The latest Alinea Analytics weekly newsletter is out, and analyst Rhys Elliott (featured often on Wccftech with exclusive interviews) could not avoid tackling the subject of the $55 billion EA buyout by the so-called Consortium. More specifically, Elliott highlighted the $20 billion debt others had already pointed to as a potential cause for upcoming layoffs at EA.
According to the Alinea Analytics analyst, IP sales and/or studio divestitures are going to be on the table. BioWare is clearly a chief candidate, but he also namedropped Motive (which is currently developing the Iron Man single player game and also helping with Battlefield 6) as another studio where the axe might fall eventually.
$20B in debt is a ticking time bomb. While EA’s cash flow ($2 billion to $2.5 billion) can certainly contribute to serving this debt, $20 billion in junk-rated (single-B) debt is a looming shadow. And in LBO land, this kind of debt often means ‘’efficiencies’’, which is PR spin for mass layoffs and cuts. Expect layoffs, departures, and cuts, probably deep ones. Many of the cuts will happen outside of the money-making sports games (but nothing will be safe from the efficiency cuts). Anything non-service or slow-building will be on the chopping block first.
IP sales and studio divestitures are on the table. Many of the cost-cutters will ask themselves, “Why keep a $200 million RPG team when FIFA cards print cash?’’ Single-player studios like BioWare (Mass Effect) and Motive (Iron Man) are in most trouble. BioWare was arguably already in management’s crosshairs before this buyout. Add the studio’s LGBTQI+-friendly nature and its themes on human rights into the mix, and this could spell trouble.
The analysis then singled out PIF, the sovereign public investment fund of the Saudi Arabian government. Like many others, Elliott believes that the EA buyout is largely an attempt to diversify PIF's portfolio in the long term as they move away from oil, and also to try and make the world forget about the human rights issues that are still present in the country. This is just the latest in a long series of steps, which include, just in the gaming space, investments in Nexon, Take-Two, CAPCOM, Nintendo, and the Embracer Group. They also acquired Scopely (which, in turn, acquired Niantic's gaming division).
About the author: With over two decades of experience in gaming journalism, Alessio Palumbo has led the gaming vertical at Wccftech since August 2015. He started working at a young age for Italian websites like Everyeye.it, Gamestar.it, Nextgame.it, and Multiplayer.it before kickstarting the indie English-language publication Worlds Factory as its founder and Editor in Chief. In the last decade, he has coordinated the overall output of Wccftech's gaming section, managed PR relations, assigned reviews, produced daily news coverage, edited gaming content as needed, and delivered game reviews. Arguably, his trademark content is the long series of exclusive developer interviews that have been cited by Wikipedia and by the biggest news media and gaming publications. His passion for technology also makes him knowledgeable when it comes to gaming hardware and tech. His favorite genres include RPGs, MMORPGs, and action/adventure games.
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