Two days have passed since EA announced that it would sell it to Saudi Arabia and private equity firms for $55 billion, and concerns continue to heat up as the dust settles.Some inside the company are concerned about possible layoffs, job cuts and content reviews in the future, and the specific operating details of the deal don’t bring them much comfort.Rumors of downgrading credit ratings, increasing efforts in AI plans, and the relative silence of relevant executives and investors are of no use.
Earlier this week, Bloomberg reported that S&P Global Ratings program downgraded the EA's credit rating to "junk" once the leveraged acquisition is completed sometime next year.EA's current credit rating is "BBB+", but after carrying a $20 billion loan, which needs to be used to pay all existing shareholders of the Battlefield 6 publisher at a 25% premium, will fall into the "non-investment grade" or "speculative grade" range.Moody's Ratings has also announced plans to conduct a similar reassessment.And the more we know about the financing background of the deal, the worse things look.
“JPMorgan Chase made this commitment through its leveraged financing division rather than a private credit strategy, and the largest U.S. bank is expected to share risks with rival companies to form a global underwriting group,” Bloomberg reported yesterday. “These people who did not want to discuss confidential details said the debt, which is expected to be rated single B, will be sold in cross-border bicurrency transactions through high-yield bonds and leveraged loans.” It sounds like high-interest debt.
Some analysts interviewed said privatization could lift EA out of the stock market impact of volatility around quarterly earnings reports, but carrying huge debt could also completely reshape the decades-old gaming company we know.EA has always acquired well-known studios with great creative ambitions, but has greatly reduced the reputation of greatly reducing the revenue potential of the "unboxing krypton gold mechanism" in the series of "Madden Football" and "EA Sports FC".
Rebirth Entertainment has recently experienced multiple rounds of layoffs, and several projects have been cancelled, including the long-awaited prototype of the new worldview of "Titanfall".BioWare's situation is even worse.After experiencing a turbulent development cycle due to the adjustment of development progress and the shift in service-oriented game goals, the role-playing game giant has now returned to the "single-project studio" state and has long since disappeared.According to Insider Gaming, EA once considered selling the studio it acquired for $775 million in 2007.At least some of the studio's developers are also concerned about the future under Saudi capital holdings.They told Insider Gaming that it seems only a matter of time before BioWare streamlines further.
“For studios that have more past records, especially those that may not match your own political stance… you look at the studio and think about how to fit them into your new architecture,” Mark Dara, former BioWare project director, said in a new video. “It’s hard to imagine that BioWare will move from delivering very progressive ideas to the opposite direction just because it’s what the government wants. It’s hard to imagine that even if you do, the public’s perception of BioWare’s games will not become extremely bad.”
In a FAQ for employees — one of the few communication documents EA has released since the deal was announced — the company claims: “This deal will not cause immediate changes to your work, team or daily work.” Despite concerns over Saudi Arabia’s poor human rights record, EA did not reiterate its long-standing commitment to inclusion — in 2022, when some states pushed anti-LGBTQ+ legislation, the EA made it clear that “transgender rights are human rights”.
“Andrew Wilson said ‘go you’ to all the female employees of EA and LGBTQ employees through this deal,” a current EA employee told Game File this week. “It just shows how many people have fallen victims in the past year to make executives rich. Everything feels terrible. And we know that once the deal is done, things will get worse before they get better—if it is possible.” Another employee, who is also anonymous, reiterated these concerns: “Members of the Proud Employees Task Force are currently actively expressing our concerns about our future,” they said. “We are worried that LGBTQ related content will be downgraded or completely cut, and that LGBTQ employees — especially trans people — will be on the layoff list. Almost no one feels their voices are heard now.”
The outside world is also worried about what the new equity structure means for EA's ongoing generative AI plan.The program is an important part of EA's 2024 Investor Day speech.At the time, CEO Andrew Wilson said AI was “the core of our business” and “more than just a buzzword” and claimed that the publisher was experimenting with more than 100 “novel AI projects” to improve the way games were developed.These grand promises have surfaced again as Saudi deals advance.
Bloomberg reported on the deal earlier this week, citing deal-related sources as saying: "Investors believe that cost reductions based on AI will significantly increase EA's profits in the coming years." The report also said: "This deal is a big bet - betting that AI can significantly reduce EA's operating costs and allow the equity consortium to deal with the huge debts borne by the historically limited company." Some employees interviewed said that EA has been pushing AI hard for the past 12 months, but the urgency level varies.While developers are encouraged to try as many AI tools as possible, no one says they are forced to apply these tools directly into the workflow.At the same time, AI has been included in customer service management - this sports game series publishing company that relies on micro-transactions to drive has a huge demand in customer service.In the past, players may be transferred to manual customer service when encountering problems such as illegal review of terms of service, but now their complaints may be transferred to AI customer service first.
This Saudi-related transaction is the second largest merger and acquisition case in the history of the gaming industry.The first largest merger case was Microsoft's acquisition of Activision Blizzard, a deal that has faced unexpected long-term scrutiny in the U.S. and overseas regulators, including a full lawsuit filed by the Federal Trade Commission.However, that was during the Biden administration, which made antitrust enforcement a federal priority.Under the current Trump administration's "spend money and take all" operation model, EA's transactions sold to private equity companies and foreign governments are not expected to encounter too many obstacles, especially considering that President's son-in-law Jared Kushner is also one of the buyers.
"Kushner has a private relationship with Saudi Arabia and has a deep connection. He is easy to do business in the Middle East. This has built a trust base for both parties," a source told the Financial Times.Another source said: "The regulatory environment we are in is welcoming Saudi Arabia and is no longer the case in the previous administration." A third source said: "Which regulatory body would say no to the president's son-in-law?"
