00:01Welcome back. Now video game maker Electronic Arts is being bought and taken private for a record $55 billion.
00:09It's the most expensive leveraged buyout in history.
00:13EA is being bought by a group of investors including Silver Lake and Saudi Arabia's Public Investment Fund.
00:21California-based Electronic Arts is best known for its sports titles in franchises like Madden NFL and FIFA,
00:27as well as video game series The Sims and Star Wars.
00:32President and CEO of NECO Partners, Lisa Cosmas Hansen, joins me.
00:36Great to have you on the program again.
00:38Now, what a flashing price tag. I mean, this is a bit of a milestone in the gaming world.
00:43But why leave public markets? There are pros and cons, aren't there?
00:48Yes, of course. There are pros and cons to everything.
00:50And a deal this large is certain to be scrutinized by analysts, investors and public authorities alike.
00:57Taking a look at a, you know, nearly $55 billion privatization.
01:02So for Electronic Arts, it's been in the public markets for a long time.
01:06Some of the pros could be not just for EA, but specifically in this case,
01:11the pros of going private might be that you no longer have to have quarterly earnings reports.
01:16You're responding to a different set of kind of directors instead of the shareholders per se than the public markets.
01:24And there's a lot more flexibility to build a long-term strategy.
01:30So I think those are some of the benefits of going private.
01:34Some of the cons of going private might be that there's sort of less visibility or less liquidity.
01:44But in this case, the public investment fund of Saudi Arabia has invested a lot of money.
01:50And I think that liquidity is probably less of the problem.
01:56Would you say this is a big bet on AI?
01:59Yeah, some are saying that this is a big bet on AI.
02:04I think overall in the video game industry, AI, just like in every industry,
02:09AI is really making a play for improving operational efficiencies.
02:15And anytime you can have an improvement in operational efficiencies, you're going to have greater profit.
02:20Now, EA is a really strong and stable company, especially among the other giants in the industry where there's been a lot of fluctuation since the pandemic,
02:31a rise and fall of games usage and behaviors and so forth.
02:35But EA has a really strong hold in this market.
02:38And if they can continue their revenue growth and then also improve profit margins via using tools that are going to come from AI for game development or for even player's own customization of their gaming avatars and so forth or the games themselves,
02:57you know, this could be quite compelling for their margins.
03:01You mentioned the other giants in the industry.
03:04What does this deal say about the current state of play in gaming right now in terms of growth and competition?
03:13Well, I think that in terms of growth and competition, EA is among a field of really impressive competitors, not just from the United States,
03:22but especially rising now from countries like China and Japan and, you know, even Saudi Arabia itself.
03:29But around the world, we see these very large companies carving out their own specialties and and really taking on the gamers and the digital entertainment audience by storm.
03:42So there it doesn't reduce competition.
03:45And I think it also just kind of signifies how embedded in daily, daily, daily digital entertainment video games are.
03:54They certainly are.
03:55Lisa, I'd love to talk to you more.
03:56We are out of time.
03:58Thanks so much.
03:58Lisa Cosmos from Niko Partners.
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