In a landmark development, video game publisher Electronic Arts (EA) has been sold to a consortium for approximately US$55 billion (around A$83 billion). This acquisition, potentially the largest buyout funded by private equity firms to date, includes notable members like Silver Lake Partners, the Public Investment Fund (PIF) of Saudi Arabia, and investment firm Affinity Partners, led by Jared Kushner, son-in-law of former U.S. President Donald Trump. The deal entails the consortium purchasing all shares of the publicly traded company, transitioning EA to private ownership.
While shareholders are likely to celebrate the deal, with each share valued at US$210—a 25% premium—concerns loom over the implications of PIF’s involvement. The acquisition raises questions about potential “game-washing” and the future business practices of a company that has faced significant criticism.
Concerns Over EA’s Reputation and Business Practices
The global video game industry surpasses both the film and music sectors in value, making it a lucrative target for investors. Yet, EA’s reputation is far from pristine. The company has garnered the dubious distinction of winning the “Worst Company in America” award twice, criticized for poor labor practices and an overemphasis on online gaming, even in single-player formats. Players of beloved franchises like The Sims, Dragon Age, and Star Wars Battlefront II have expressed dissatisfaction with EA’s management, alleging that corporate meddling has adversely affected game quality.
Moreover, the company has faced backlash for its reliance on microtransactions, small fees for in-game items that can accumulate into significant costs. This model has drawn criticism for fostering gambling-like behaviors among players, further tarnishing EA’s image.
As the economic landscape poses challenges for high-tech industries, EA has responded by laying off nearly 2,000 workers since 2023 and canceling several game projects. Consequently, the US$55 billion offer from the consortium likely appeared attractive amid these financial strains.
Saudi Arabia’s Growing Influence in Entertainment
The PIF has aggressively invested in entertainment over recent years, with a focus on sports and gaming to bolster its global image. Prior to this acquisition, the fund made headlines by investing in golf and tennis, securing sponsorships and naming rights with organizations like the Women’s Tennis Association and the Association of Tennis Professionals. Additionally, PIF played a pivotal role in establishing the LIV Golf tour, which attracted top players with lucrative contracts, including one reported at US$125 million (around A$189 million).
This strategy of using substantial financial incentives has proven effective. In 2023, a merger was announced between LIV, the DPA (European golf tour), and the PGA (North American golf tour), with PIF as the principal funder.
The fund’s interest in the video game sector can be seen as an extension of its “sportswashing” efforts—using sports and entertainment to improve a tarnished reputation linked to human rights concerns. Video games, known for their entertainment value and interactivity, provide a fresh avenue for this strategy. With EA owning numerous sports franchises, this acquisition opens doors for potential collaborations between sports and gaming.
Beyond the implications for public relations, the nature of the buyout also raises financial concerns. This transaction is classified as a “leveraged” buyout, meaning that part of the purchase price—around US$20 billion (approximately A$30 billion)—will be financed through debt incurred by EA. Consequently, the company will carry US$20 billion in new debt following the acquisition.
With this debt obligation, worries about further layoffs, cost-cutting measures, and heightened monetization through microtransactions are valid. Such changes could negatively impact the gaming experience, perpetuating a cycle of dissatisfaction among players.
As the landscape shifts with this monumental acquisition, the future of Electronic Arts remains uncertain. The intertwining of entertainment and geopolitics offers a complex narrative that will unfold in the coming years.
Jacqueline Burgess, Treasurer of the Digital Games Research Association of Australia (DiGRAA), highlights the implications of such investment strategies, having collaborated with various organizations and received funding from government entities. Her insights underscore the need for vigilance as the gaming industry navigates these turbulent waters.
