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EA Exploring Sale?

New York tabloid NYPOST.com reports Electronic Arts is exploring potential transactions with private equity firms KKR and Providence Equity Partners, attributing the rumor of a sale to "sources." Their attempt to get a response from EA on this failed as the company told them it does not comment "on rumor and speculation." Likewise they could not pry anything about this out of KKR or Providence. They quote a "source familiar with the company" saying: "They’ve made it known they’d do a deal at $20 a share."

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35. Re: EA Exploring Sale? Aug 18, 2012, 12:14 Beamer
 
killer_roach wrote on Aug 18, 2012, 04:17:
Creston wrote on Aug 17, 2012, 12:42:
killer_roach wrote on Aug 17, 2012, 03:14:
The problem, however, lies in that publishers are getting more and more squeezed on margins as game distribution goes digital,

Huh? Isn't that the other way around. They get a far, FAR bigger cut of the pie from digital sales than they do from B&M sales...

Creston

What I'm getting at is that publishers are less needed for digital distribution, just a contract with a distributor. One of the likely easy places for EA to gain increased revenue (at a high profit margin) is to expand the EA Partners program, but why sign with EA when you can just put your game on Steam yourself?

Like how in music large publishers are mostly going the way of the dinosaurs. They're needed for the biggest, but that's it.

With Steam anyone can publish a game. But, for the biggest games, you still need extensive capital for technology, for a large team, for QA and for marketing.
It will take much, much longer for big publishers to go anywhere because the money is still in big games. Small games are fun, but their successes are few and far between. For every Notch there are dozens of whatever that dinosaur shooter that came out last month was.

But expenses in games will drop much faster than, say Hollywood.
 
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34. Re: EA Exploring Sale? Aug 18, 2012, 04:17 killer_roach
 
Creston wrote on Aug 17, 2012, 12:42:
killer_roach wrote on Aug 17, 2012, 03:14:
The problem, however, lies in that publishers are getting more and more squeezed on margins as game distribution goes digital,

Huh? Isn't that the other way around. They get a far, FAR bigger cut of the pie from digital sales than they do from B&M sales...

Creston

What I'm getting at is that publishers are less needed for digital distribution, just a contract with a distributor. One of the likely easy places for EA to gain increased revenue (at a high profit margin) is to expand the EA Partners program, but why sign with EA when you can just put your game on Steam yourself?
 
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33. Re: EA Exploring Sale? Aug 17, 2012, 14:05 Dev
 
Creston wrote on Aug 17, 2012, 12:42:
killer_roach wrote on Aug 17, 2012, 03:14:
The problem, however, lies in that publishers are getting more and more squeezed on margins as game distribution goes digital,

Huh? Isn't that the other way around. They get a far, FAR bigger cut of the pie from digital sales than they do from B&M sales...

Creston
LOL yeah I know.
For instance, skyrim at $60 on steam (of which they sold a crazy number of) makes beth almost twice the margin that they do selling a physical console copy at the same price.

So even if skyrim's PC sales were only half of the console sales? They'd still have made equal money on it (again, at the $60 price point)
 
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32. Re: EA Exploring Sale? Aug 17, 2012, 12:42 Creston
 
killer_roach wrote on Aug 17, 2012, 03:14:
The problem, however, lies in that publishers are getting more and more squeezed on margins as game distribution goes digital,

Huh? Isn't that the other way around. They get a far, FAR bigger cut of the pie from digital sales than they do from B&M sales...

Creston
 
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31. Re: EA Exploring Sale? Aug 17, 2012, 11:32 HorrorScope
 
They have finally realized they don't want to be in the gaming business. Everything we've known for years now. Welp we can't make the money we want here... Anyone want to buy us? Wall Street FTL.  
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30. Re: EA Exploring Sale? Aug 17, 2012, 11:16 Beamer
 
MattyC wrote on Aug 17, 2012, 10:57:
Beamer wrote on Aug 16, 2012, 22:39:
killer_roach wrote on Aug 16, 2012, 22:27:
Kosumo wrote on Aug 16, 2012, 21:40:
Anyone from Vegus here? What are the odds on of Notch buying E.A. by 2025?

My guess? EA won't exist in its present form by 2025. Talk is that EA wants to go private, and, if they're bought by a private equity firm, they'll likely be disassembled and the constituent parts would likely then be sold off.

What "constituent parts" do you think there are, and what value do you think they have? Do you think they're going to sell Westwood and Origin separately?

Westwood has not existed in a very very very long time. EA never held any intention of saving that, just their IP (to slowly destroy).


Nor has Origin. Obviously.
 
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29. Re: EA Exploring Sale? Aug 17, 2012, 10:57 MattyC
 
Beamer wrote on Aug 16, 2012, 22:39:
killer_roach wrote on Aug 16, 2012, 22:27:
Kosumo wrote on Aug 16, 2012, 21:40:
Anyone from Vegus here? What are the odds on of Notch buying E.A. by 2025?

My guess? EA won't exist in its present form by 2025. Talk is that EA wants to go private, and, if they're bought by a private equity firm, they'll likely be disassembled and the constituent parts would likely then be sold off.

What "constituent parts" do you think there are, and what value do you think they have? Do you think they're going to sell Westwood and Origin separately?

Westwood has not existed in a very very very long time. EA never held any intention of saving that, just their IP (to slowly destroy).

 
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28. Re: EA Exploring Sale? Aug 17, 2012, 09:20 Kajetan
 
shinchan0s wrote on Aug 17, 2012, 08:46:
I'm not surprised a company like EA would want to go private. Being a corporation these days is kind of a pain in the ass with all the regulations and retarded shareholders.
Yeah, right. Abolish regulations and retarded babies
 
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27. Re: EA Exploring Sale? Aug 17, 2012, 08:46 shinchan0s
 
I'm not surprised a company like EA would want to go private. Being a corporation these days is kind of a pain in the ass with all the regulations and retarded shareholders.  
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26. Re: EA Exploring Sale? Aug 17, 2012, 04:43 Qbex .
 
... and 6 months down the line new owner decides to pull the plug on Origin. Just you wait.  
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25. Re: EA Exploring Sale? Aug 17, 2012, 03:22 xXBatmanXx
 
20 a share is about 18 too much....  
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Buy from GreenManGaming? Use this, we both get $2.00 - http://www.greenmangaming.com/?gmgr=purutuwi
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24. Re: EA Exploring Sale? Aug 17, 2012, 03:14 killer_roach
 
At the share price that EA is looking to get bought out for ($20 a share, just over $6 billion for the company), somebody would have to be thinking that they could get them up to making Activision Blizzard-level profits (assuming a P/E ratio of around 15-20... ATVI currently hangs out around a 34 P/E, but that's more a sign the company is overvalued than anything).

The problem, however, lies in that publishers are getting more and more squeezed on margins as game distribution goes digital, and most of EA's major franchises are getting pretty long in the tooth. Short of figuring out a way to cut their development costs by a quarter without losing revenue, I'm at a loss to figure out a clear path to what would make them worth $20 a share to anyone. (Then again, that's where Beamer's idea of treating them like Zenimax might come into play - get them to take on a couple of promising small studios who are developing new IP and hope to get something to bank on going forward.)
 
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23. Re: EA Exploring Sale? Aug 17, 2012, 02:55 Prez
 
I'll give them 50 bucks for their company. And that's my final offer.  
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22. Re: EA Exploring Sale? Aug 17, 2012, 02:54 Dev
 
mag wrote on Aug 17, 2012, 01:56:
So EA's strutting around in a miniskirt, fishnets, stilettos?
Yes, but they've been doing it a while.
 
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21. Re: EA Exploring Sale? Aug 17, 2012, 02:52 El Pit
 
Cutter wrote on Aug 16, 2012, 21:54:
Kosumo wrote on Aug 16, 2012, 21:40:
Anyone from Vegus here? What are the odds on of Notch buying E.A. by 2025?

Why would Notch want EA? Is he some sort of masochist?

Call of Minecraft: Modern Brickbuilding 4
OHMYGODOHMYGODOHMYGODOHMYGODOHMYGODOHMYGOD
 
Consoles? I owned two: a Pong clone and an Atari 2600. And that's it.
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20. Re: EA Exploring Sale? Aug 17, 2012, 01:56 mag
 
ASeven wrote on Aug 16, 2012, 23:52:
Grapevine is filled with rumors about this. No big name within and outside the industry have showed any sort of interest for the moment though and there's still no official word if EA is putting itself to sale though unofficially they pretty much have signaled they are for sale.

So EA's strutting around in a miniskirt, fishnets, stilettos?
 
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19. Re: EA Exploring Sale? Aug 16, 2012, 23:52 ASeven
 
Grapevine is filled with rumors about this. No big name within and outside the industry have showed any sort of interest for the moment though and there's still no official word if EA is putting itself to sale though unofficially they pretty much have signaled they are for sale.  
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18. Re: EA Exploring Sale? Aug 16, 2012, 23:46 Beamer
 
Eirikrautha wrote on Aug 16, 2012, 23:30:
Someone in management saw the sales figures for Madden12, looked at Bioware's recent missteps, looks at the drop in COD sales (its competitor) and figures that bodes ill for the MoH release, and has decided to get out early. The pilot is usually the first person to see the mountainside...

This is silly as well. Someone above mentioned that Valve is doing well because they're private. So EA looking to ge the same advantage is "someone in management... looking to get out early?"
 
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17. Re: EA Exploring Sale? Aug 16, 2012, 23:44 Beamer
 
killer_roach wrote on Aug 16, 2012, 22:58:
Beamer wrote on Aug 16, 2012, 22:39:
killer_roach wrote on Aug 16, 2012, 22:27:
Kosumo wrote on Aug 16, 2012, 21:40:
Anyone from Vegus here? What are the odds on of Notch buying E.A. by 2025?

My guess? EA won't exist in its present form by 2025. Talk is that EA wants to go private, and, if they're bought by a private equity firm, they'll likely be disassembled and the constituent parts would likely then be sold off.

What "constituent parts" do you think there are, and what value do you think they have? Do you think they're going to sell Westwood and Origin separately?

You don't understand what private equity is, do you. What KKR does?

Most private equity firms would realize that the parts of EA are more valuable than the whole. Origin and Westwood no longer exist, but the various other studios (Black Box, Tiburon, Bioware) all have significant value, their IP catalog has value, and their publishing business has value. I think it would be hard for a private equity firm to look at EA and go "yeah, we're going to get our best return on investment by leaving this monolithic entity intact, considering how little they're able to leverage their constituent parts".

How, exactly, are the pieces worth more than the whole? In order for that to be true:
1) The pieces need some sort of special value. Usually employees are not good enough, as employees can leave. Game studios that do not own their own IP have nothing of value beyond their employees
2) There needs to be a buyer. Who, exactly, do you think would buy these pieces from EA? Who out there wants Black Box or Tiburon?

Private equity firms buy to turn around, this is true. And sometimes that means selling parts off, this is also true. But typically that's cutting the fat, so to speak. If they bought a conglomerate like, say, Disney, they may investigate this. With Disney you can divest, say, the publishing business, with no true issue. The publishing business isn't directly related to their core business and can be seen as a drag or a distraction. There are other publishers out there that may want it, and it can be somewhat easily made to stand alone if need be.

This isn't true for EA. For one, there aren't really buyers out there. Activision may be on the block itself, as Vivendi is doing what I said in the above paragraph due to an overwhelming debt burden in their main business, and certainly will not take on more debt for more studios. THQ is borderline DOA. That leaves who, Take 2? Will Take 2 alone buy more from KKR than KKR spent on EA? Ubisoft? They'd possibly take some. Zenimax? Hey, guess what, the other PE firm they're saying is interested in EA already owns Zenimax! (And, interestingly, has't broken them up. Shocking, I know!)

Furthermore, EA isn't easily broken up. Even if you can find someone dumb enough to buy a studio whose employees can just walk (when a small dev is purchased it's typically for IP and the heads of the studio are either quickly shuttled out, because they aren't wanted, or they sign long-term agreements as part of the deal to make sure the brain power stays intact. You cannot force them to do this when you jettison the part) you have the issue that these studios can't survive alone. They need to be in a publisher. You can't just sell them to, say, some conglomerate, like you can other companies. They have shared services (e.g., legal, payroll, fp&a, marketing, real estate, design, etc.) It's very easy to add studios to this infrastructure, as you don't need to add much headcount, but in order for a small studio to survive on its own it spends a great deal on this headcount when no longer shared.

So, basically, the individual pieces of EA have no value, they aren't any publishers looking to grow at the moment, and no non-games entity can successfully run these.

Now, another point - if EA was worth more separately than as a whole, why the hell would they get involved with private equity? PE firms either take a company over hostily, which they aren't doing here because EA sought them out, or they take over distressed firms that are desperate and failing. EA may be in some harder times, but they're far from distressed, desperate or failing. If they were truly no longer worth the sum of their parts they'd sell some of those parts themselves to get the value for their shareholders rather than some PE firms' partners.

Lastly, one of the two PE firms the Post is claiming EA is talking to already owns Zenimax. Has Zenimax been split up? No, in fact it's acquired studios recently.




I hate to be a jerk about this, but you're just throwing out nonsense without thinking about it. Seriously, there's no way EAs IP is worth more than the company, and the studios you're talking about have no value. You're making claims due to a dislike of EA without stopping to think about how valid they are, or investigating to figure out how PE firms work (hint: not the way bloggers are claiming Bain Capital works.)
 
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16. Re: EA Exploring Sale? Aug 16, 2012, 23:40 Creston
 
Jivaro wrote on Aug 16, 2012, 22:09:
Leaking a sale rumor to increase stock prices when approaching a quarterly report or shareholders meeting...I am sure EA would never stoop to that level...


They'll only stoop to it once. The FTC does not look kindly on such shenanigans...

Creston
 
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