If you caught the news that EA is being bought out by a private firm and thought it was weird; you are not alone. Gamers Nexus has a good video that goes over the details and outlines how shady of a deal this is. It covers most of my thoughts so saves me having to type it all up. Go watch the video.
Video summary with timestamps; thanks to Gemini
The video discusses the $55 billion acquisition of Electronic Arts (EA) Games by a consortium of three entities: Saudi Arabia's Public Investment Fund (PIF), Silver Lake, and Affinity Partners (0:02-0:50). The acquisition raises questions due to EA's history of being voted "Worst Company in America" and the seemingly high valuation compared to other major gaming acquisitions like Activision Blizzard (0:34-1:40).
The Three Buyers:
- Saudi Arabia's PIF: A government-controlled wealth fund with extensive investments in various sectors, including gaming companies like Take-Two Interactive, AMD, and Nvidia (3:42-4:33).
- Silver Lake: One of the world's largest private equity firms, known for its investment in Intel's Altera business and a past investment in a Chinese facial recognition surveillance company, SenseTime, which was later divested due to US government sanctions (4:34-5:46).
- Affinity Partners: An investment firm founded by Jared Kushner, which has received significant investment support from the Saudi Arabian government (5:46-6:25). The video highlights the complex web of connections between these entities and various governments (6:25-6:39).
EA Games' History and Valuation: EA Games is a major developer and publisher known for franchises like The Sims, Battlefield, and various sports games (7:18-8:06). However, the company has faced significant criticism for its microtransaction-focused business model and its tendency to acquire and then abandon or "run into the ground" smaller studios and their beloved franchises (8:21-8:49). The video argues that EA is wildly overvalued at $55 billion (13:44-14:05), especially when compared to the Activision Blizzard acquisition, which included more valuable and consistently high-grossing intellectual properties (14:21-15:46).
Implications and Concerns:
- Ownership Structure: Affinity Partners will hold a 5% stake, Silver Lake will be a substantial minority shareholder, and the PIF will own the rest (8:57-9:05). The transaction is an all-cash leveraged buyout, the largest in history (9:13-9:37).
- Leadership Continuity: EA's current CEO, Andrew Wilson, will remain in his position. The video notes his extensive history with EA and his involvement in the Business Council, a think tank advising US presidents (9:56-11:07).
- Political Connections and Ethical Concerns: The video points out the extensive government connections of the acquiring parties, particularly Jared Kushner's role in facilitating Saudi Arabia's interest in the deal (17:39-18:45). This raises ethical concerns and potential conflicts of interest, especially regarding regulatory oversight (18:45-20:06).
- The Role of AI: The deal is reportedly a "huge bet" that artificial intelligence can significantly reduce EA's operating costs, potentially boosting profits (20:10-20:46). The video speculates this could lead to more "soulless, lifeless cash grabs bloated with microtransactions" (20:46-20:52).
- Saudi Arabia's Gaming Investments: Saudi Arabia has a history of significant investments in the gaming industry, including Nintendo and Take-Two Interactive (20:56-21:10). The Crown Prince, Mohammed bin Salman, established Savvy Games Group with a $38 billion budget to acquire mobile game companies and expand into China, with a potential interest in data acquisition through games like Pokémon Go (21:10-21:49).
- Impact on Consumers: The video concludes that the acquisition will likely be a negative development for consumers, leading to further consolidation of money and power in the gaming industry and potentially more aggressive monetization strategies (25:01-25:40).
