The sale of Electronic Arts to a “consortium” of billionaires and millionaires made some good money for stockholders, but an uncertain future for many may come with it.
The $55 billion sale announced last September and finalized yesterday made around $210 per share for its shareholders, including many employees, but now some of those same employees’ careers could be on the line in the wake of the deal.
As part of the massive sale, EA took on around $18 billion in debt (with $36 billion in equity put towards the purchase), which means it will have to pay around $1.8 million per year in interest. And to help pay that off, the company said it will need to cut a lot of its budget. And you can guess what that means next.
“EA’s annual EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is around $1.5 billion, which should be enough to service the interest payments,” Bloomberg’s Jason Schreier said of the deal. “But the publisher has told debt investors that it will cut $700 million in annual costs including $170 million in ‘organizational efficiencies,’ per Bloomberg. In other words: mass layoffs.”
“Mass layoffs” have been a common occurrence in the industry over the past several years, unfortunately. But this would also continue a trend set forth by EA and its CEO Andrew Wilson, who got a $38 million bonus this year and laid off a bunch of Battlefield 6 devs after the FPS game made the company a whole bunch of money.
“This moment recognizes the extraordinary people whose creativity, ambition and passion have made EA one of the world’s leading interactive entertainment companies,” Wilson said of the sale’s finalization. “We’re entering this next chapter from a position of strength with partners who share our vision and ambition. Together, we’ll invest boldly, accelerate innovation, and build the next generation of games and experiences for the hundreds of millions of players and fans who inspire us every day.”
EA is held up by its yearly sports franchises like FC, Madden, College Football, and NHL, so I’d expect those to get pushed even harder when it comes to generating revenue. I cannot say the same for the certainty of its upcoming slate of singleplayer titles like Mass Effect 4 or the Star Wars Jedi franchise.
