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Electronic Arts, led by CEO Andrew Wilson, pulled off an M&A hat trick June 23 when it unveiled its $1.4 billion acquisition for Warner Bros.’ game studio Playdemic, known for producing the mobile title Golf Clash.
The Redwood City, California-based video game giant’s third major buy in the space since December comes amid a rush to secure rights to sports franchises.
The race is largely between EA and Take-Two Interactive, which owns rights to NBA and PGA Tour franchises and posted a 9 percent revenue improvement for its latest fiscal year. Over the past year, notes Cowen analyst Doug Creutz, the companies have been in an “escalating” battle for franchise rights and studio acquisitions.
“Given the proven ability of sports franchises to generate significant live service revenues, we do not find it surprising that both companies are aggressively investing in the genre,” said Creutz.
EA, which has deals in place for flagship titles like Madden NFL, FIFA and NHL and posted a 1.7 percent revenue gain in its latest fiscal year, will, of course, have to prove to Wall Street that its major buys are paying off.
In some cases, both publishers have been vying for the same studios. Take-Two tried to buy racing game firm Codemasters before EA sealed a $1.2 billion deal in December. Then EA snapped up sports and lifestyle gaming firm Glu Mobile for $2.4 billion in February, and, a month later, Take-Two inked an exclusive deal with Tiger Woods and bought HB Studios, maker of such golf games as PGA Tour 2K21 and The Golf Club. EA then nabbed Metalhead Software, developer of Super Mega Baseball, in May.
Now, as EA grabs Playdemic, whose Golf Clash has reached 80 million global downloads, the company hopes that it can boost its mobile gaming revenue. EA expects to more than double its annual mobile revenue to $2 billion within the next three years, Stifel analyst Drew Crum notes.
For WarnerMedia, the sale of Playdemic slims down a Warner Bros. gaming unit that had been eyed for sale with a $4 billion price tag in 2020. The division — which will become part of Discovery Warner Bros. when that merger is expected to close next year — plans to concentrate more on its own intellectual property.
Warner Bros. Games chief David Haddad says the deal was in line with the unit’s strategy to focus on the studio’s “storied franchises” like Harry Potter, DC Comics, Lego and Mortal Kombat.
EA may not be done with its dealmaking yet, though. The company will have a $2.8 billion war chest available once the latest acquisition closes, Crum notes, “Looking ahead, we believe EA still has the flexibility to fund future transactions and could do so through cash as well as issuing debt and/or equity.”
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