With the European Commission this week approving the $55 billion acquisition of Electronic Arts by a fund led by Saudi's PIF, Rob Fahey pulls apart the deal's intentions and underlines why the entire industry should be paying close attention to what happens next.

Next, James Batchelor speaks to analysts about the validity of the next console generation and the final acceptance that the model of subsidising launch hardware to profit from late-cycle software is broken.

Finally, some Steam publishing metrics and further reading in Social Commentary and Extra, and an overview of Edge 426, on sale now.

In the midst of the high drama surrounding Xbox in recent weeks, it’s easy to forget that the fate of one of gaming's other great edifices is also currently being decided. Yesterday, the European Union approved the $55 billion buyout that will take Electronic Arts private – the second-largest acquisition deal in game-industry history, after Microsoft’s $68.7 billion buyout of Activision Blizzard in 2023.

Approval from the EU’s competition and anti-subsidy watchdogs is an important hurdle for the deal to clear, though it never seemed likely that it would get tangled up by these kinds of investigations. Unlike the scrutiny of the Activision Blizzard deal, which attracted plenty of submissions and lobbying from other interested parties around the industry, the EA deal has largely passed by without so much as a shrug.

That’s because while EA is a tremendously consequential company to the industry as a whole, it’s being acquired not by a platform holder or another industry player, but by a financial consortium with minimal existing interests in the gaming space. That fact may set competition authorities at ease, but ever since the bid was first announced last September, the identities of those involved in the purchasing consortium have been creating misgivings for lots of other people, from fans of the company’s games to staff at its studios.

Private-equity apocalypse

The key names behind the consortium are Saudi Arabia’s sovereign wealth fund, the Public Investment Fund (PIF); Affinity Partners, an investment firm headed by Jared Kushner; and Silver Lake, a US private-equity firm that generally specialises in technology investments.

Regardless of those specific identities, customers and employees alike have generally learned to fear the worst when private-equity firms take over major companies. The private-equity sector’s reputation for vulture-like asset stripping is hardly undeserved. The past two decades are a graveyard of successful, respected companies that were hollowed out and destroyed after private-equity firms took over, extracted the most valuable assets, and lumbered what remained with brutal levels of debt.

Silver Lake’s involvement in this private-equity deal also comes with specific baggage given its links to former EA CEO John Riccitiello. Riccitiello isn’t confirmed to be involved in the EA bid in any way, but he co-founded private-equity firm Elevation Partners with investor Roger McNamee, who also co-founded Silver Lake. Silver Lake’s only previous dealing with any gaming company, incidentally, was a 2017 investment in Unity, whose CEO at the time was John Riccitiello, following up a misstep-laden tenure at EA with a catastrophic run at Unity’s helm. Even if that’s all coincidental, the spectre of Riccitiello’s influence returning to EA as one of the four horsemen of private equity is a grim one.

Remarkably, though, that concern is a secondary one for most people. Instead, as the deal moves towards becoming a reality, the most prominently voiced fear is about political interference in EA’s output and creative decision-making. The possibility of being entangled in ham-fisted attempts at reputation laundering by Saudi Arabia – or of having a chill of disapproval over content decisions from Saudi investors – certainly doesn’t fill anyone with joy; but if anything, the involvement of Kushner and Affinity Partners is even more concerning.

Affinity’s stake makes the EA deal look less like an isolated investment decision and more like part of a pattern, fitting in alongside the recent takeovers of other major media companies by conservative oligarchs in the United States. Buying a major videogame publisher isn’t quite so obvious a political move as, for example, the Ellison family’s weaponisation of their Oracle billions to buy up media firms with the open intent of interfering with broadcast-news channels. Nonetheless, videogames exert their own influence over cultural conversations, especially among younger generations; the fear that political control over this area of culture is a key motivation for the deal isn’t unreasonable.

Swimming against the tide

The concern that EA is going to start finding thumbs pressed on many of its decision-making scales is only made more valid by how profoundly strange this acquisition is from a purely business perspective. The $55 billion bid comes even as other major companies are pulling back from large gaming investments. Tencent, which has been building a portfolio of gaming subsidiaries and investments around the world for years, is slowing the pace of its investments and reportedly even considering downscaling holdings in some areas. Google and Amazon have dropped or scaled down gaming ambitions, and Netflix has gone quiet over its erstwhile plans. Microsoft’s issues with Xbox, too, are arguably part of the broader movement of corporate giants that made strategic bets on gaming and are now cooling on the sector.

The reasons for the pullback aren't hard to identify. Soaring development costs in triple-A production have made profitability hard to reach even for well-established franchises, while various live-service gambles simply haven't paid off. Add to that the fact that these companies' attention has been drawn to a newer, shinier thing in the form of the speculative bubble around generative AI, and it's no wonder their interest in gaming is waning.

Until recently, it looked like the Saudi PIF was part of that broad movement as well. Back in 2023, there were reportedly cold feet over a planned €2 billion investment from the PIF that sent Embracer Group into a tailspin, which in hindsight was actually the first canary to snuff it in this particular coalmine. Yet now, as everyone else in the world pulls back and reassesses their investments, the PIF is on board with a deal almost as big as Microsoft’s Activision Blizzard bid – a proposal, incidentally, that the Microsoft of 2026 would almost certainly not pursue were it on the table today.

Under these circumstances, it’s entirely fair for players, staff and anyone else involved to be concerned that this deal is more about political and cultural influence than purely financial or business-driven considerations. If that’s the case, the coming years could be very rough indeed for EA, because such attempts to turn cultural and media industries into political bludgeons have historically been both commercially disastrous and creatively barren – but the damage done in the attempt can be severe nonetheless, both to the companies themselves and to the lives and careers of those who work there. 

Whatever your feelings about EA as a company, under the circumstances – an industry battered by layoffs and closures in recent years – everyone should hope that these misgivings are unwarranted. We can only hope that one of videogames' most prominent and storied publishers can actually thrive after this deal, rather than becoming mired in some unholy concoction of private-equity avarice and misguided peddling of political influence.

The future of the console has never seemed so uncertain. From Xbox's aggressive downsizing to Sony abandoning physical discs, combined with escalating component costs and the inevitable impact on prices at retail, it's increasingly hard to predict how the next generation of living-room game boxes might perform. 

Multiple analysts tell Knowledge the sector is in "an existential crisis," with Aliena Analytics head of market analysis Rhys Elliott clarifying that this is "an economic and margin crisis rather than an audience one." 

"The historic console playbook of manufacturing a bespoke box, subsidising it heavily at launch, and making the margins back on software royalties is structurally broken and simply not possible under the current component crisis," he says. "And that shows no signs of slowing down, thanks to the fickle, misguided, greed-driven gen-AI bubble."

Biggest threats 

Kantan Games CEO Dr Serkan Toto declares the rising component costs are "one of the biggest threats for growth in the space," adding: "In my view, the traditionally lower price point for consoles has always been their raison d'être for many people. Remove that, and you have a problem getting into the mainstream." 

The reaction to Valve's $1,000 Steam Machine was a sign of things to come. Elliott observes that if the next generation of PlayStation and Xbox hardware arrives as digital-only boxes with a four-figure price point, "mass-market growth is effectively dead on arrival."  

"When a console costs that much, casual consumers simply opt out, choosing to spend their time and money on the hardware they already own, or migrating over to mobile and PC," he adds. 

Ampere Analysis head of games research Piers Harding-Rolls notes that even the rumoured introduction of 'buy now, pay later' options won't offset the impact of high prices. 

"It will mean reduced scale of sales over a console's lifetime, and gamers playing older consoles for longer," he says. "This reduction in scale will have a knock-on impact on games publishers and they will be looking for more opportunities to monetise to overcome these smaller userbases." 

Toto agrees the mainstream appeal of consoles is in danger, as rising prices and the disappearance of physical media will mean "a significant part of the audience will get further priced out."

The size of the console audience is a major concern here. Aldora CEO and SuperJoost Playlist author Joost van Dreunen reports that the addressable audience for dedicated consoles has remained the same for at least a decade, with annual revenue fluctuating around the $40 billion mark during that period. Meanwhile, spending on PC has grown and mobile spending has tripled. 

"Dedicated gaming hardware increasingly caters to diehard players," van Dreunen continues. "That audience has become a clear minority in the overall games industry… but a minority is not the same as small or casual." 

He likens players who buy dedicated consoles to sports fans who buy season tickets, adding that the current economic climate is "pushing [platform holders] to evolve faster." The answer, he suggests, is "not cheaper components or a snazzier title selection but an evolution of what console gaming can be" – namely, the premium gaming experience.  

"Consoles should stop trying to be everything to everyone," van Dreunen says. "The idea of console gaming as the primary entry point for mainstream audiences has always been a beautiful dream, but it has clearly been eclipsed by mobile and, to a degree, PC. Mobile now accounts for roughly 55 per cent to 60 per cent of all revenue – roughly three times the console share."

Rocks, hard places 

Elliott observes that platform holders are "trapped trying to serve two conflicting masters." On the one hand, they vie to maintain their identity as premium hardware providers (but are unable to subsidise that hardware due to high component costs). On the other, they need to fund blockbuster exclusives to sell those boxes, but development costs have become so unsustainably expensive they can't afford to lock those games to a single platform. 

"The spreadsheet always wins in the end," Elliott adds. "This is why Xbox is shifting its centre of gravity toward PC and mobile, and why first-party exclusivity is being quietly dismantled on a 'case-by-case' basis – walking away from huge external playerbases makes no economic sense." 

All of these analysts agree that longer console generations are inevitable – it's too costly for both platform holders and consumers to upgrade on the historic five-to-seven-year basis, making decade-long console cycles more likely. And while they all expect a huge spike in growth around GTAVI – notably a console-first title – such moments will be few and far between. 

But regardless of how bleak the situation seems, none believe the next console generation will be the last. 

Van Dreuen cites Nintendo's success with Switch 2 as proof that consoles can deliver something neither PC nor smartphone can replicate, while Harding-Rolls hopes to see more technological innovation from platform holders trying to offset rising costs and drive consumer interest.  

"We saw how Nintendo turned around the GameCube and Wii U cycles with Wii and Switch innovations," he says. "Could we come to expect more innovation to stand out in a difficult market?"

SOCIAL COMMENTARY

Highlights from industry chat channels

What was it about 1666: Amsterdam that made creative director Patrice Désilets put himself through years of legal wrangles and associated difficulties in order to realise his dream? "It's a really good question," he laughs. "First, I knew that we had something. Then, when Ubisoft eventually kicked me out of the office, my partner and I went to have a sandwich. When we received the bill, it was $16.66. I was like: 'OK, let's continue'."

The coincidences didn't end there. Further instances of serendipity helped to reassure Désilets that the 1666: Amsterdam project was worth pursuing, and in Edge 426, out now, he and his colleagues at Montreal's Panache Digital explain how they've pushed towards the finish line on an idea that first stirred into life towards the end of the PS3/360 era. 

In other features, Hideki Kamiya's Collected Works guides us through his celebrated CV, from Resident Evil to the forthcoming Okami sequel, while in The Making Of… we talk to Blue Manchu about the creation of Void Bastards, and in Time Extend we rewind to the GameCube launch for another run at Super Monkey Ball. Dan Marshall's Size Five Games is the focus of our Studio Profile slot, and elsewhere we check in with Fumito Ueda to discover some of the inspiration behind the forthcoming Gen Atlas. 

As per tradition, our post-Summer Game Fest edition is a preview special, featuring 100 forthcoming games to watch, while new releases such as Star Fox, Rhythm Paradise Groove, Beastro and Gothic 1 Remake arrive for review.

Edge 426 is in UK shops now and available to buy online here.

We'll be back next week. In the meantime, don't forget to share your feedback with us by email ([email protected]), and follow us via Bluesky and LinkedIn.