Is Apple about to buy a major video game company?
Electronic Arts is looking for a buyer. Let’s dive into whether or not Apple would be a good fit.
This is a juicy story to dive into, so let’s get right into it. The original sourcing for this scoop is behind a paywall, but here’s Allison McDaniel, writing for 9to5Mac:
Video game publisher Electronic Arts (EA) is actively seeking a potential buyer or merger. Apple has reportedly been in talks with the company about buying EA out according to Puck. Disney and Amazon have also been in talks about purchasing the video game company.
Were this to happen, it wouldn’t be the first major acquisition of a video game studio this year, or even the second. McDaniel continues:
The idea for a buyout or merger came after Microsoft purchased Activision Blizzard for $68 billion earlier this year. Shortly after, Sony purchased Bungie, the studio behind Destiny for $3.6 billion.
I remember wondering if Apple might look to scoop up a big name in the video game space when those two purchases happened. I think there’s some good reasons to think Apple might buy EA, but there’s also a strong case to be made that they won’t. So let’s dive into it, starting with why Apple would purchase EA:
Profit and Wall Street
Video games are a huge business. In circles I travel in, people are much more prone to talk about movies and TV, but the video games industry is larger than Hollywood from a revenue standpoint. By several times. As Apple continues to find ways to diversify its revenue streams so that the iPhone isn’t such a massive slice of the pie, buying a major game studio would give Apple a significant seat at that wealthy table. That would increase Apple’s value and also make Wall Street, long nervous about how dependent Apple is on iPhone revenue, happier.
Mac gaming and Apple Arcade
It’s widely accept that Apple is “not a gaming company,” but that’s a little misleading. The iPhone has been a huge platform for casual gaming since the inception of the App Store in 2008. Casual gaming isn’t glamorous, but it is a lucrative space to be in. But it’s very true that the Mac is not, and has never been, a big player in video games. Most AAA games aren’t ported to the Mac, and the ones that are are very often not well optimized to take advantage of Apple’s Metal graphics API. Were Apple to acquire EA, they would undoubtedly continue to ship their full catalog of games for Windows PCs, but they’d also insist that EA bring all of their key games to the Mac and do so in a well-optimized manner. That alone wouldn’t solve the problem of Mac gaming since there are other big players that Apple would have no control over, but it would increase the Mac’s appeal to gamers, and that could entice other studios to better support the Mac over time. Heck, I’ve long wanted Star Wars: Squadrons on the Mac, but it’s not available.
Then there’s Apple Arcade. My biggest fear when Apple launched Apple Arcade is that they wouldn’t seriously support it and new games would be few and far between. But Apple has steadily released new games for the platform, and they’ve very savvily worked with makers of existing popular iOS games to bring those games into Apple Arcade. It’s clear that Apple TV+ and Apple Music are the services Apple cares about the most, but they haven’t left Apple Arcade to die on the vine. The question is, what do they ultimately want from it? If they just want to appeal to casual gamers, they’ll just keep doing what they’re doing. But do they have loftier ambitions for the service? If they want to infuse Apple Arcade with AAA games, a splashy acquisition like buying EA would allow them to take Apple Arcade to the next level.
There’s always been speculation that Apple might have loftier ambitions for the Apple TV as a gaming console. But to do that you need big games to entice serious gamers and also to set apart your console from the rest. Like Mario to Nintendo or Halo to Xbox, you need the intellectual property to anchor your hardware.
Ok, now let’s look at why Apple may choose to say, “no thanks” to Electronic Arts:
This would be a big acquisition
Apple has always said it would consider making a large acquisition if the right circumstance came around, but historically it’s almost always shied away from them. Apple’s acquisition of Beats in 2014 was its largest and splashiest purchase ever, and buying EA would be a much bigger buy than that. But it’s not true that Apple rarely makes acquisitions. Apple makes several per year, but they’re mostly smaller companies that infuse Apple with the patents and talent to improve its existing products or create new ones. A few years ago there was a lot of agitation on Wall Street around the idea that Apple should buy Netflix. Instead they built Apple TV+ themselves and have steadily grown its subscriber base and catalog of original content. However, it might be significantly more challenging for them to roll their own premium video games studio. That’s the biggest reason why the EA negotiations make some sense. But that it would be by far Apple’s largest acquisition ever makes me doubt that it will happen.
The CEO problem
One other nugget from McDaniel’s piece:
According to Puck, EA ideally would like a merger so Andrew Wilson can remain CEO of the combined company.
There’s no way Apple would go for this if that were a serious sticking point. Andrew Wilson is not going to become the CEO of Apple and if the acquisition does go through, it would be a purchase for Apple, not a merger. Or at least not a merger in the sense that you get something that feels like a conglomerate with a name like Apple-EA. This would be something Apple would write a check for and absorb. Honestly, if this has really been floated to potential suitors by EA, I can’t imagine that anyone would go for it. Andrew Wilson’s not becoming CEO of Amazon or Disney either.
It’s not hard to imagine the upsides of a purchase like this, and it’s easy for us to spend Apple’s money for them on paper. The sheer size of this potential acquisition makes me doubt anything comes of it, but never say never…