🇸🇦 Why on Earth Would Anyone Spend $55bn on a Gaming Company?

The feedback from last weeks’ newsletter and the subsequent YouTube video on the ROI of football academies has been extremely positive. I made some silly mistakes in the video which I did not catch before release. I’m sorry for that. Regardless, thank you to everyone who read and thank you to everyone who watched.

I worked with TransferRoom on that video. Their platform allows clubs and agents to find and facilitate football transfers across the world. You can book a demo with them here.

The Saudi Series is coming. Episode 6 of the Saudi Series is an entire video dedicated to Esports. It was the maybe the most fascinating video to research as I had little knowledge into the scale of the investment in that area.

Last Monday a consortium led by the Saudi PIF led one of the biggest asset purchases in recent memory. They agreed a $55bn all-cash deal to buy EA, one of the biggest gaming publishers in the world. I had to re-record some segments of Episode 6 to include this news! Today, we dissect why the Saudi PIF acquired EA and the importance of the acquisition to the gaming industry.

Before then however, an update on the broadcast situation in Ligue 1!

If you’ve been a fan of TLP for some time you will know I am paying very close attention to the broadcast situation in France. For those unaware, the economic situation in French football is in a very precarious position due to a very uncertain broadcast environment.

A timeline of events going back the last five years paints a bleak picture:

• October 2020: Mediapro deal collapses mid-season after non-payment

• October 2020: LFP re-enters the market seeking €1bn/year for rights. Rights return to Canal+ temporarily

• 2021: No takers at target valuation. DAZN and Amazon secure short-term deals at steep discounts

• June 2021: Amazon becomes main Ligue 1 broadcaster for €250m/year. Far below expectations

• June 2023: Amazon pulls out. DAZN agrees to carry the channel in France for 2024-25 in deal worth c.€170m-€180m

• May 2025: DAZN exits the deal after one season. Pays €240m settlement fee to leave early

• June 2025: Canal+ walks away from talks. Offered €100m, LFP wanted €200m

• July 2025: LFP officially goes solo. No broadcaster, no partner. Launches Ligue 1+, their own DTC platform

Now that you have up-to-date context, the update is both positive and quite sobering.

Against the odds, the LFP managed to build and launch a direct-to-consumer product in under six months. That alone deserves credit. Most leagues wouldn’t have had the stones to go it alone. They have managed to acquire more than 1,000,000 paid users to the platform.

Despite this, the numbers paint a bleak picture. The platform is forecast to generate €158m in total revenue this season. Of that, €16m will go to distributors as commission, leaving €142m to be split between clubs. In years prior, the DAZN and Canal+ deal paid the league €500m in revenue per season. The Mediapro deal before that paid €726m in revenue per season(!)

The title-winning club will receive around €30.1m this year under the new model. That is significantly less than what clubs at the top were earning during previous rights cycles, when broadcast revenue was higher and more stable. For mid and lower-table teams, the drop is even steeper.

Yes, the league has more control now. Yes, the league can grow this foundation with more products, more ancillary services and a richer product suite in the future.

But clubs no longer have the guaranteed broadcaster cheques they once did. Instead, they are dependent on subscriber uptake and platform performance and so far, there is a sizeable delta in total revenues for the league.

I am almost certain we will see even more French clubs go into administration in the months to come.

Don’t forget to check my video on this topic below:

Now, a word on the EA acquisition. I found the people involved to be interesting. The consortium is strong:

• Public Investment Fund (PIF)

• Silver Lake: Private equity firm from the US

• Affinity Partners: Jared Kushner’s investment firm, backed heavily by Middle Eastern sovereign wealth

• JP Morgan: providing $20 billion in committed debt financing

Of the $55bn, $36bn is equity and $20bn is debt provided by JP Morgan. If either party walks away before closing next year, there’s a $1bn termination fee.

Interestingly EA make $2bn per year by creating and selling video games (FIFA, Madden, and Battlefield). EA then has a subscription business on top of this across their games, generating $5.5bn in revenue per year. These are things like Ultimate Team packs.

The numbers are pretty bonkers. EA is a monster but it has been hamstrung by the pressures of being a public company for many years. By taking it private, they no longer have to report quarterly financial accounts and can make longer term bets on the future. The Saudi PIF own 10% of streaming service DAZN, my prediction here is that they will bring together all of their assets. By adding in other features like live sports rights via DAZN, they can massively increase the number of users and exposure their game titles have.

There is also a very big, young, tech savvy demographic in Saudi Arabia that can be leveraged. It’s a small market on the global sale, but its easily controlled.

We are not far away from the Saudi Series. All of this will make so much more sense soon.

Stay tuned for information.

See you next week.