Who will buy Electronic Arts?


The video games business is currently going through an unprecedented phase of consolidation. This phase is characterised by big global media companies investing very heavily to rapidly increase their presence, mainly by the aquisition of independent specialist game companies. They are doing this as a matter of survival as many traditional media areas such as TV are experiencing ever reducing revenues whilst gaming continues to expand rapidly as a business.

The recent acquisition of Activision by Vivendi is symptomatic of this phase and the size of this particular deal has focused attention on the whole consolidation process. Electronic Arts are the largest independent specialist game publisher in the world at $3 billion annual turnover, so they are the biggest prize. Who could be in the frame to buy them?

  • Nintendo. The popularity of Nintendo platforms has raced ahead of the availability of games for them. Nintendo need all the game making capacity they can get their hands on. And, as the most profitable video gaming company ever, they have the money.
  • Microsoft. In the war against Sony the most powerful weapon is the AAA platform exclusive. EA could give Microsoft a huge stream of such exclusives making the 360 a must have purchase and effectively handing Microsoft victory. And they can afford to do it.
  • Sony are in a worse position than Microsoft regarding AAA platform exclusives. They would love to address this weakness, but how much money do they have to do so?
  • Google are increasingly a company with a wide portfolio of software products. And the huge gap in their portfolio is gaming. They could easily afford to buy EA and if they applied the possible synergies it would move the whole industry along a lot. Downloadable content, pay per play, server based gaming, episodic content and user generated content would all become mainstream realities either far sooner or to a far greater extent.
  • News Corporation. Already own Myspace (recently opened up to developers as a gaming platform), IGN Entertainment (which includes GameSpy) and a small Danish game developer ITE. Obviously they are missing out and need to move quickly. They have a history of speculate to accumulate (Sky TV for instance) so a bold move, such as buying EA, is entirely possible.
  • National Amusements controls CBS and Viacom (which owns MTV (who are investing $500 million in gaming), Xfire, Harmonix, GameTrailers and Neopets) and Midway Games. So they look set probably to grow their gaming organically and by smaller acquisitions. But don’t rule them completely out of the frame.
  • Warner Brothers are very active at buying game industry assets , they have seen the writing on the wall. I am sure they would love to own EA.
  • Walt Disney are yet another media giant who are already in gaming with Disney Interactive Studios and who need to rapidly increase their presence.
  • NBC Universal are in a slightly complicated position of being 20% owned by Vivendi who now own Activision. However the other 80% is owned by General Electric who certainly have the money to buy EA. NBC have lots of good IP which they could make gaming use of, they are also heavily dependent on the lacklustre TV industry so need a growth area.

Of course there is a chance that EA remains independent, but the economic and commercial forces are so strongly in favour of them being taken over that it is just about inevitable. The main way to remain independent is to rapidly become a lot bigger. To merge with, say Ubisoft and/or Konami to make a global gaming giant. If the regulators would allow this.

The above businesses seem to be the ones with the most to gain from a purchase, but that does not preclude other suitors. As I keep saying, we live in interesting times, and it will be fascinating to see the outcome. 



  1. What would it cost to buy EA- how much of multiple over revenue?

    How would that compare to the market valuations of the companies you mentioned?

    Would they bet that large a stake of their business?

    Would they move outside a core area for such a large acquisition?

    You mentioned Google, for example, would Google spend upwards of $10b to get into gaming, a non core area for them?

    I’m not suggesting you’re theory isn’t interesting but you haven’t laid out much of a financial case. I saw the post on seekingalpha, and for a finance site, I expected more data and detail. At your convenience would love to see more justification and insight than this summary you’ve written.

  2. This article seeks to illustrate 2 points.
    1) Independent video game software publishers are currently big targets for M&A activity. They are in high growth and are in an industry that will be bigger than film or television. EA is just chosen because it is the biggest. All the other big game publishers will go the same way. Small game publishers (unless they are niche players) have no value because the economies of scale are so great. As has been proved in other areas of IP publishing.
    2) Many companies, especially the media giants, have the potential for massive commercial synergies by acquiring games publishers. In fact many are in declining market areas and need to acquire game assets in order to survive. Currently they have the advantage of size so they have a window of opportunity. This will soon go as gaming grows and other media contracts. Hence the current M&A imperative.

    Gaming will be the biggest area of media, this is inevitable. Currently it is still at it’s very beginning. The fundementals of interactivity, connectivity and non linearity are so enormous that they will reach into areas that are beyond our current imagination. Education, certainly, will become centred around video games, something we are just beginning to see on the DS.

    Gaming will be core for Google. They really have no option. Because gaming will be so all pervasive.

  3. I dont always see a column that catches my eye..but this one did. I hadnt thought about EA being taken over since they are so big in the game field.
    You are bang on though.. its very true it would make a good acquisition for someone. Problem is that they are really a production outfit these days. The real developer is Black Box which they took over years back and originated Need for Speed and according to an article in the Vancouver Sun Business section today have another hit with their Skate game. So Black Box is the hitmaker for them. Black Box was created by some folks that left Radical Entertainment and just last week I found out something I didnt know. Radical was started by people that had been involved with Don Mattrick who had created the EA Vancouver franchise that has become a world leader. Back in the early 80s he had developed a game called Evolution and sold it. I know this because i was in grade 10 and invested some money in a software development company called Sydney Development. They bought his game.. proceeded to go under and hence now Vancouver is a world leading game dev center! So as much as i didnt make any money off of that..i can always joke that i helped finance the start! Not to mention the companies that developed games like Galaga, Defender or Spy Hunter that I poured tons of quarters into.

    so i like your take on that situation. I would only argue that i dont think they are worth as much as a nimble upstart. Online gaming is where its at now.. my roomate is sitting in his room right now trying to kill some.. who knows what. Its obvious.. not to mention i could see one of the companies develop there boxes to run movies through. That would make a lot of sense to try and grab a bit of the movie or vid market on top of the games. Having powerful chips and cards could make that experience better and easier. Just a guess.. but seeing the sandisk system that just came out we can see where the market is evolving.. yet i wonder.. why dont they just do a bluetooth version of that.

    I also like the people that talk about how games have evolved to the point that people like myself arent even interested in them anymore. The Wii appears to slightly address that issue.

    Another issue that i wonder about is that if games are bringing in more than movies..then realistically game companies should be taking over the film companies..not the other way around!!! Its just the games folks arent savvy to their power potential..therefore they deserve to die…haha..

    ok, cheers and keep the good articles coming.. whatever happened to Rage?

    -bill stenner
    vancouver bc
    *after this email i would like to add i find the list of companies interesting..one especially being Google. They havent stepped into the gaming arena yet..but following their pattern expect something open source styled that would allow everyone else to cannibalise each other. National Amusements is a good one because Viacom is constantly on the move trying to find new markets. One problem who will take over when sumner redstone is gone? he just cut his kids out..so that company will just go to the wolves when he is done. I think we are missing the dark horse asian companies since online gaming is massive with them. I expect to see some of them grow faster than most. I think we are naturally in a huge M&A era.. lots of money floating around..lots of uncertainty and too many players chasing limited money.

  4. 1. Nintendo are making money on hardware for both the DS and Wii. They should be buying more factories, not western games publishers
    2. Microsoft and exclusivity. EAs business model is selling large quantities of reasonable quality products on all formats with a large marketing push. This organisational setup is not compatible with first-party exclusive title development
    3. Sony are selling off divisions to pay for a heavy loss-making games division. Next.
    4. Google are a web software company. EA a bricks and mortar packaged goods company. EA bring nothing to this deal.
    5. Your others are just as tenuous.

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