The recent announcement by gaming giant EA (Electronic Arts) that it had agreed to be acquired in a deal valued at $55 billion (€47bn) has sent shockwaves through the industry. The buyout price is a 25% premium on the company’s current market value, valuing it at $210 per share.
The deal will be the largest-ever buyout funded by private equity, and will see the video game maker remove their shares from public ownership. EA’s new owners include Saudi Arabia’s sovereign wealth fund, Silver Lake Partners, and Affinity Partners, run by Donald Trump’s son-in-law Jared Kushner.
The agreement is the second most valuable gaming purchase in history, after Microsoft’s record $69bn purchase of Activision Blizzard, the publishers of Call of Duty. Andrew Wilson, the boss of EA, claimed the deal was a “powerful recognition” of all the company’s incredible work and a testament to all the hard work put in over the years. But questions are already being asked about the effects of this deal on both EA and the gaming industry as a whole.
The Canadian Gaming Industry
As of 23/24, there were 821 video game studios in Canada, with the industry contributing an estimated $5.1 billion to Canada’s GDP. It’s no surprise, therefore, that one of the biggest players, EA Sports, has caught the eye of investors.
The sector is a huge source of employment and tax revenues, and is one of the country’s biggest success stories and difficult economic times. Online gaming as a whole is booming, with esports, video games, and casino gaming all gaining in popularity.
Recent legislative changes in parts of the country have seen a boom in poker, blackjack, roulette, and more. Online casino which are the fastest paying according to Casino.ca’s experts, are seeing growth across all demographics, accentuating the popularity of not just casino games, but video gaming as a whole.
Top 10 Game Companies in Canada
- Ubisoft Montréal
- EA Vancouver
- The Coalition
- BioWare
- Behaviour Interactive
- Digital Extremes
- Eidos-Montréal
- WB Games Montréal
- Relic Entertainment
- Beenox
Why the deal potentially makes sense for EA
Experts believe the deal gives the Saudi Sovereign Wealth Fund (PIF) more gaming exposure, and fits into their strategy of generating soft power through entertainment and sports – such as boxing and soccer. This approach is all part of a strategy aimed at the 2034 World Cup in Saudi Arabia.
Both PIF and Silver Lake also have other interests in games studios, sports, entertainment, and esports, which could all potentially lead to integration with EA’s output. While experts expect EA’s mobile business to undergo a transformation that will see the company create a more diversified strategy of revenue growth.
Other advantages of going private include no longer having to satisfy the demands of shareholders, and potentially allow EA to focus on long term investments and strategies. It could also free up game designers to be more creative and remove many of the hoops they need to jump through to satisfy investors, such as sticking to game release deadlines.
Most Successful EA Franchises:
- FIFA (Now EA Sports)
- The Sims
- Need For Speed
- Madden NFL
- Apex Legends
- Battlefield
- Bejewelled
- Medal of Honor
- Command & Conquer
- Star Wars Battlefront
Possible Layoffs
Cost-cutting is common practice after any takeover, and there’s no doubt the new owners will be looking at ways to reduce costs and increase profits. Inevitably, fears of redundancies will heighten with this announcement, and it is almost inevitable that job losses will follow.
Debt
The takeover is funded by $20 billion of debt that the new owners will be eager to pay off as soon as possible. That will mean a whole host of changes, from cost-cutting, sales of underperforming businesses, diversification strategies, and reduced investment in game development.
Game Development
Many gamers are worried that the takeover will reduce EA’s new game development and lead to a focus on monetising their biggest titles instead. A more predictable, low-risk investment strategy could see a loss of creative freedom and a reluctance to explore new ideas and unique game concepts.
Implications for small game developers
There is a fear that games developers will see reduced budgets, which will lead to projects getting cancelled or delayed. Many small studios will be under more financial pressure as a result, and there is the potential to see talented studios fold as a result.
Critics highlight that over the years, EA has also closed many game studios, and recently cancelled the planned Marvel’s Black Panther title as part of the closure of Cliffhanger Games.
The Future
If the deal does indeed go through, it will mark the end of EA’s 36-year run as a publicly traded company. It will also herald its Saudi investors’ tighter grip on the gaming sector, and a growing influence over the industry as a whole.
