Licensing exclusivity can be a major factor in video game success or failure. The right title, for instance, can drive customers to a console; just look at what Halo has done for the Microsoft Xbox platform or how Sony’s PS3 struggled early on without an equivalent “Tent Pole” title. Similarly, exclusive content licensing can help define, or destroy, an individual title. Where would Guitar Hero be without the rights to use popular songs? What kind of draw would there be for a sports game without the rights to replicate pro teams and players?
Electronic Arts understands these equations as well as any game publisher. Good games are important. Good games tied to the right content licenses are essential. As a result, today the Redwood City game publisher expanded their 3 year old contract with the NFL and the NFL Players Union. (Their existing contract had one year left).
Under the terms of the new deal, EA will retain exclusive rights to use NFL Teams, logos, player likenesses and stadiums in gaming products through Super Bowl XLVII in 2013.
The Madden Football Franchise EA’s will be the primary beneficiary of the license. Over its near twenty season lifespan it has generated more than $2b in sales. The license will insure it remains the dominant NFL title for the next five.
The broader EA Sports division should also reap rewards. According to Forbes, EA Sports is the number five brand in sports behind powerhouses like ESPN. And, overall, in a given year, the sports division can account for as much as 40% of gross sales for the company. As CEO John Riccitiello noted in an interview (via WSJ) “Sports at EA are like the theme parks at Disney. It’s the heart.”
The NFL deal, and other exclusive relationships (NASCAR, PGA Tour, FIFA and Arena Football) are at the foundation of the brand’s strength. The exclusivity also makes it easier for Peter Moore’s group to make long term investments without fear of competitive encroachment. Such investments might take the form of new/revised titles, new non-simulation games, more casual gaming initiatives, and, also, increased innovation with online or console based dynamic gaming efforts.
In calendar year 2007, under increased pressure from competitors like Activision, U.S. retail sales for the Sports division were off about 10% year over year (via NPD). Increasing the brand’s global footprint, more innovation, and more emphasis on the brand are part of a plan to correct that. A recent deal with management firm IMG Worldwide to explore expanding EA sports into non gaming consumer products could help too.
Financial incentives included in the new NFL contract haven’t been disclosed.
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