00:00Convoy is an investment firm. It's dedicated to video game and interactive entertainment industry.
00:04You understand better than anyone the disruption that's happened within this industry.
00:08Is going private the right tactic for EA?
00:13Thank you for having me on again, Caroline and Ed.
00:15And I absolutely do think it is the right thing for EA to go private.
00:19And here's why.
00:21Today, EA has represented kind of the digital home for many core tenant properties and games.
00:26Think of the sports division, which compose about 60 percent of revenue.
00:30You've got the SINs. You've also got Battlefield, which is about to launch.
00:34And a lot of speculation for EA has been that they continuously go back to the well of producing the same types of IPs.
00:41And they haven't come up with anything, quote unquote, new in a while.
00:44Going private will allow them to take a risk to develop some new IP and also be a powerhouse once again for generating new experiences for gamers.
00:54And so, therefore, as a gamer myself, I like the transaction.
00:57You're investing at the frontier of gaming and the next experiment.
01:01So what is it that they can innovate on at the moment?
01:04What are the trends that you're seeing in your portfolio companies that can be adopted by the biggest studios?
01:09Yeah. So one of the challenges for large studio driven public entities is that the public market cycle is difficult for developing new IP.
01:18And so, you know, you saw the Activision Blizzard acquisition by Microsoft.
01:22You're seeing this again, finding homes where these companies can actually innovate in private.
01:28Think of like what Rockstar is doing with Grand Theft Auto.
01:31That is difficult to do as a public entity.
01:34It just is unless you have a multitude of properties that can kind of play defense for you in the short term.
01:40And so what am I excited about?
01:42I'm excited to see what that infrastructure optimized, let's call it further refined, which I have full confidence, the PIF and their other partners will do here in this transaction to see what they can produce on the other end.
01:57And they produced Battlefield.
02:00I don't know if you all saw that test, but it was the 19th most successful CCU event on Steam.
02:07And Ed, I'm banking on the play this game.
02:08No, I've seen the test and like all over Instagram Reels and TikTok is the early access experience.
02:15What you just said about PIF, though, this is the letter that Andrew Wilson sent employees, right?
02:20And in the limited amount of time I've spent with EA's leadership this year, they've talked about IP in the context of going outside of games.
02:27And this letter, he talks about sports and he talks about gaming and he talks about entertainment broadly.
02:33This is something that Saudi Arabia has been working on for a number of years.
02:36Do they just give EA a new domain to move into?
02:41Absolutely.
02:42So, you know, roughly right now, about 2% of the PIF's assets are in entertainment and sports.
02:47That's going to move to about 3.5% at the conclusion of this transaction.
02:52They've seen massive success with Scopely.
02:55They acquired that for just under $5 billion.
02:58They've rapidly expanded and acquired Niantic for an additional $3.5 billion.
03:01They are now looking at EA as the mothership of their gaming strategy outside of mobile.
03:06I believe that you will continue to see Scopely dominate their mobile strategy.
03:11And EA will now probably dominate their console and PC and alternative strategies outside of mobile.
03:17And so this is a formative move by the PIF.
03:22And I'm excited to see what they do with it.
03:24I'm keeping a team in New York on their toes.
03:27But like Battlefield 6, we're showing on the screen right now, Sims, Madden, EAFC, formerly known as FIFA.
03:34What are the future of those properties?
03:36Do they change somehow?
03:38People are spending less time on new titles and more time on existing titles.
03:43That's going to continue to propagate here.
03:46And that's why I look at this transaction by the PIF as a very intelligent move.
03:54EA has dominated the digital homes that we're familiar with for years.
03:57And that's what people want.
03:59They want innovation on things they're slightly familiar with.
04:01Also, they will have the ability when going private to risk it and go for some new properties that will come to love, like a new Battlefield.
04:08I'm excited to see them challenge Call of Duty with their Battle Royale.
04:12And so for all these reasons, I like the transaction.
04:15What about consolidation?
04:16Do they start picking away at companies that you invest in?
04:21I think when you have a new buyer in the market, which the sovereign wealth funds appear to be, you know, one, we're seeing this with the PIF mainly.
04:28But secondarily, we're seeing this with Tomasic with their move into Keyword Studios.
04:32So absolutely, having a new buyer on the scene is a good thing for the industry.
04:37It is not a bad thing, and especially one that's willing to pay a premium.
04:41You know, typically when you look at private equity, you're not that excited, given that the multiples you may receive are not quite what you would hope for if you're going to go public.
04:50But sovereign wealth funds are here to play.
04:52They're here to play well.
04:53And I think having another price of capital liquidity is only a good thing for startups and for those who are motivated to build these companies.
05:00Jason, I saw a twitch in your eyebrow there.
05:02Very quick.
05:02I think Kara's question is, it's a good opportunity for your portfolio companies to get acquired by a bigger beast.
05:08Because, like, EA goes for very technical acquisitions.
05:11Yes.
05:12Yes, absolutely.
05:13And I'm very excited about this.
05:15I think it's a good sign for what is to come.
05:17And there's many good companies in our portfolio that I think would love to work with EA and many of the parties involved in this transaction.
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