EA To Get Exclusive NFL Player Rights?

Thanks to GameSpot for its news story reporting that EA may be on the verge of an exclusive contract for NFL football player likenesses. According to the piece, which quotes a Sports Business Journal article: "Electronic Arts is in final negotiations with Players Inc., the NFL Players' Association marketing arm, to exclusively license all NFL player rights for the next four years. The Journal set the price tag of the deal at $250 million each year, which EA would pay Players Inc.; in other words, a literal billion-dollar contract." The story goes on to note: "If that turns out to be the case, no non-EA Sports game could license NFL player likenesses--an almost certainly fatal blow to the Madden series' rivals." Update: 05/19 21:07 GMT by S : It seems the linked article has been retracted: "When contacted by GameSpot, NFLPA executives said that not only was the story false, but The Sports Business Journal has since run a retraction."

Comments

Thats a real Shedload of cash.

[iainl]

Can this really be profitable?

Madden is already the biggest selling NFL title. Even assuming that this manages to persuade every single current purchaser of a non-EA NFL game to switch, and furthermore that none of those customers currently buy the EA game as well, that can't be close to $250M a year.

The top selling PS2 game of an average month (from NPD released stats, not including the big December) seems to only take in about $20M, and both EB and EA will want at least some slice of that too.

Re:Thats a real Shedload of cash.

[Divide By Zero]

$250M/year for four years will effectively shut down every other NFL game for four years, but that's not the kicker. The kicker is after those four years, if EA chooses not to keep their agreement "exclusive", any other football game (ESPN NFL Football, etc.) will be four years behind, at a minimum. I would guess that the more likely scenario would be that the project teams would be dissolved, and that EA would snap up any talent laid off by Sega, Microsoft, and whomever else. That -really- puts Madden in the driver's seat, with a four-year jump on everyone else from a software/technology standpoint, and any potential competitor having to start from scratch from a personnel standpoint.

It's almost anticompetitive in nature. EA (the 800-kg gorilla) is getting exclusive rights to a commodity (NFLPA licensing rights) that's almost necessary to compete in the market, and has been available to all competing parties until now. What'd happen if GM were to get exclusive rights to anti-lock braking or airbags? What if Nokia were the only company offering car chargers or customizable ringtones?

They drop a billion short-term in exchange for a major leg-up on the competition long-term, with the hopes of driving said competition out of business. No competition means they can cut costs and turn a bigger per-unit profit. Not only that, they can basically ditch their promotions and advertising. Tell me that being the only game in town when it comes to football games in the US isn't worth big money.

Possible Lawsuit on the Horizon

[humpTdance]

I don't think this is true. If exclusive rights, such as these, were going to be made available, it would be in the NFL's greatest interest to entertain all possible bids. With their Disney roots, the ESPN line of football games certainly could afford it.

If the deal is legit and EA is awarded exclusive rights, without competitive bidding, I imagine EA's rivals will come together and file a class-action lawsuit against the NFL. Awarded damages could be huge (revenues for the games and costs of production). As I see it, EA's rivals could sit on their hands and wait for it to happen and recoup their annual earnings without doing any work.

Monopoly

[Mr_Blank]

EA's competitors will go after the NFL and the player's association on the basis of the NFL unfairly using its Monopoloy. Have you ever heard at the end of a televised NFL game that "this broadcast is copyrighted by the NFL. Pictures, vidoes, and descriptions of this game my not be rebroadcast blah blah blah without written permission from the NFL". As far as I understand it, this applies even to the evening news stations. Imagine if FOX got an exclusive deal with the NFL to be the only broadcaster to be able to show video clips from the game. Every other televised news program and sports program would be in serious jeapordy with a segment of their customers. Here is where it gets interesting: The NFL (and NBA and Major League Baseball by the way) are given limited monopolies in the US by Congress. That monopoly power is powerful good for making money, but it also gives the leagues special responsibilities. If anyone or any other company thinks the NFL is abusing its monopoly power, then they can sue. Everytime the league gets sued it risks earning the ire and scrutinty of Congress which could revoke its monopoly license - imagine each team owener actually having to compete in the market place instead of being able to work closely together to set prices blah blah blah; the players union would run prices through the sky. Anyhow, for an example of the monopoly being tested in court read about the Maurice Clarett case. In a nut, if this deal goes through the other game manufacturers can sue that the NFL's monopoloy is unfairly hurting their businesses.

[[See Your Ad Here. Cheap]]

You don't need a license.

[KDR_11k]

I remember that 5-10 years ago, almost no games used licenses from any of the major sports associations. Somethimes they had completely fictious names, sometimes they just changed them around enough to avoid legal trouble. You don't need an official license to make a sports game, the license only covers the names and looks, not the game rules. Therefore the competition would have to fall back on the old way of making up names. That would not mean they couldn't develop the gameplay mechanics and once EA's license expires they can get their licenses back and continue using the real names.

I don't know how the casual gamer will react to that, whether they play the games just because they have the official names or whether they care about gameplay instead. Also, I'm not sure they'll figure out that those games don't use a license until they bought it and play it and at that point they can start appreciating the gameplay.

Scary part is that they can afford it

[*weasel]

From what I googled:

Madden 2k3 was the #4 best selling console game in 2003 -- selling 2.6m units for the PS2 alone. (~$130m USD)
Madden 2k2 was the #6 best selling game in 2003 -- selling 1.99m units (~$97m USD)
Madden 2k1 was the #33 best selling console game -- selling a respectable 900k units (~$46m USD)
Madden 2k3 for the XBoX is way down at #76 with 490k units (~$22m USD)
Madden 2k2 for the XBox is clinging to #96 with 411k units (~$19m USD)

So the Madden franchise brought in ~$314m USD in 2003 on the consoles alone. EA also has the NFL Blitz and NFL Street franchises which also require likeness rights' licensing.

Also keep in mind retailers don't typically make much profit (if any) off video game sales. (the publisher/distribution/storefront business is more hackneyed and assinine than film distribution) -- So nearly all of the revenue goes right back to EA, who as we all know, puts very little development money back into its minute incremental gameplay updates for each season. However, it's marketing budget is likely quite sizeable for the industry.

The shocking part of this is that EA can afford this contract. But will it be worth squeezing out their competitors?

Sega NFL 2k3 sold only 600k units (~$16m), and MS Fever 2k2 sold only 500k units (~$25m)
Is a potential increase of $40m worth spending $250m to get?
(granted we don't know what the current fees are for non-exclusive likeness rights -- but I have to assume exclusivity adds more than $40m to the price)

Gamespot reports the article has been retracted

[yoDon]

http://www.gamespot.com/gba/sports/maddennfl2005/n ews_6098784.html