Well, it’s official. Electronic Arts is now a privately owned company after its $55 billion acquisition by an investor group consisting of Saudi Arabia’s Public Investment Fund, Silver Lake, and Affinity Partners (Jared Kushner’s firm) officially closed. PIF reportedly owns 93.4 percent of the new company, effectively giving Saudi Arabia’s sovereign wealth fund control of one of the biggest publishers in gaming, and I can’t say I’m happy about any of this.
We’re living through a period where the gaming industry continues to be hammered by layoffs, studio closures, canceled games, and developers constantly wondering if they’ll still have a job tomorrow. Yet somehow, a $55 billion leveraged buyout like this sails right on through.
That $20 Billion in Debt Should Worry Everyone
But politics aside, there’s another part of this deal that I don’t think enough people understand, and that’s the $20 billion in debt financing attached to it. This is the largest leveraged buyout in history. Not kidding, I checked, and I don’t think people fully grasp just how insane that sounds. Let me be frank, even though I’m Keith, about what that actually means.
That $20 billion isn’t being borrowed so EA can build new studios, hire thousands of developers, create more games, or invest in new technology. It’s debt financing being used to help make the purchase of EA possible. More than a third of this $55 billion transaction is tied to debt financing, with $18 billion expected to be funded at the time the deal closed. That sounds like a terrible deal if I’ve ever heard one, and frankly, leveraged buyouts of this size shouldn’t even be legal.
Now ask yourself what happens when the people running the newly private EA start looking at that debt and figuring out how to improve profitability. That’s the part that worries me, because there are only so many ways a massive company like EA can start cutting expenses and increasing revenue.
Layoffs, studio closures, canceled projects, higher game prices, more aggressive monetization, or some combination of all of those things immediately come to mind. None of that has been announced, and I’m not saying it’s guaranteed to happen, but come on. You don’t bring $20 billion in debt financing into a deal like this and then never think about how you’re going to service that debt while making the investment worthwhile.
We’ve already seen who usually pays the price when companies decide they need to cut costs, and it’s rarely the people sitting at the top. So, when we’re told EA will retain creative control and that there won’t be immediate layoffs, forgive me if I’m skeptical, because we’ve heard this song and dance before. Did we not just see the controversy surrounding Saudi-owned SNK and the bizarre inclusion of Cristiano Ronaldo and Salvatore Ganacci as playable characters in Fatal Fury: City of the Wolves, with plenty of questions being raised about how much influence Saudi ownership had on those decisions? So, excuse me for not believing for one minute that EA’s new owners are simply going to sit back and have no influence over what the company does.
A company gets acquired, everyone talks about how exciting the future is, and employees are told everything is fine. Then the restructuring starts, projects disappear, studios close, and people lose their jobs. We’ve seen it happen far too many times across this industry to just shrug our shoulders and pretend there isn’t a reason to be concerned.
Hopefully, I’m wrong. Hopefully, EA’s studios remain intact, its developers keep their creative freedom, and employees don’t end up paying for a $55 billion deal they had absolutely nothing to do with. But looking at the state of the gaming industry right now, I don’t have much reason to be optimistic, and this deal only gives me another reason to wonder where the hell this industry is heading.
What About Boycotting EA?
As for whether I, or anyone here, will boycott EA over this, it’s too early to say. I understand if that sounds like a copout, but the reality is that we do like some of the games EA publishes, and more importantly, we still want to support the developers who spend years of their lives making them. Unfortunately, buying those games also means putting money into the same company and feeding the people at the top who benefit from decisions like this.
That’s the uncomfortable position this deal puts players in. You can dislike the people controlling a company and still want to support the developers working underneath them, and I don’t think there’s an easy answer to that. What I do know is that I don’t like where this is heading, and I doubt I’m the only person looking at this deal and wondering what EA is going to look like a few years from now.
