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Friday, October 03, 2025
Giving up and getting rich
Imagine you were the CEO of a company and you realize that your currently profitable company is heading straight into financial ruin. You know your product development pipeline, and realize that everything in that pipeline is overproduced garbage that nobody wants. You know your management team, and know that none of them had any good business idea for years. Your whole company is built on past glory, trying to wring out the last cent from old products, but unable to produce anything really new. And then you meet a business consortium consisting of a political nepo-baby, and a group of shady but ultra-wealthy investors who clearly have not the slightest clue about the industry you are operating in. You realize, this is your chance! You know your company is a pile of shit with no future, but that is insider knowledge, and not yet obvious to everybody. It is time to give up on your worthless company, sell it for $55 billion to those rich, clueless investors, and retire rich.
I don’t know why everybody is so upset about EA selling itself to a consortium of Trump’s son in law and Saudi Arabia’s sovereign wealth fund. Honestly, if I would own EA, I would have done the same. I would have felt bad if I had sold EA to somebody nice, but selling it to this sort of people feels like morally the right move. I think EA knows that a crash of the triple-A video game industry is coming, and getting out before more people notice is the best idea they had in years. Making video games for hundreds of millions of dollars which then nobody wants to play is simply not a sustainable business. The market is oversupplied with games, and double-A games frequently have a much better chance of being actually good, while costing a lot less to produce. This is the cleverest business deal since Monsanto sold itself to Bayer for $66 billion, knowing full well that they had billions in liabilities for Roundup lawsuits. The only thing that EA CEO Andrew Wilson has to worry about, is that he doesn’t end up like Jamal Khashoggi, when the Saudis find out how much EA is really worth.
- posted by Tobold @ 9:28 PM Permanent Link
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It does seem like a puzzling time to get into the hugely over-saturated video game business. Maybe they're banking on/deluded by visions of AI and VR making things more desirable/profitable, but that's a huge bet to be making.
Wow, you went hard with this one. I haven't cared about EA in decades, I basically just ignored them - Activision too. Ubisoft is a more recent addition to my "I don't care that you exist" list, only a few years.
I don’t know that much about the rest of EA but their sports division is essentially printing money. They’ve managed to crack the strategy of getting kids to buy at full price and then pay through the nose for micro-transactions, and then buy essentially the same game for full price next year.
# posted by 
: 3/10/25 23:45
: 3/10/25 23:45
As much as I agree with the sentiment that EA is garbage and puts out soulless trash products the reality is that they have some of the best selling games worldwide under their thumb and between just Madden, FIFA, Battlefield and their mobile catalogue they will be just fine for years to come.
I think the market had a reasonable view on EA being "just fine", by valuing the company at around $145 per share on average over the last 5 years. The consortium is paying $220 per share, a premium of about 50%. There is nothing in the business prospects of EA that would justify that sort of increase, with a price to earnings ratio of over 50. Even if we assume that EA will be just fine and continue as usual, and there will be no crash of the triple A video games industry, the consortium is massively overpaying. There is basically zero risk that the shareholders don't approve of this deal, and with the political connection also very little risk of regulators stopping the buyout.
Agreed. I'd imagine they were willing to overpay so much because they get to dump a large portion of that debt onto the company they just bought. Then they will do layoffs and cut smaller games and likely increase monetization for their money makers to try and repay that debt quickly. Wouldn't be surprised if the Mass Effect and Dragon Age IPs get sold off as well. They make almost no money compared to the sports titles.
My guess is that they "part it out" -- separate it out into the separate business units, and then sell them all for a premium. Just flip the whole thing and make a tidy short-term profit.
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