Why did Saudi Arabia just spend billions on a video games company?

0:00This is The Guardian.

0:07Today, Saudi Arabia splurges billions on a video games company.

0:22Saudi Arabia's crown prince Mohammed bin Salman is known for many things. The war in Yemen, allegedly ordering the murder of a journalist, the mass arrests of his own citizens. But there's something else you might not know about him. Apparently, he really loves video games. Rumour has it that his favourite games are League of Legends and Age of Empires. Which is where you literally build empires. Of course. I don't think we should downplay the fact that he is a gamer. And I think that is important because not only is it making him passionate, but it also made him knowledgeable about the sector.

1:06And this might help explain a multi-billion dollar deal announced this month, which will see Saudi Arabia become a major investor in one of the world's biggest games companies. Electronic Arts or EA. The deal finally got done. And the EA sport business has officially gone private. It's been bought out by those investors, including Saudi Arabia's public investment fund. We'll have a look at what that means. So what's really behind this deal? From The Guardian, I'm Annie Kelly. Today on Focus, why are authoritarian regimes so into video games?

1:50Keith Stewart you are an author and you're a journalist who writes about video games for The Guardian as someone who obviously knows the industry inside and out can you just remind listeners who maybe aren't gamers themselves and I am including myself in this just you know how big an industry is this how popular and lucrative is gaming oh my goodness it is gigantic so there are rough estimates that the industry globally every year makes around 200 to 350 billion dollars good grief so if we compare that to maybe the film industry and we combine film box office with sales of dvds and blu-rays that comes to usually around about 110 to 115 billion dollars a year so the games industry is possibly double that it's an enormous industry I mean, that's wild.

2:44And how many people do we know, like, play games? What's the percentage of the population? We can only ever make rough estimates, but most of the companies that do this kind of statistical analysis in the industry reckon it's probably around 3.5 billion people play video games on a regular basis. And lots of those people might not think of themselves as gamers, but they might be playing puzzle games on their, you know, New York Times or Guardian website, or they might be playing Candy Crush on their phones. So they're technically gamers, even if they don't acknowledge it. So, you know, at least a third to maybe even a half of people on the planet playing video games.

3:19The value it has to countries is enormous. Like it brings hundreds of millions into the UK economy, hundreds of millions into the US and China and the other big games producing nations. And, you know, some of these gaming companies are real household names by now, aren't they? They're brands that are known by multiple generations of the same families. We're here today to talk about one of these really big companies in this space, Electronic Arts or EA. So I was just wondering if you could tell me, you know, how big are they and what kind of a part do they play in the industry? Electronic Arts are actually, you know, one of the key instigators of the video game industry as we know it.

3:59They were formed in 1982 and their model at the time was kind of inspired by United Artists and the film industry, where lots of film creators got together and made a studio that they wanted to represent the art and culture of films rather than commerce. And Electronic Arts was very much kind of based around that principle. The founder, Trip Hawkins, was really interested in portraying video games as an art form rather than just something that you put kids in front of to keep them quiet for an hour. Last year, their revenue was£7.5 billion, which is quite a respectable figure. and this is considering that the video game industry has had some significant problems over the last couple of years.

4:41They had lots of famous games, obviously the FIFA franchise. Thanks Derek, well you can really feel the sense of anticipation as the players warm up for their big moment on the world stage. The Madden franchise. That's a good throw right there and I know it's just the pre-season. Let's face it, these reps are important for him. Mass Effect. Is that the kind of person we want protecting the galaxy? That's the only kind of person who can protect the galaxy. So they've produced some of the biggest games in the world and they are still a major player. And as I confessed at the top of this episode, I'm not a gamer myself, although my children are, but I do know The Sims.

5:19And that's their game as well, isn't it? Which I love.

5:28The Sims is kind of like a living soap opera with a very kind of a large progressive and LGBT audience as well. So very different. And very beloved, isn't it, as well as a game? Oh, yeah, yeah. I mean, there's people that have grown up with the game and then handed it on to their kids. So it's a lifetime experience for a lot of people. So this company's been around forever. You know, one of the founding companies that's grown the gaming industry into what it is today. Now, last September, Saudi Arabia, along with a couple of other partners, announced that it wanted to buy EA. And this month, the acquisition actually went through.

6:04And it is quite a big deal, isn't it? What can you tell us about it? It's a$55 billion leverage buyout, which is one of the biggest deals in the games industry. And in fact, in the entertainment industry, in the games industry, it's dwarfed only by Microsoft's purchase of Activision. So it's an enormous deal, but it's also a leveraged deal in that$20 billion of that is debt to a large bank. And so if you think about the fact that EA made$7.5 billion last year, which is a reasonable amount of money, they're going to have to make a heck of a lot more to pay off the leveraged part of that buyout.

6:46That's quite a big part of the deal then, isn't it? That's a lot of debt. Yeah, exactly. And there's a lot of people involved. I mean, it's Saudi Arabia's public Investment Fund. There's Affinity Partners, which is led by Jared Kushner, obviously with the Trump connection there. So it's not only a money buyout, I think there's also cultural implications for electronic arts as well in this deal. Yeah, and Saudi's involvement and the scale of their involvement in this deal has also raised quite a few eyebrows, hasn't it? So yeah, I think Saudi Raber has been going through this process of what people have called sports washing, which has been buying into sports in order to improve their soft power, their reputation overseas.

7:24Fans were celebrating it at James' Park today on hearing their clubs been bought by a consortium led by a Saudi Arabian sovereign wealth fund. Golf's two main tours are the PGA Tour and the DP World Tour. And they've cut a deal with Saudi Arabia's public investment fund. This is the same state-owned fund that created LiveGolf as a rival to the two main tours. At the time, the PGA Tours lawyers said that that was an effort to sportswash the Saudi government's deplorable reputation for human rights abuses. What they're doing in the games industry is aligned to that, but on a potentially much larger scale of influence.

8:01If you think about, they're bought into golf, they're bought into one club, Newcastle FC. But with the purchase of Electronic Arts, they get EA Sports FC, the global video game brand. And through that, they get access to hundreds of clubs, hundreds of football players, because the game is so intricately tied in with the sport of football. So it's a very clever deal for them. And it gives them, you know, wonderful number of layers of influence over the sport that simply buying a football team hasn't managed.

8:43And are there any other reasons why a country like Saudi Arabia would be interested in buying EA? I mean, Mohammed bin Salman or MBS is apparently a huge gamer, but surely it must be more than him wanting to kind of make his hobby his job. What else might be in it for them? So I think there's a lot of things. First of all, I think it's going to be popular in Saudi Arabia. Saudi Arabia has a very young population, very large number of teenagers, 20-somethings, who are very, very keen on games. So it's good for the country. Also, games are enormously popular all over the world. So it gives them a global influence that they might not have been able to enjoy through other investments that they might make.

9:28And even though Electronic Arts has been through lots of controversies and is obviously seen as one of those companies that people kind of love to hate in some ways, but they still buy the games. So, you know, you have these huge fan bases around The Sims, around Battlefield, around EA Sports FC, around Madden. You have these incredibly dedicated fans who now, well, now Saudi Arabia sort of controlling this big kind of cultural asset that they're all very invested in. Is it quite a divisive company then already, even before this deal? Yeah, Electronic Arts has been one of those big companies that people love to hate.

10:04anything from ending their favourite game franchises, for example, the Dead Space series of sci-fi horror games. People loved those games, shutting down studios that people loved. But at the same time, people turn up every year and buy their games in the millions. Yeah. And this isn't also the first time that Saudi Arabia has been interested or invested in gaming either, has it? What was the kind of landscape of their involvement in the industry before this deal? Well, they've sort of snuck in through the back door in a lot of ways. over the last sort of five years they've been quietly investing in some of the biggest companies in the games industry so they've invested in nintendo which we all know they've invested in capcom the company behind resident evil and street fighter they've invested in take two which is the parent company of rockstar which owns grand theft auto so they have invested in these companies and sometimes they're like you know quite small percentages five percent here 10 % there but that has a sort of an influence over the industry that maybe the public might not have spotted but is going to be important in the coming years.

11:10Also obviously they've invested massively in esports. Esports essentially just means professional gaming. They fund and run the esports world cup which is a huge annual competitive games event. Welcome ladies and gentlemen to call of duty black op 7 here at the esports world cup and the first two took place in riyadh in saudi arabia lots of different games are involved in the esports world cup which is actually going on at the moment so it's got call of duty tekken rocket league it's got lots of different games that being competed in so it's kind of almost like an olympics it's a an amalgamation of lots of sports for the last year's world cup i think there were around 340 million hours of e-sports viewed during that competition, which is quite a considerable amount.

11:57Wow. And so the way you've described it, you know, you've got Saudi's kind of fingerprints all over the industry, even before this deal came through. And, you know, Saudi specifically, big gamer MBS has explicitly said that he wants Saudi to become the global hub for games and sports by the end of the decade. Are there any other reasons why it might be important to them? like the economics of it are they set to make a lot of money from this industry? I think so yeah and I think partly what this is about is divestment from fossil fuels so obviously their economy relies heavily on petroleum and oil and I think as with sports this is a really important part of finding ways for the future in which Saudi Arabia can make money that doesn't rely on fossil fuels so yeah I think they're very much at the investment phase and it's going to be really interesting how the electronic arts deal plays out because in order to make enough money to sort of pay back the bank that they've borrowed a lot of that money from it's going to require a heck of a lot of success from their games and there are a lot of questions over what's going to happen to electronic arts what's going to happen to their development teams what's going to happen to their development culture when the owners of the company like right we've put in 55 billion dollars what happens now we're going to need battlefield 6 7 8 9 we're going to need ea sports fc to be like doubling in its revenue and i guess the worry is that some of the other games that ea makes or publishes that perhaps aren't as big those development teams may be looking at that deal and worrying about their jobs

13:49you talked about sports washing earlier i'd like to like look at this concept of games washing in a minute but it hasn't all worked out for them in that area has it either i mean you think about the fact that the Live Golf debacle springs to mind. Is this it for Live Golf? Well, it could be in serious jeopardy. That's according to the Wall Street Journal, which is reporting that Saudi Arabia's public investment fund is going to cut it loose after this year. It is a slightly precarious position they're putting themselves into as well. I mean, do you think they could have bitten off a bit more than they can chew with this?

14:23I think it's a big risk. The games industry is changing. It's incredibly volatile. while big publishers going down, big games closing. I just think that's a lot of money to bet on a company which is relying heavily on two or three key franchises. Even The Sims may not be enough to pay off all of that debt. And there's a lot of worries as well about The Sims. Like I said earlier, The Sims has a large LGBTQIA plus community. It's a very progressive game. The development team has gone out of its way to court queer gamers. There are gay relationships in the game. There are polyamorous relationships in the game.

15:05How is that going to square with an incredibly conservative authoritarian regime? Right. And it's probably worth reminding people at this point that Saudi Arabia is one of the most repressive regimes around the world. their treatment of women, of minorities, of LGBTQ plus people of migrant workers is shocking and doesn't ever seem to get any better either. So it's within that context that these very beloved brands are entering their ownership. And it is fair to say this deal has seen quite a lot of backlash for all of these reasons since it was announced last September. You've mentioned concerns about how the games themselves might change due to the nature of its new ownership.

15:48But has anything else proved really controversial? Like, could you talk a bit about this kind of games washing that we were discussing a bit earlier on? As you've said, there have been human rights violations, and that has had a huge effect on the country's and the regime's identity and reputation. Games represents an excellent way of washing its reputation and becoming known for and involved in an important global cultural industry. So it's an amazing way of trying to divert attention away from some of those issues that we all know are there. And I mean, you're a gamer, your job is writing and knowing a lot about the industry and its influence like how do you feel about this deal does it worry that we're going to have a government and you know an intensely problematic one at that owning one of the biggest gaming companies and these huge virtual worlds i find it really worrying i find it really worrying as a lifelong gamer you know i write about video games for the guardian so you don't really have to try and guess where my politics lie i think quite apart from the political element this kind of consolidation of the games industry into a few big companies is mimicking what we're already seeing in the technology industry where you know almost every time we switch on a computer we're interacting with products and services made by like five or six different companies and so what I worry about culturally and politically in the video game space is that you know when you have a few people in charge then your access to lots of different ways of seeing the world and thinking about the world and who gets to make things and who doesn't, these things all get restricted.

17:32I'm worried about it on that basis, but I'm worried about Saudi Arabia as a regime having a vast amount of control over this really important, historically powerful company.

17:46Coming up, how other superpowers are also looking to video games to exert their influence.

18:06George Osborne, you're a journalist and you're the author of Powerplay, Video Games, Politics and the Battle for Global Influence. Welcome to Stay in Focus. Thank you so much for having me on. Do you think that we're making a mistake in framing video games as just entertainment? In your book, it seemed like one of your arguments was that video games have actually become incredibly important geopolitical battlegrounds. Could you explain why you've come to that conclusion? I would say that we are making a mistake if we just view them as entertainment. And I think the analogy that I would try to use is we wouldn't just say the World Cup is entertainment anymore.

18:45The World Cup is now bound up in wider geopolitics. You can see everything that's going on with FIFA at the moment and the relationship between Gianni Amfantino, between Saudi Arabia, between the Trumps. And we accept that entertainment can have massive political value, in large part because entertainment has a real capability of creating and generating communities. And video games have this unique power to create incredibly strong communities that stretch out across our digital landscapes. I think particularly when you look at an audience of younger men, sort of 15 to 30 year olds, you see different actors trying to tap into that group because they have an immense amount of power in the digital ecosystem.

19:35And by failing to accept that this value exists, we miss out on a group that's actually exercising an enormous amount of political influence. We've already talked about Saudi Arabia and this deal earlier in the episode. Could you give us another few examples of how you've seen that playing out? The most obvious example is around the way that Steve Bannon harnessed the video game hate movement Gamergate in 2014 to essentially create the campaigning model for the alt-right online. You have to roll it back to 2014 to see the impact of Gamergate that essentially harassed female game developers on a trumped up charge of concerns over ethics and video games journalism.

20:16What started as an online spat about the ethics of gaming journalism quickly escalated into a full-blown culture war. Women shouldn't be mere disposable objects or symbolic pawns in stories about men. And a small but hardcore group of gamers resistant to change. That essentially created both the playbook for how to take alternative fringe positions on the more extreme parts of the political spectrum and wash them from digital spaces into the mainstream discourse. But it also created the activist base, especially amongst online campaigners, that are now such a prominent part of Trump's movement that when you look at the White House's social media posts and you look at the content being posted at the start of the war in Iran, you see video game memes being interspersed with conflict footage.

21:07You know, this has become such an integral part of the movement that it's not just people who it's influencing. It's influencing the entire language and culture and aesthetics. I think probably lots of people, probably before this conversation, including myself, still thought of video gaming as a kind of passive hobby. But you're talking about these communities as being incredibly engaged and generating their own political discourse. How is it that those huge virtual worlds can be leveraged by political actors and become politically capitalised? You can have game content that influences the way people think.

21:44You know, Russia, for example, has backed a number of video games, including one called Squad 22 ZOV, which is a military tactical shooting game available on PC, which essentially promotes Russia's perspective on the war in Ukraine by allowing you to take part in levels set in the Ukraine campaign. So, for example, the opening level is set in Mariupol. And when you watch some of the footage within the game itself, one of the opening cutscenes seems to indicate Ukrainian forces invading Russian territory. And this is actually predominantly used as a way of trying to reinforce narratives internally.

22:22So the game has essentially been put in front of Russian youth to give them the Russian perspective on things. In that specific example you've just given, how is the kind of Russian state involved in that? Like, how is the games ending up pushing the kind of Russian state message? So the country recently published a video game strategy from its local trade association, where it talked about a few things like the importance of building Russia's economic side in terms of its games industry. But one of the things it explicitly said is that video games need to be a vehicle of Russian soft power. And, you know, I found a quote from Vladimir Putin where he's speaking to a game developer and saying, remember, your duty to Russia is not just to make video games that are economically successful, but ones that tell our story.

23:09So it's that blatant then? Yeah. So when you look at Squad 22, I think this is fascinating. You can go onto the game's website and it explicitly says, you know, this has been supported with advice from Russia's Ministry of Defence. It lists a number of advisors, including people who've served on the front lines and also people who are essentially part of Russia's essentially proxy state that they've set up in eastern Ukraine as advisors for the game. In terms of just some other examples where it may be softer, you know, China, for example, has the world's biggest video game market. And to officially enter it, you have to go through a licensing process to be able to get a license to secure a release for your video game.

23:51One of the things they are searching for is ideological alignment. And there's a series of content guidelines that recommend you towards positively promoting elements of Chinese history that the CCP approves of and steering away from elements like spiritual aspects, which they don't approve of as much. And that is softer and it's more targeted towards China's internal messaging. But if China is the biggest video games market in the world, and if the biggest market has certain requirements of what content you can or can't share, that's naturally going to tilt what people are playing. It's so interesting and kind of terrifying as well, because it kind of seems, you know, all of these examples you're giving are authoritarian, repressive regimes.

24:36It kind of feels a bit like Western democracies are still wringing their hands about people spending too much time playing video games, whilst authoritarian regimes have understood the power that these communities could potentially have. Do you think there is that split? What I will say is Russia recently publishing its video game strategy, China putting in really strong efforts to control what content is entering its market and Saudi Arabia's video game strategy shows that there is a clear strategic effort to control this information ecosystem that 3.7 billion people inhabit and I think when you look at western democracies and when you look at how they interact with video games they're still slightly stuck in that perspective of they're trite, they're unimportant, they're uninfluential, which means you're trying to essentially push away a social space in which millions and millions of people are inhabiting it and enjoying it and talking to each other.

25:35The only reason why authoritarian states need to pursue these goals is because they need to use brute force to enter these spaces. Whereas if you think about what we do in democracies in spaces that we want to influence, we do things like run public information campaigns we run education initiatives how much of that have we done in video games i'd argue basically nothing i think it's actually really important to say here that i love video games like i love the the medium i've worked in the industry for about 15 years now i love the people who work in it the communities who are in it are predominantly enjoying themselves having an immense amount of fun and often generating massive social good on their own terms You know, one of the facts I found from the book was in 2022, Epic Games, as a result of community-led fundraisers and sales during the course of the year to support the Red Cross as part of the Ukraine campaign, managed to raise more money for the Red Cross than the nation states of France and Italy.

26:32So, you know, there's immense power in there. Frankly, if there are ways that we can encourage game developers and encourage inhabitants in this space to just do what they do normally in their real life, you know, express their opinions, express their identities and feel safe to do so, it's going to make a massive difference. George, this has all been so illuminating. I will really have changed my whole perspective on video games as part of this conversation. So thank you so much for joining us today. Thank you.

27:02And that's it for today. My thanks to Keith Stewart and George Osborne. You can read Keith's reporting at theguardian.com and George's book, Power Play, Video Games, Politics and the Battle for Global Influence is on sale now. This episode was produced by Natalie Kutena, Elna Biggs and Nilofa Morali and presented by me, Annie Kelly. Sound design was by Brian McNamara and the executive producer was Danielle Stevens. And we'll be back tomorrow.

27:43This is The Guardian.