EA Agrees to Private Investor Sale at $55 Billion

Watch EA Agrees to Private Investor Sale at $55 Billion - Bloomberg on Dailymotion

Transcript

00:00When I was a kid, you know this story, I would save up for weeks and I would spend my allowance

00:05at a store to buy a disc for my PlayStation or my PC. The video games industry does not work

00:11like that anymore and I think it speaks to the core of how EA is running right now. Explain it.

00:17Ed, I think nowadays you would be saving up to buy a new costume for your character in

00:23EA's Apex Legends. Yeah, the big number that I would look at that I think helps illustrate

00:29why this happened is EA's revenue split between what they call live services and products. Live

00:38services meaning in-game transactions, what people spend with inside their games rather

00:43than buying new ones. And that split is 75-25. 75% of EA's revenue in the last fiscal year

00:49came from live service, microtransactions, people buying costumes, people buying FIFA players,

00:56ultimate team players. And that to me is a shocking number in many ways, but I think largely what it

01:03says is that gaming has started to become, if it's not already, a mature market where it is not seeing

01:09a ton of growth. It is certainly not seeing double-digit growth anymore. It is seeing maturity and

01:15predictability among its games and EA's yearly sports franchises, which is kind of generating

01:21predictable revenue. EA's free-to-play titles like Apex Legends. That tells that story.

01:26Just to go in on why private equity therefore thinks this is the moment to take this out of the public

01:31markets. You're not having to report on a quarterly basis, Jason. But it's also interesting timing because

01:36they've got a juggernaut about to come out in October, Battlefield 6. Could this change the dynamics of what

01:42this is priced at, whether other people come into the field and try and scoop it up?

01:45Yeah, it's a little baffling to me. I was actually pretty surprised at the timing because I would

01:51think that EA would want to hold off for a better price given that Battlefield is expected to be a

01:57pretty big hit. That said, from what we've heard, from what other people have reported, this deal has

02:02been in the works for months now. EA has actually been looking to sell themselves or to participate in

02:08an M&A of some sort for years now. Andrew Wilson has been, if not quite public, at least semi-public about

02:14that fact about wanting to become a bigger BDA company, whether through a merger or an acquisition.

02:19And it could be just that the timing worked out kind of independently of their release schedule and

02:24they were looking to do this regardless. But yes, I would think they would be able to get a better

02:28premium if Battlefield 6 comes out and does Gangbusters or even beats Call of Duty, their biggest rival.