166. What Has Changed After the EA Sale?
What is going to happen to AAA? How will markets and industry be affected?
Back in 2013 when European regulators asked me to be their expert witness at the upcoming Panama ICPEN summit, and to help them create regulations to protect children in online games, I had to make a choice. We could argue about whether choice is even real, but I made that choice back when I was 8 years old when I vowed not to use my talents in math to harm people. Later when I discovered what a Hippocratic Oath was, I essentially took such an Oath and extended it to all of my emerging talents.
Given that I had a 1M+ daily readership back then and was also on National Public Radio regularly (before its budget and staff got cut), it’s fair to say that AAA had to make a Choice also. They doubled down on consumer antagonistic behavior/technologies, and lawyered up to fight international regulators.
This was, of course, ruinous for my career. But I was willing to make that sacrifice since I really didn’t have a Choice. I could have made millions by applying my tech in harmful ways against consumers, but I took that option off the table when I was 8. Industry was also willing to make a sacrifice…
Nonetheless, I continued to develop the technologies that industry would need to satisfy regulators and their own consumers. The added benefit was that monetisation models that consumers like actually perform higher than ones they reject. I have not been idle, and now I estimate that my pro-consumer tech is 20 to 30 years ahead of what the industry has developed. That wasn’t hard since industry has removed all employees that might have dared to develop such techs.
It became clear after the announcement from the EU that the Digital Fairness Act was going to be deployed in 2026, and the deafening silence from AAA, that industry leadership intended to hit that wall full force. As this would destroy their companies, I assumed they intended to (golden) parachute out at the last moment to save themselves. This sort of selfish and irresponsible behavior upset me (mildly, I’m not particularly emotional) and the tone of my articles became less conciliatory.
While the rank and file might have been complicit, I understand that people do what they think they need to to survive. This is especially true when so many people are being laid off. Thus my opinions became pointedly aimed at industry leadership.
So What Happens Next?
Ever see one of those stunts in a movie where two cars are racing towards each other (we call this game “chicken” in the West)? This is essentially a runaway car heading straight for a wall, which in this case is the DFA. Death of the driver, if it doesn’t alter course, is usually assured. In this case, I assume the (older more privileged) driver has a plan to jump out at the last moment, leaving the younger screaming passengers to their fate. The Tarantino movie Death Proof (2007) comes to mind.
Some of the smarter passengers might see what’s coming and give me a call. That actually happened and those people were fired. Since leadership has not called me, and the more alert screaming passengers are being purged, it is safe to say that these sold companies (including the ones that will be sold in the next year) are runaway vehicles. Some will operate as Zombie Companies until they hit the DFA full force next year.
This sort of mass suicide doesn’t happen coincidentally. It’s organised. I assume the only group with the ability to do that is the ESA (Entertainment Software Association), and that’s why I started calling out ESA leadership earlier this year. Meanwhile, the “Big 6” that ultimately pull the strings of all the larger players in interactive media have been watching. Microsoft and Unity have spent a lot of money vetting me over the years and know that betting against my prediction papers is high risk behavior. They were willing to support the ESA as long as they had the situation under control. When it became clear to me that it was clear to the Big 6 that the ESA did not have it under control I began warning the community that those weren’t “layoffs”, those were divestments. I explained how this was all going to go down back in July and now we are seeing that play out in real time. Big Tech was pulling out of interactive media and doubling down on AI instead.
That’s also when I would have expected all of the exit deals to be initiated/accelerated, and now we see those plans being announced.
Can Anything Positive Be Done For AAA?
This depends on your definition of “positive”. Those that can get out quickly, using their insider knowledge, are doing so. Those who realize late (I.e. investors who do not read my papers) will be left holding the bag. This has been the Circle of Life in the industry since I wrote my Zynga Analysis paper in 2011.
Yes it is theoretically possible for me to go in and repair these large AAA games prior to the DFA deploying. But these are complicated games with a lot of content that does not pass the DFA. I don’t spend a lot of time playing badly designed games, just enough to accurately complain about them. I don’t generally publish repair instructions because this is my job and I like to get paid. I don’t enjoy being the industry cleaner, but I’m good at it. I do enjoy saving companies, investor assets, and rank and file jobs.
Thus I might only be able to fix one game prior to the DFA. This will create a template for repairs that others will be able to follow. We won’t know until we get into it. The biggest impediments won’t be technological, they will be political. I’ve already developed the technology. I’ve had 8 years since I predicted the current scenario to prepare. As I’ve talked about in various places, especially here, any fixer/cleaner will be limited by the authority they have to do their job. Current leadership won’t give up that authority unless they’ve already catapulted out and the new owners have empowered a transition team to transfer that authority to their cleaner.
In most cases, new owners will be looking for opportunities to chop the IP up and transfer that to other companies at a profit. They won’t be interested in the hassle of doing repairs prior to DFA. Flipping for quick profit is the most attractive reason to take over one of these Zombie Companies.
Still, I’d be very enthusiastic about assisting the transition team of new owners. I think I’d be suspicious about trusting existing AAA leadership after I endured this 11 year blacklist following my ICPEN support. I’d be more enthusiastic about being tasked with fully repairing an existing IP than I would be about just getting a Zombie Game to pass the DFA for extended passive income. I can’t help everyone and, given the circumstances, I don’t feel any responsibility to do so. I’ve already made those sacrifices.
What is ultimately going to benefit the space, and especially games/investors, is if a promising independent studio like Arrowhead Game Studios (Helldivers dev) wants to fill the void with new IP that is made from the ground up to pass the DFA. Since most of the competition is going to be Zombified by the DFA, the opportunity for huge profits will be unpredicted in the history of interactive media. I’m still possibly the world’s biggest fan of Games as a Service, as I’ve dedicated my whole life to improving it. Done properly, the profits could be eye popping. All of the companies that have already Zombified (Activision, Ubisoft, EA) were examples of consumer antagonistic monetisation and even EOMM.
Once proper examples are in the market (both in terms of profitability and ethics) then it will be much easier for other companies to emulate those models and come into DFA compliance.
Since investors are mostly not understanding the environment and current risks, they will be slow to react. The perils of inductive reasoning, which is useless in an environment where the rules are changing rapidly. Then you need to rely on higher effort deductive reasoning. What this means is that the first ones to sell (like Activision) will get the best rates. The last Zombies to sell will be selling for close to nothing ($20B paid, plus $20B debt = sold for $1). This means the rate of liquidation in the industry is going to accelerate rapidly. This in turn tends to trigger panic in people who don’t understand what is going on. This would include gamers, but gamers learn faster than normal since they collaborate and form effective hive minds.
Oh, and I should point out that the same groups that have organised to fight companies inserting ideology into gaming will use the same systems and methods to track former AAA leadership as they try to chameleon into new teams. Thus I don’t think that’s going to work as well as if they just moved to an entirely new industry. I will be personally interested in seeing what the ESA does next, and updating the community.