EA's $55 billion valuation reflects 'forward-looking value of IP,' Xbox studios boss says

Xbox game studios boss Matt Booty discusses EA's $55 billion leveraged buyout, saying that the high share price represents both the existing and future value of the publisher's billion-dollar IPs.

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Electronic Arts is going private in a $55 billion leveraged buyout financed principally by Saudi Arabia's Public Investment Fund, with contributions from investment firms Silver Lake and Affinity Partners. The deal, which would see EA go private, would also involve billion-dollar entertainment properties like the FC franchise, Madden NFL and college football, Battlefield, and even Apex Legends.

EA is among the last major AAA independent publishers on the market and the publisher's peers have taken notice, especially Xbox, whose own success scales with that of third-party groups like EA. In a recent interview with Variety, Xbox Game Studios head Matt Booty shared a prognosticating take on the EA deal, saying that the $55 billion valuation isn't just about what Electronic Arts has produced in the past--it's also an attempt at placing a value on what's on the horizon.

"Games have really become a foundational part of entertainment, and as such, I think we're seeing these valuations and transactions that really reflect their place in modern entertainment.

"What the collective value of somebody like Electronic Arts is, with decades of franchises--speaking of things like Madden and Football Club and The Sims and all the work that they've done--I think it just reflects the value that exists in all of that gaming IP.

"What its value is--I'm certainly not an M&A expert--but I would look at the value of the transaction really being about the forward-looking value of the IP and the stories and what they've created, even more so than necessarily, the static or rearward-looking value."

The Xbox exec's words ring true. When companies look at making an acquisition, they will tally up the value of all the existing assets and weigh that against a fair asking price.

Also included in these models, however, is how much the acquired company could be worth under the buyer's control. This implies a higher level of forward-thinking planning.

Back in the FTC v Microsoft case in 2023, I remember that in the part of the evidentiary hearing with Xbox gaming CEO Phil Spencer, FTC prosecutor James Weingarten presented a figure to Phil Spencer that was "a lot more" than the $70 billion that Microsoft had paid to acquire Activision Blizzard King. This value represented what ABK could be worth under Microsoft's ownership as part of a forward-looking valuation model that was included in the briefs that Microsoft had prepared.

EA's top brass are excited about the deal because it is expected to help unlock the future value of brands and IP.

In October, Glu Mobile CEO Nick Earl says that going private will allow EA to plan for 10 years into the future.

"Having run a public company before in the gaming space, I can tell you that there's tremendous pressure from a quarterly perspective. Being freed up to be more creative, to think long-term, to think of 10 years down the road as opposed to quarterly or that fiscal year, this allows the company to make better creative decisions."