoo (YHOO), and shortly after that the company became enmeshed in a high-profile copyright lawsuit with Universal Music Group. The suit is still ongoing, and though Veoh has won several recent points, people familiar with the company tell me that the legal bills have been significant. I asked Shapiro if the cost of the suit had anything to do with the restructuring, but he declined to comment.

Here’s the press release:

VEoh NETWORKS TO Intensify FOCUS ON ITS SUCCESSFUL
VEOH VIDEO COMPASS™

Company to Streamline Efforts around Omnipresent Video Discovery

SAN DIEGO, CA (April 1, 2009) – Veoh Networks, one of the leading innovators in the online video arena, announced today that the company will be focusing its efforts around its highly successful Veoh Video Compass™ application.  Video Compass is a browser plug-in that makes video discovery a truly seamless experience, enabling video to be played while on every major search engine, portal and commerce site.  It enhances the browsing experience by surfacing recommended videos that are relevant to a consumer’s search terms.  These video recommendations – based on the viewing behavior of millions of online video users – make it easy for consumers to discover and watch videos from an index of millions of videos from around the Internet.  Veoh adds over 25,000 new Video Compass users daily and supports millions of recommendations each day on major web sites such as Google, Yahoo!, YouTube, Ask, MSN, Amazon, IMDB, Craigslist, eBay, Wikipedia, etc.

Meanwhile, Veoh.com, the company’s popular video portal, continues to generate more than 200 million video streams each month from a wide range of independent and traditional content publishers such as ABC, CBS, ESPN, Viacom, and Warner Bros.  The site reaches over 23 million unique users each month with average engagement time at more than 100 minutes per user, and helps dozens of blue chip advertisers reach a broad and highly targeted audience.

As part of Veoh’s continued focus on innovation, Dmitry Shapiro, Veoh’s Founder and Chief Innovation Officer, will be stepping in as CEO.  Shapiro replaces Steve Mitgang.

Shapiro stated, “Veoh was founded in early 2005 when video on the Internet was at its very beginnings.  Today after four years of being a pioneer in the online video space, we know a tremendous amount of what viewers, publishers, and advertisers want.  We have always believed that video discovery and personalization are ultimately the important problems to solve in the world of billions of videos, and have invested heavily in technologies to support that belief.  Video Compass is the latest innovation from Veoh that makes video discovery omnipresent.”  Video Compass can be downloaded at http://www.veoh.com/videocompass/.

As part of this new concerted effort, Veoh will be streamlining its organization to better enable the company to focus on providing compelling offerings to consumers, partners, and advertisers.

About Veoh Networks
Veoh Networks is an innovative Internet Television company that delivers broadcast-quality video programming via the Internet. Veoh has more than 100,000 content publishers – from CBS, Viacom’s MTV Networks, ABC, Warner Bros. Television Group, ESPN and Lions Gate to thousands of independent filmmakers and content producers.  For advertisers, Veoh offers compelling ways of engaging with a targeted audience and measuring performance of their ad buys.

Veoh Networks is a privately held company that is backed by leading technology and media investors, including Shelter Capital Partners, Spark Capital, Michael Eisner’s Tornante Company, Goldman Sachs, Time Warner Inc., Intel Capital, Adobe Systems Incorporated, Gordon Crawford, Tom Freston and Jonathan Dolgen. The company’s principal offices are in Los Angeles and San Diego, California.

But until then, if you want to see your favorite stuff on the Web (legally), you’ll need a well-annotated map: You can see ABC shows like “Lost” on Veoh, but not on Joost. Joost can show you stuff like CBS’s “CSI,” but not NBC’s “Heroes”–you’ll need to go to NBC.com or Hulu for that. Etc.

The newest set of directions: You’ll soon be able to see Viacom shows like Nickelodeon’s “SpongeBob Square Pants” and MTV’s “The Hills” on Sling.com, giving the video site something you can’t get on Hulu or Google’s (GOOG) YouTube–but can get on Joost and DailyMotion.

Except that Hulu already shows full episodes of two of Viacom’s premiere shows–”The Daily Show” and “The Colbert Report”–via a one-off deal with Viacom (VIA). And… Sling redistributes all of Hulu’s content except for those two shows. [UPDATE: Sling will be getting both of those shows under terms of the new Viacom deal, I'm told.]

Confused? Of course you are. Because there really isn’t any rhyme or reason to this.

So while the networks and the video sites spend time on business development deals, it’s hard to begrudge those who throw up their hands and just go find what they want when they want at various torrent sites like The Pirate Bay.

In the meantime, here’s a (legal) clip from last night’s Daily Show, via Hulu.

That is almost certainly a record for a Web-only event. But it’s a nonevent by mainstream entertainment standards.

A poorly performing show on network TV, by comparison, draws millions of viewers: Recall that GE’s (GE) NBC canceled “Quarterlife,” the soap opera that started out on MySpace, after it drew an audience of 3.1 million in its debut. A bona fide hit draws many millions more: Last Thursday’s episode of “CSI,” for instance, garnered more than 18 million eyeballs.

Not fair to compare a weeknight audience to one on Saturday nights? OK. Try this: Last year, before anyone had ever heard of Sarah Palin, “Saturday Night Live” was averaging more than five million viewers.

You can’t blame the modest audience on a lack of effort on YouTube’s part. The video site generated plenty of publicity in advance of the event. And heavy promotion on the site itself all but compelled visitors who ventured onto YouTube last night to check it out.

Part of the issue, I think, is that while the show had a smattering of sort-of-popular singers (Katy Perry, Akon) there was no one really huge. Most of the show was dedicated to viral video stars/oddities like Tay Zonday. And the point of viral videos is that you see them on your own time, serendipitously: You take a couple minutes out of work on a Tuesday afternoon to watch Tay Zonday sing “Chocolate Rain” because your friend sends you the link. Not because he’s appearing live on Saturday night.

Could YouTube rustle up a bigger audience for a live event in the future? Absolutely. It’s one of the biggest Web sites in the world, so if it had a truly compelling show, instead of a niche event, it wouldn’t be hard to get the word out. And if parent company Google (GOOG) wanted to lend a promotional hand, game over.

So maybe that’s coming down the pike. In the meantime, if you didn’t tune in last night, here’s a sample of what you missed: Katy Perry singing “Hot ‘N Cold.”

The broadband peer-to-peer Internet service, which is trying to popularize a television experience on the Web by providing professionally produced content–complete with network television shows–will remain in beta, although you no longer have to be invited to join.

Presumably, kazillions will now sign up. Or not!

Those who were invited and already using it now get a better interface and a way to find shows that seems more intuitive (the old carousel approach was plainly confusing, so let’s just forget it ever happened).

It will also open its API for third-party apps–in other words, widgetmania continues unabated!

We are no Walt Mossberg, but found the pre-beta version a bit buggy and often annoying, so this is an improvement. Now, bring us more programming we like (and, um, not more of investor CBS’s gross-me-out “CSI”)!

Joost, founded by the founders of the Skype online phone service, is backed by some big players–such as Sequoia Capital and Index Ventures–to the tune of $45 million in funding.

And it also nabbed a popular Silicon Valley player, Mike Volpi, as its CEO.

Here’s a video interview with Volpi, in two parts (Part 1 and Part 2), which I did on a recent trip to Los Angeles, where he was visiting in the vain hope that Hollywood types might suddenly realize the kids love this crazy Internet thing.

Also included is a video I made at Joost’s party in Burbank in June for those same ungrateful entertainment folks.