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Two huge US gaming deals in the space of a fortnight means the race is on to guess who might be third. Like Activision Blizzard and Zynga, the next acquisition target is likely to have an impressive library of game titles. Step forward Electronic Arts.
Video game publishers and the platforms competing for titles know that the $200bn gaming sector is in flux. Consoles are still popular but mobile gaming is the industry's fastest growing segment. More players are streaming games via subscription services instead of buying them outright. Franchises are being milked for longer. To compete, companies are looking for more high profile content — known as AAA games.
EA fits the bill. The Redwood City company has produced The Sims and Fifa, a football game popular with both fans and professional players. It has made astute investments in mobile gaming development too, buying Glu Mobile and Playdemic last year in two cash deals for a combined $3.6bn.
With an enterprise value of $38bn, potential buyers would need deep pockets. This is not a problem in the tech industry. Apple has an enterprise value 71 times as large. Amazon, Meta, Google and Netflix are all expanding their gaming divisions too. Rival Sony may also be on the lookout to build up its portfolio of exclusive games.
EA's 500m user accounts exceed Activision's monthly active user total. But EA has been less successful at extracting money from players. The sub 20 per cent operating margin over the past year compares poorly with Activision's 35 per cent.
EA has not experienced the same stumbles as Activision. Shares fell last year as negotiations over Fifa's branding went sour. The sporting body was reported to request double its $150m per year licensing fee — a figure that would equal around half of EA's forecast annual net income. But the game is popular enough to survive a rebrand and shares recovered. Less expensive than Zynga and less risky than Activision, EA is an attractive target.