This article was published an hour before EA confirmed the $55bn buyout. For further reaction, read our EA: what happens next? piece.
News broke late last week that EA could go private as part of a $50bn deal led by Saudi Arabia’s Public Investment Fund and US-based private equity firms Silver Lake Management and Affinity Partners.
The deal is not confirmed, but both The Wall Street Journal and Bloomberg claim that an announcement could be made this week.
The most striking of the hot takes on social media includes this one from industry analyst and Spilt Milk Studios boss Nicholas Lovell, who warned that the deal might prove to be a “total disaster”.
The level of debt taken on by the company could resul in little investment in new games and huge job losses, he said.
“This leveraged buyout, at around $50 billion, includes $20 billion of debt,” he explained. “That debt load takes the cashflows from big, predictable games and uses it to service the debt, not to invest in future games. So it is basically a bet that the games industry is mature and predictable, that EA has found stable cashflows for the next decade without reinvestment and that no one else emerges to eat EA’s lunch.”
“It’s all about squeezing existing franchises,” he continued. “Either way, there will be a lot of job losses…margins will be squeezed. And I suspect speculative investment in new ideas will be limited.”
Gossamer Consulting’s Eric Kress said that any major public gaming company going private is generally bad for the industry, meaning “less transparency, fewer public comps, weaker liquidity.”
He added later: “$50bn at a 14% premium is weak. Shareholders will demand closer to $65bn…this is still a negative for the industry overall but compared to Activision, Ubisoft, and Embracer, it may be the least damaging deal we’ve seen over the last few years.”
Bloomberg’s Jason Schreier suggested that the Saudi buyout reflects the games industry’s slowing growth and trend toward consolidation. Some industry observers said that the proposed deal “suggests EA executives are looking for an exit because of concerns about the future of the $178bn video-game industry,” he said.
“Growth has slowed significantly following a period of big spending on gaming throughout the 2010s and into 2020, when the Covid-19 pandemic boosted sales,” Schreier continued. “Since then, gamers have tended to stick with old favorites rather than purchasing new titles.”
Investor, advisor and Pragma CEO Eden Chen said that alot of industry people knew that EA CEO Andrew Wilson was looking to sell the company. Given the Saudi PIF’s ambitions across sports and gaming, it is “the most obvious buyer”.
“I’m just happy that a big tech company didn’t buy them out as that would lead to more consolidation + power moving to platforms and away from developers,” he continued. “I’m sure Apple, Amazon, and Netflix took a look!”
Industry analyst Joost Van Dreunen noted that buying up EA could be risky. “The timing is tricky,” he said. “Battlefield 6 appears solid, but it will soon face competition for attention from GTA 6. Meanwhile, EA Sports FC has not entirely replaced FIFA’s momentum.”
“The bigger story is capital,” Van Dreunen continued. “GTA V was launched in 2013 with a total budget of $260 million. By contrast, Scopely has reportedly spent $1 billion on marketing alone for Monopoly Go! Competing at that level requires sovereign-scale financing, something only players like PIF can provide.”
Former EA employee and current CEO of developer Symbol Zero Rafael Brown said that the move is part of Saudi Arabia’s ongoing efforts to improve its reputation in the west.
“If the Saudis want to truly engage in sportswashing there is probably no better target than to acquire Electronic Arts, home of many American and European sports videogame franchises.”
It’s a view shared by former Valve writer and current Stray Bombay boss Chet Faliszek, who said on TikTok that the move is “gross” and is part of Saudi Arabia’s ongoing attempts to ‘buy western culture’ as it has been doing in other areas like golf, F1 and football.
