Jason Schreier

EA's Deal to Go Private Could Be Good for Investors, Bad for Employees Leveraged buyouts almost always lead to cost-cutting in the form of big layoffs

EA's bombshell deal to go private could be good for investors, but bad for employees. Leveraged buyouts almost always lead to immediate mass layoffs, and more than half of EA's current cash flow will likely go toward servicing the debt.

This week's column: www.bloomberg.com/news/newslet...

Confused by EA going private? Game industry expert @jasonschreier.bsky.social from @bloomberg.com and Triple Click joins us on the new episode of The MinnMax Show to help explain the situation. youtu.be/se-CQM_rXwM

My colleagues at Bloomberg report that the $20 billion debt in the EA deal is expected to be rated single-B — meaning it is considered a "junk" loan, or one that is high-risk and speculative, typically offering high interest rates. Which the new EA will have to pay
www.bloomberg.com/news/article...

Think about it this way: if you buy a house with a mortgage, the loan is "funded at close" — meaning the sellers get the full amount from the bank as soon as you all sign the paperwork — and you owe the debt for however many years it takes.

No, that means the bank is paying $18 billion to the borrowers at the close of the deal, and $2 billion later. The debt is $20 billion.

And they're going to want 20-30% profit on top of that. In the best case scenario (they manage to stay profitable without getting buried by debt like Toys R Us did) it still means significant cost cutting

That's impossible to say without knowing how the debt is structured but the interest alone could be a billion a year, or more than half of EA's EBITDA

If there’s a market, sure. But companies don’t often sell their IP, and nobody would want to buy, say, BioWare without also getting Dragon Age and Mass Effect

A lot of people are (understandably) focused on the Saudi Arabia and Kushner part of this, but the far bigger immediate impact will come from the new private EA being on the hook for $20 billion in debt. That could mean mass layoffs, more aggressive monetization, and other big cost-cutting measures

Yes and that $20 billion will go on EA’s books. Essentially they are buying EA with EA

It’s official: EA is going private.

The leveraged buyout will be financed by a staggering $20 billion of debt, which likely means some *aggressive* cost cutting is ahead for EA in the coming months and years.

www.businesswire.com/news/home/20...

Yeah, this is conjecture but I think $20bn in debt is likely going to have a much larger impact on EA than Saudi potentially increasing their stake will

Some important context I think people are missing is that Saudi Arabia *already* owns 10% of Electronic Arts. It's the company's third-largest institutional shareholder.

"Going private" just means delisting from the stock market and becoming a privately owned company rather than a publicly owned one. doesn't matter who the owners are

It means they're delisting from the market and becoming a privately owned company instead of a publicly owned one

Exclusive | Videogame Giant Electronic Arts Near Roughly $50 Billion Deal to Go Private Investors including Silver Lake are eyeing a deal that would likely be the largest leveraged buyout ever.

Megaton: EA is close to a $50 billion deal to go private, WSJ reports www.wsj.com/business/dea...

Literally every article I post is a free gift link

I'm all for free speech but imo it should be illegal to comment on articles before reading them

There's too much TV to keep up. Have we hit the limit? It's not that there are too many bad shows. It's that there are too many perfectly fine ones. That has implications for jobs in Hollywood.

??? www.npr.org/2022/05/03/1...

There Are Too Many Books; Or, Publishing Shouldn’t Be All About Quantity And now for my hottest take in a minute: There are already too many books in the world. As a reader, I’m constantly overwhelmed with new material, and I know I’m not alone. And this is before we fa…

??? lithub.com/there-are-to...

The Video-Game Industry Has a Problem: There Are Too Many Games A crowded September for video-game releases illustrates a broader challenge in the market

Too many games www.bloomberg.com/news/newslet...

Glad we steered you well!

In my experience usually that just means the text is too small

And MH Wilds has issues on beefy desktops too

I assume it cleans your house

Dunno if the new ROG Xbox Ally is worth $600/$1,000, but I do know that I've used the Steam Deck OLED ($550/$650) nearly every day for the last two years and it runs almost everything I want to play perfectly

They sure didn't!

yup. As always if you're not using Agrias and Orlandeau, you're handicapping yourself. The game is just as wildly unbalanced as it was in 1998

I didn't compare every single line but the script seemed identical to the WOTL version to me

Between consecutive battles you can now bail and go to the world map