I have been sort of enjoying former Dragon Age executive producer Mark Darrah’s reinvention as a Youtuber who trades insider BioWare anecdotes for merch. He’s got an actual T-shirt line, including a T-shirt for babies upon which Mark threatens to “pump NFTs” unless you buy his gear. Respectable Crazy Uncle energy. Maybe don’t invite him to your kid’s baptism. But maybe do watch his new video about what might happen to EA’s many development studios in the wake of the company’s $55 billion acquisition by Donald Trump’s son-in-law, Saudi Arabia’s Public Investment Fund and the gilded suits of Silver Lake.
The tl;dr/tl;dw is that Darrah thinks EA’s various sport game teams, like Madden and EA Sports FC, are probably fine under the new privately-owned EA. Those games bring home a lot of bacon, after all, and EA’s new dads in Riyadh are keen on sports in general. He’s less confident about the studios clustered under EA Entertainment, and especially those such as Darrah’s old joint BioWare who might have more pronounced cultural objections to the new ownership, based on the kinds of stories they tell.
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Darrah – who worked at BioWare for 23 years before leaving in 2021 – prefaces his comments with the disclaimer that he is not a proper financial analyst or a solid source of hot tips for investors, noting “that any attempt that I’ve ever made to predict what a stock is going to do has been wrong, even when I’ve tried to take my wrongness into account”. Nonetheless, he argues that EA “has been looking to change its corporate structure for a while”, with plans including “a potential merger with NBC Universal”, and that the acquisition will likely accelerate that transformation, because the consortium who bought EA did it with $20 billion of borrowed money, and the interest on that loan is going to stack up fast.
There follow some hypothetical napkin calculations in which Darrah suggests that EA might have to pay a billion dollars a year, just to keep up with the debt. For context, EA reported net income of $1.273 billion in the year ending March 31st 2024. “So, the company as it currently stands is in a dangerous position.”
Going private will save EA some money by getting rid of the “giant accounting group that’s necessary to prepare your finances for your public statements”, but this will be a drop in the ocean, Darrah continues. He thinks we can expect job losses across EA’s organisation, and possibly even some studio closures.
Which teams might be particularly affected? Well, Darrah reckons EA Sports at large are “very safe”, primarily because they make a lot of cash. Darrah notes that around three-quarters of EA’s revenue in 2024 came from live service projects, and that EA’s various football and American football series accounted for a large chunk of that cash.
He also notes that Saudi Arabia’s PIF – who previously owned around 10% of EA shares, which have now been rolled into the acquisition – are partial to investing in sporty things, whether as a means of relieving Saudi Arabia’s dependency on oil revenue, or as a distraction from the Saudi government’s tendency to treat women like second-class citizens and have critics of their rule imprisoned or killed.
“It’s hard to imagine that acquiring a $55 billion media company, which is ultimately what EA is, won’t play into that effort, won’t be used in some way to further their own political goals in terms of public perception of the country,” Darrah comments. One comparison point here is Ubisoft’s recent collaboration with the PIF to make an Assassin’s Creed: Mirage DLC pack set in 9th century AlUla – it’s arguably government-sponsored virtual tourism.
Darrah thinks the various developers and series grouped under EA Entertainment could be in trouble, however. Apex Legends, at least, is “a consistent cash revenue source”. As for Battlefield, “I guess we will see what happens with Battlefield 6”. The Sims? “Potentially not” a good fit for the “messaging desires of the three groups that are involved in the acquisition”, but the series does make money. Which leaves the studios who haven’t shipped anything yet, or not in a while, or who’ve shipped games that did terribly.
“The groups working on the Marvel games and, of course, BioWare are, I think, going to be in a different position,” Darrah notes. “If this is a PR move for the Saudi government as much as it is a financial one, the studios that don’t have much of a track record, what you might do is just come in and put your thumb on the scale and push their messaging in directions that you want, in directions that make you look good or at the very least, steer them away from messaging that makes you look bad.
“But for the studios that have more of a track record, especially a track record that maybe doesn’t line up with your own political views – again, BioWare – you’re going to look at that studio and wonder how you make them fit into your new structure,” he goes on. “It’s hard to imagine that you have BioWare pivot from having very progressive messaging to having the reverse, because it’s what the government wants. It’s hard to imagine that the public perception of a game that comes out of BioWare, even if you do do that, isn’t apocalyptically bad.
“So in that case you either have to decide that you’re willing to just leave it alone, or you have to think that they don’t fit anymore within the goals of this new organisation.”
For what it’s worth, my own experience of working for arch-capitalists sitting on giant hills of money is that they are generally OK for you to swing left, providing this adds to the height of said giant hill of money. After all, Disney were happy to profit from Andor. I have no real insight on Saudi Arabia’s Public Investment Fund, but I suspect they’ll be absolutely fine with BioWare expressing all kinds of progressive positions in-game, providing BioWare are sufficiently lucrative. BioWare don’t, however, appear to be sufficiently lucrative for EA, at least under the old regime, so perhaps Darrah is right to suggest that the new owners will seek to sell them off or shut them down.
In addition to dangling the prospect of studio sell-offs or closures, Darrah broaches the possible sale of EA intellectual property. EA have historically avoided selling their IPs, Darrah says, because management have not wanted to risk handing off a promising property to a competitor that then proceeds to earn eleventy-squillion dollars. “But as this deal closes, those incentives could radically change,” Darrah goes on. “We could enter into a situation where now the incentives are to shed costs or generate revenue if at all possible. We need to generate revenue to pay down as much debt as we can as quickly as we can. We need to cut costs to give us more wiggle room to make sure that we are not in a dangerous position when servicing our debt.”
He notes that “EA has a huge repository of dormant IPs that are just sitting there dormant. It seems unlikely that the new resulting structure is going to be eager to suddenly revive a bunch of those IPs. So, one option might be to sell the whole lot of them for $100 million if you could get it, because $100 million can come off the debt.”
He posits that the acquiring consortium might even try to sell the entirety of EA Entertainment to a group with “deep pockets, like say Sony”. Perhaps this has been the plan since the acquisition was first discussed. “It is conceivable that EA’s new structure was intentionally conceived with this action in mind. Or you could imagine that what happens is this new [owning group] plucks all the parts it wants out of EA Entertainment and then sells off whatever is left over.” Whatever happens, “it’s incredibly unlikely that EA stays exactly as it currently is in a private structure, especially carrying $20 billion worth of debt.”
Darrah does suggest that there might be an upside to the acquisition for a studio like BioWare, in a side-commentary on the rhythms of financial management at publicly-owned companies. He argues that the quarterly earnings report cycle of a public company doesn’t make much sense for how videogames are developed, because game projects tend to be an on-going cost for years followed by a “burst” of revenue.
This is part of the reason companies love live service projects with steady monetisation, Darrah says: it doesn’t just increase the returns but renders them more predictable. Private companies don’t have to report their financials, he says, which means that “if they want to see a studio go dark for 25 years in order to investigate some sort of radical new way to develop games, they can do that.”
He paints a more optimistic picture of a possible future “where you have EA Sports generating revenue, being this source of cash, servicing the debt and paying money into whatever structure ends up being formed. And then on the other hand, EA Entertainment being tasked with something different. Still making money, but with different time horizons. maybe simply with a goal of making games that sell the most that they possibly can sell regardless of when they release or making games that make EA look good”.
Even if that comes to pass, however, Darrah seems convinced we can expect job losses and potentially studio closures and the flogging of entire gameworlds, as EA’s new owners try to rustle up a few billion for the bank. In what is perhaps a show of Darrah’s sense of the idea’s viability, he doesn’t discuss the recent insider claim that EA’s new owners are gambling on generative AI as a cost-cutting measure in order to repay the debt.
