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Sizing up EA's unprecedented $55 billion leveraged buyout, multiple analysts reckon the deal could result in termination or downsizing for some employees at the company and for many EA games or franchises that plenty of people enjoy, even if operating privately rather than publicly could give EA some protection from other industry hazards.
After this buyout, veteran industry analyst Serkan Toto of Kantan Games, speaking with GamesRadar+, expects "there will be an even stronger focus on evergreen IPs, blockbusters (fewer but potentially bigger games) and live services - at the expense of riskier projects, new ideas and innovation."
Already, there are fears among fans and former staff that BioWare, already seemingly on EA's naughty list after Dragon Age: The Veilguard underperformed against the company's expectations following protracted development, is near the front of the line quietly forming at the chopping block.
Paying down the $20 billion in debt baked into the deal has put a new elephant in the room. Toto and Cole note that it's not unusual for leveraged buyouts to include large debts. Cole says "it almost always means cost cutting and selling off assets."
Toto highlights that "there are not too many examples in gaming" for leveraged buyout precedents – and for its sheer size as the largest buyout in history, EA is still an outlier – and agrees this sort of deal is often followed by "radical restructuring of the business, layoffs, new strategy etc."
"I don't see a reason why EA's case should be any different," he says.
More to the point, concerns of pending layoffs at EA "are not only concerns," Toto says, "but at least in my eyes, actual events that we will see unfold going forward. I do not expect to see the new owners take radical action 'next week', but starting in the very near future."
For its part, EA has only assured worried employees, in an internal FAQ made public by the US Securities and Exchange Commission, that there are no "immediate" changes coming to jobs or teams.
In a blog post assessing the deal, Van Dreunen says the $55 billion valuation "doesn't add up" because it drastically overvalues EA based on its annual cash flow.
"Neither EA’s mature business profile nor the current market environment appears to justify such lofty valuations," he writes, pointing to "little growth potential" in EA's dominant sports segment and the inability of games like Apex Legends to achieve "the cultural permanence" of live service rivals like Fortnite.
Van Dreunen points to the benefits of EA freeing itself from shareholder expectations, quarterly metrics, and the rest of the publicly traded baggage. There's deserved pessimism for the future of several EA IPs and internal groups, but the deal may create "some breathing room" for Battlefield 6, he says, as EA's new overseers won't be putting immediate returns under a microscope.
And given Saudi Arabia's track record with aggressive marketing on previous acquisitions (hello, Monopoly Go), Van Dreunen suggests the likes of Battlefield 6 and EA Sports could "actually see increased investment while peripheral operations face pressure."
"Saudi Arabia is seeking to foster engagement, providing EA with at least a temporary reprieve from its strict focus on profitability," he says. "That may yet have its benefits for the publisher and its players," he continues, arguing that privately traded game companies "outperform their publicly traded counterparts." Private companies "can operate as true product businesses, focusing on creative vision and long-term value."
The question is whether this creative vision manifests and aligns with what players hope to see both within, and particularly beyond, EA's live service and sports bubbles.
"At the center sits the irrational financial logic that tells you it’s about power, prestige, and staking Saudi Arabia’s claim in American entertainment," Van Dreunen writes, again targeting Saudi Arabia's Private Investment Fund, a main investor in the deal (and a longtime EA shareholder).
Saudi Arabia's goal here, he theorizes, is to "throw staggering amounts of money at establishing market dominance" in games and to reduce its reliance on oil trade as an economic core.
Cole agrees "the motive is clearly a desire by the Saudis to expand their economy by getting into a high tech industry." For EA, he posits that the enormous deal "is a way to get shareholders an immediate return and also allow EA to function without the demands of answering to public shareholders."
Toto notes that "EA is profitable, scaled, international and sits on some of the biggest IPs in the gaming world - so the LBO might come as a surprise to some." However, he concurs that "I believe that CEO [Andrew] Wilson saw a fundamental challenge for his company coming in the long run and decided to exit at this point in time."
"Please remember that former Activision Blizzard CEO Bobby Kotick remarked exactly this as a critical reason for agreeing to the merger with Microsoft, a deep shift in the way the gaming industry works in the future," Toto adds.
This speaks to a farther-reaching assessment of where games are headed in large part because of the growing presence of live service titans and slow growth in a mature market.
Toto also doesn't expect Saudi investment in games to slow anytime soon. "We live in a free market economy, Saudi Arabia has resources, and the country is not sanctioned," he says.
"In other words, Saudi Arabia can buy into any game company they like in most territories in the world, regardless of what we may think about it. I believe that their plans go beyond the tens of billions they spent so far in Asia and the West and that we will see even more Saudi money flowing into the games market globally over time."
