Saudi Arabia’s $55 Billion Wager On Gaming: Why The EA Takeover Issues

Saudi Arabia has made its greatest transfer but into the worldwide gaming business, taking management of Electronic Arts in a $55 billion deal that places among the world’s best-known online game franchises below Saudi-led possession.

EA is the corporate behind titles together with EA Sports FC, Battlefield, Apex Legends and The Sims, and the transaction is the second-largest acquisition in gaming historical past, behind Microsoft’s takeover of Activision Blizzard.

The deal is being led by Saudi Arabia’s Public Investment Fund, which reportedly controls greater than 93 p.c of the corporate. Jared Kushner’s funding agency Affinity Partners and personal fairness agency Silver Lake are additionally a part of the consortium.

But for Riyadh, the takeover is about rather more than proudly owning standard video games.

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Video sport business knowledgeable Joost van Dreunen instructed i24NEWS that gaming matches neatly into Saudi Arabia’s broader Vision 2030 technique to cut back its dependence on oil and construct affect in new industries.

“Video games are incredibly attractive to young audiences,” van Dreunen mentioned. “It’s a great way to build up some cultural clout and sort of have some soft power in foreign markets.”

Saudi Arabia has already invested closely in esports, gaming corporations and leisure infrastructure. Crown Prince Mohammed bin Salman is thought to be an avid gamer, whereas the dominion is growing Qiddiya, an enormous leisure challenge exterior Riyadh with a complete district devoted to gaming and esports.

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This November, Riyadh may also host the inaugural Esports Nations Cup, a worldwide multi-game match through which gamers will compete for his or her international locations reasonably than skilled golf equipment.

Van Dreunen mentioned such occasions assist Saudi Arabia introduce itself to new audiences and join extra intently to the worldwide economic system.

“They see it as a great way to introduce themselves to the world and the world to them,” he mentioned.

Backlash from avid gamers

Not everybody within the gaming group has welcomed the takeover.

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Some gamers worry the brand new possession might result in modifications in beloved franchises, whereas others are involved in regards to the monetary stress created by the deal.

Van Dreunen in contrast the response to what occurs when a overseas billionaire buys a serious soccer membership.

“Gamers are always kind of curmudgeons,” he mentioned. “They don’t like change that much, but eventually they tend to come around.”

One of the loudest reactions has come from followers of The Sims. For greater than 20 years, the life-simulation sport has allowed gamers to create a variety of characters, relationships and identities. Same-sex {couples} have lengthy been a part of the franchise, whereas gamers can customise gender presentation and pronouns.

That has helped The Sims construct a very massive LGBT fanbase.

The sport is now managed by Saudi Arabia’s sovereign wealth fund, whereas same-sex relations stay unlawful within the kingdom.

There is at the moment no proof that Saudi Arabia plans to censor The Sims or take away LGBT content material.

But van Dreunen believes the franchise might face one other type of uncertainty.

“The diverse nature of The Sims audience raises immediate questions when owned by a government, or a sovereign wealth fund, that may not be as open or as comfortable with some of the content that it puts out,” he mentioned.

He predicted that The Sims might probably be among the many belongings offered off as the brand new house owners look to handle the monetary burden created by the transaction.

The $20 billion debt query

The EA takeover reportedly comes with roughly $20 billion in debt, making it the most important leveraged buyout ever.

That might have important penalties inside the corporate.

Van Dreunen mentioned the stress to repay that debt might result in studio gross sales, restructuring and layoffs.

“It’s going to shed a bunch of studios,” he mentioned. “That’s going to mean layoffs, unfortunately. It’s private equity at work.” For avid gamers, that will show to be simply as necessary as questions over Saudi possession itself.

Why gaming issues

The scale of the business helps clarify why Saudi Arabia is prepared to spend a lot. Around 3 to three.5 billion folks worldwide play video video games, in response to van Dreunen, whereas annual world shopper spending on gaming is round $250 billion.

“It’s a large entertainment industry that caters to a huge number of people,” he mentioned. “And it has grown over the decades into becoming one of the most culturally relevant pastimes and leisure economies.”

Gaming is now not a distinct segment interest. It is without doubt one of the world’s greatest leisure companies, with an viewers that rivals conventional sports activities, tv and movie.

Saudi Arabia is now betting that this viewers can assist convey funding, know-how and world affect lengthy after oil turns into much less central to its economic system.

The $55 billion takeover of EA is its greatest wager but.

Now avid gamers shall be watching intently to see what meaning for the video games they love.