*

Buyout highlights media crossover potential

*

Videogame market faces slowdown, firms seek new IP

strategies

*

PIF expands in gaming, entertainment

By Zaheer Kachwala

Oct 2 (Reuters) - Electronic Arts' ( EA ) record $55

billion leveraged buyout by Saudi Arabia's sovereign wealth fund

and two other firms marks a turning point in the videogame

industry, as companies look to capitalize on intellectual

property through media crossovers.

Despite being the largest entertainment industry in the

world, the videogame market is facing slower growth as consumers

rein in spending in response to higher prices, forcing companies

and executives to think of other ways to leverage successful IP.

One way they're doing that is through other types of media -

like film and television.

Acquiring EA means the company's incoming owners, Silver

Lake, Saudi Arabia's Public Investment Fund (PIF) and Jared

Kushner's Affinity Partners, get their hands on properties

including "Battlefield", "Apex Legends" and "The Sims."

Other companies of late have found success in translating

wildly popular video games into film and television franchises,

whereas in decades past, such adaptations - such as 2005's

"Doom" or 2009's "Street Fighter: The Legend of Chun-Li" - often

received poor reviews and stumbled at the box office.

The global success of Sony's ( SONY ) "The Last of Us"

television series in 2023 spurred Hollywood studios and gaming

publishers to greenlight the film and TV adaptations of popular

videogame intellectual properties. Those include Amazon Prime's

"Fallout" series, a new season of Riot Games' "Arcane", Warner

Bros' "A Minecraft Movie", and sequels to Nintendo's ( NTDOF )

"Super Mario Bros" film and the "Mortal Kombat" movie. "Call of

Duty" is also expected to be adapted for the big screen in a

Paramount Skydance ( PSKY ) production.

EA, which is gearing up to launch the highly anticipated

"Battlefield 6", already announced plans last year to partner

with Amazon's ( AMZN ) MGM Studios to produce a film based on

its simulation role-playing game, "The Sims".

"The direction of travel is clear in the longer term, and

the value of high-end video gaming IP is only increasing as

players continue to concentrate engagement among fewer, more

popular franchises and games," Raymond James analysts said.

PIF has bought or made major investments in other video game

companies such as Take-Two Interactive and Nintendo ( NTDOF )

and has also bet big on growing other entertainment

sectors, having signed deals to expand cinemas in the kingdom

and taking a stake in Japanese animation firm Toei Co. ( TOEIF )

"The PIF has shown heightened interest in entertainment

assets with prominent positions in popular culture. I would

expect them to be more focused on digital media and less on

print media, or traditional film and TV delivery models like

linear television and movie theaters," said Jon Wakelin, Partner

at tech strategy consulting firm Altman Solon.

Experts say that while paying hefty amounts to own large IP

could benefit in the long run, high production and development

costs could pose a financial risk if it is not deployed

appropriately.

For example, Swedish videogame group Embracer

went on an acquisition spree over the last three to four years,

buying up dozens of smaller studios and beefing up its portfolio

of games. However, poor critical reviews for big titles and

canceled projects hit the firm, leading to a three-way split of

the company last year.

"Consolidating IP during a down market has its short-term

benefits, but more often than not, ends up running into

inefficiencies and a devaluation," said Joost van Dreunen, games

professor at NYU Stern School of Business.