The buyers are committing $36 billion of their own equity (briefly and inexpertly, “equity” is the value of your assets after you deduct anything you owe), including the value of the PIF’s existing investments in EA. They’re making up the rest of the total thanks to a $20 billion loan from JPMorgan Chase Bank. How will they manage that massive debt? According to the Financial Times, who cite unnamed insiders, they’re gambling on the deployment of generative AI tools as a gigantic cost-saving measure.
“The investors are betting that AI-based cost cuts will significantly boost EA’s profits in the coming years, people involved in the transaction told the Financial Times,” the paper wrote (paywall) in their own coverage of the story. The FT elsewhere commented that the acquisition “is a huge bet that artificial intelligence can significantly cut EA’s operating costs, allowing the equity consortium to manage a large debt load on a company that historically carried limited net debt.”
They’re over leveraged on AI so they’re trying to create markets for it, lol. Jesus christ this economy is a ponzi scheme
Might as well consider EA dead.
Good?
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As long as someone buys the rights to…half a billion video game franchises EA is sitting on, yes. It is good.
On paper EA being dead is good, but I’d like it to be dead and without parasites making money off of the corpse.
It’s been a rotting corpse for a while now.
1982:
Well, they’re fucked then
EA can always keep printing money by putting out the same sport games every year, how the fuck did they get into $36 billion debt? I’m not even mad, that’s impressive.
The $20B was printed by JPMorgan Chase bankers so that Jared Kushner and the Saudis could buy EA at 45% off. In return, the saudis promise that they can siphon $20B from fired workers back to the bankers over the next ~10 years.
No? JPMorgam Chase wrote a loan, right? Don’t they win no matter what, so long as the company doesn’t go under? They’re getting interest no?
Yes, it’s a loan so big that normal personal finance “savings and loans” rules don’t really apply. This loan is 3X EA’s entire revenue, 2X Nintendo’s entire revenue. Basically an entire new game-publisher’s worth of money flowed into the gaming industry to exert dictatorial control over EA. JPMorgan Chase just have to make sure that they get their money back from the EA employees they just helped the Saudis buy.
They actually don’t even have to do that. They get the money off the fees and limited interest on the transaction and sell the debt as a “prime” investment to your retirement fund or pension. Leaving the common people to hold the bag while they receive millions in fees and no liability
At this level, maybe not. When you owe the bank $10k and can’t pay it back, it’s your problem. When you owe the bank $20B and can’t pay it back, it’s the bank’s problem.
This is how 2008 happened.
Also, a bet on consumers being willing to pay AAA prices for slop
They already do, the only difference is now the slop will be made by AI instead of underpaid developers in Romania.
Don’t they do that already?
EA’s output of middling products filled with aggressive microstransactions is about to be bolstered with… heavy use of AI slop?
I’m looking forward to watching this bankruptcy speedrun.
This has got to be some form of vulture capitalism. They will sell off all the IP and physical property, either directly or by spinning off divisions into new companies to sell off. Then sell off any other pieces of the company that they can, and finally they’ll take all that income as bonuses for the new owners and leave the remains of EA with nothing but debt and no option other than to file for bankruptcy. Same thing that was done to companies like Toys-R-Us but on a larger scale.
Thing is, could they even get enough from selling the IP to cover the purchase?
Probably not and they have no intention to. They will give themselves bonuses and stock dividends that will eat up all the income from selling the IP (and everything else) and then leave the company with nothing but debt forcing it to declare bankruptcy.
Don’t they need to get at least $36 billion from that for it to be worth it?
That was exactly my thought. Extract cash for the owners through massive cuts, gut the company and discard the husk. Classic leveraged buy out scheme.
What a fantastic plan. Nothing could possibly go wrong.
Not that I bought their games to start, but I can hope this drives others to stop buying their games all just to say fuck you to some of the investors in this.
good, let them fail more.
Just sitting here playing the long game, waiting for EA to finally implode and get sold off for parts so we can finally get a new Command & Conquer.
Hope their IP gets sold to other companies. Would love to see another wing commander in my lifetime.
I have good news and bad news on that front. The good news is that the original wing commander dev is making a spiritual successor to the game. The bad news is that it’s star citizen.
Fuckin oof
For a brief moment, I had hope. Then, poof, it was gone.
Technically, the Wing Commander successor is Squadron 42. Star Citizen is a Freelancer successor.
I understand if this brings you little comfort.
More comfort than before. Thank you, kind internet stranger.
Well now, I’d already basically given up on EA, glad I made the right choice
Vibe coding is one thing, but I am curious about the state of using of AI tools to reduce the cost of generating 3D assets, animations, and textures. I assume they are introducing this into Ignite and their other build tools, for more rapid prototyping if nothing else.
My first thought was they’ll probably use it to generate endless slop assets for The Sims, since people seem to pick up whatever they put out for that.
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They’re also betting on people buying this crap. Hopefully they don’t.
Kind of a strange bet to make when AI use has been going down in large companies lately. Hope EA goes down as well.
