Latest Exclusive License Developments Indicate EA is the Less Satisfied Party

No matter where the most blame is placed by gamers when it comes to the NFL exclusive license, whether that be the league or EA Sports or an equal share, the extension of a year to the current contract and the manner it was negotiated could be telling. Based on each side’s actions it appears that the NFL is much more in favor of the deal as it currently stands than EA Sports who took a reduction on this season’s payments while tacking on another year.

The following quote from Jacksonville Jaguars owner Wayne Weaver, the chairman of the NFL’s business ventures committee, says it all.

“For one of our core partners in a difficult environment, we say let’s look at this, and maybe it makes some sense to extend something out longer and give our partner some relief in the short term but gain something on the back end.”

Essentially the NFL gave EA Sports the break for this year but wanted something in return. That something was the addition of a year to the contract that will take it through 2013 (Madden 14). As Weaver states the NFL is “gaining” on the back end. The way it is phrased makes it evident that EA agreed to the additional year primarily for the cost reductions being offered in the short-term rather than necessarily wanting to extend it in its current state. The nature of negotiations are in the give and take so obviously EA was not going to win out (and the NFL lose out) on both ends of the restructuring.

Sales of Madden 12 will surely take a big hit if the labor strife affects the upcoming season despite some who may suggest that the lack of a season would make Madden a fill-in for those that miss the sport. The excitement as the NFL season nears is what largely drives the excitement for the release of Madden. Roster updates also are critical in generating interest in sports games beyond release week and without those week-to-week developments it just wouldn’t be able to capture the same level of attention. There is also a question surrounding rookies and whether they would be able to be included in the game.

Over the years many have hoped for the NFL to cease their use of an exclusive video game license and open things up for multiple parties. The NFL’s actions however show they cherish these exclusive deals and that hasn’t changed as of late. Whether it be DirecTV with NFL Sunday Ticket, Nike taking over on-field apparel, Bud Light replacing Coors this year as the official beer, or a single video game representing the league…this is simply how they operate.

The exclusive license is far more lucrative than what would be had with multiple publishers paying a much smaller rate to secure the rights. It is estimated that EA Sports pays twice as much as the NFL used to get when there were four (or even more) companies making NFL branded games. Why would the NFL wan’t to turn away from that? They are guaranteed that large sum regardless of how many copies sell. Despite the unrest amongst the hardcore gamers the league still believes Madden represents them well and they retain a higher level of control over how their product is presented.

Madden isn’t the only NFL product that EA produces in hopes of capitalizing on the NFL license. The problem is the spin-offs have not been all that successful. Attempts such as NFL Head Coach, NFL Tour, and Madden Arcade have not delivered. There are rumors that the company will be resurrecting NFL Blitz but after the flat sales of NBA Jam bringing back a popular franchise from the past doesn’t seem to provide the potential they had at first anticipated. EA is also now utilizing the license for Facebook gaming with Madden NFL Superstars as well.

The longer the market goes with no competition the more difficult it is to imagine another company being able to jump in and take over the reigns. The initial investment would be much greater and it would take years to produce a high quality product. The NFL is surely well aware of this and would rather go with the devil they know (and have a close relationship with) rather than the one they don’t.

No one can know what the market will bear for an exclusive NFL license the next time it comes up for negotiation. As of now it appears that EA Sports will have some trouble justifying a deal that has similar terms to what they originally signed. Whether the NFL will accept lesser terms or flirt with a different party when the time comes will be determined by a number of factors. One thing seems certain however and that is the league, unless forced by an unlikely court decision, will continue their practice of selling the exclusive rather than opening it up for multiple parties.