Thoughts on EA’s CEO getting a pay raise even as EA is doing massive
From the outside looking in, the situation looks bad, especially to the layman. However, that's not a good perspective because we're really only be looking at one game in EA's entire catalogue and not the larger…
From the outside looking in, the situation looks bad, especially to the layman. However, that's not a good perspective because we're really only be looking at one game in EA's entire catalogue and not the larger perspective of the whole company. EA's overall situation is much more than the performance of a single game.
First, these two events are actually completely unrelated. Wilson didn't get a pay raise, he got his annual payout for doing his job and getting EA to hit the targets they aimed for at the beginning of the fiscal year. The majority of that compensation (~74%) is in Restricted Stock Units, which basically can't be sold for another several years and even then only under certain conditions. He can borrow against it and go into debt, but he likely can't actually sell any of it until 2030 at earliest. The main reason the amount looks so high is because Wilson gets paid mostly in stock shares and EA's stock price is juiced due to the impending deal to go private with the Saudi consortium. If/when the buyout happens, he and everyone else who holds stock will get all of their shares converted to cash at the strike price ($210 per share).
Second, the greater situation with EA is that they cannot continue operating the way they have been, even if they've been doing really well. They are 100% going into cost-cutting mode because of this buyout. Currently, EA is carrying about $1.5 billion in debt. At today's interest rate of ~7.5%, that's around $112 million annually paid in interest to keep afloat. This isn't too bad right now - EA currently earns around $2-2.3 billion annually, so paying $112 million annually for the interest rate isn't too bad since they earn so much more than they have to pay.
The buyout is going to leave EA with roughly $20 billion in debt, which means that EA is going to have to pay $1.5 billion every year just to keep the debt from growing. In order for that to happen, they need to cut a lot of costs and cancel projects until they can get their finances in order. This cuts their $1.9-2.2 billion cash flow to roughly 1/3 of what it was, leaving them significantly less wiggle room. This is why they are cutting costs so aggressively - the lower performers and riskier future bets are being cut company-wide in order to better service the massive debt they're taking on.
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