All Your History: EA Sports Part 4 – Pros and Contracts

As the video game industry entered the 21^st century, the competition for consumers’ attention—and dollars—continued to heat up. Throughout the ‘90s, several challengers to Madden NFL’s dominance over the football game genre had risen, though none were able to make much of a dent in the franchise’s supremacy. But in 1999, when Sega launched their Dreamcast console, a rift developed between the console manufacturer and Electronic Arts. Little did anyone know that this conflict would help change the landscape of sports video games for years to come…

Pros and Contracts

While Sega and EA had successfully teamed up with John Madden Football on the Genesis system in the early 1990s, they couldn’t see eye-to-eye about EA’s Dreamcast presence. According to a 2009 Gamasutra article, Sega had already bet their sports fortunes on a California-based developer named Visual Concepts, buying it for $10 million prior to the system’s launch. Ironically, Visual Concepts had previously developed three Madden titles for EA—Madden ’94 and ’95 for 16-bit consoles, with’96 getting canned due to programming difficulties with the new Sony PlayStation.

In a situation that mirrored their Joe Montana licensing deal back in the ‘90s, Sega wanted Madden on Dreamcast while still publishing their own football game. But though EA took over Joe Montana Football when Sega couldn’t get the job done in 1990, this time Visual Concepts was on track to deliver the goods with NFL 2K.

EA remained unbowed; they wanted to be the exclusive sports game publisher on Dreamcast, looking to ink a five-year exclusivity deal. Sega reportedly offered EA the opportunity to be the only third-party developer of sports games for the system—meaning that it would still publish its own 2K franchise. But EA walked away from negotiations.

Bing Gordon, Electronic Arts’ then-marketing director, was quoted in the press as saying, “Dreamcast can’t succeed without EA.” As it turned out, Gordon wasn’t far off the mark. While Sega and Visual Concepts released NFL 2K and NFL 2K1 exclusively for the system—to absolutely rave reviews— it couldn’t stave off the onslaught of the PlayStation 2. And EA didn’t mend fences with Sega: Madden never appeared on the Dreamcast, but found a happy home on Sony’s console. Sega ceased Dreamcast production in March of 2001, after only 18 months.

EA’s Dreamcast-snub wasn’t all about ego. They reportedly had legitimate concerns about Sega’s decisions prior to the console’s launch, such as flip-flopping over whether or not to include a built-in modem, and not throwing in with EA’s preferred chip-manufacturer 3dfx. But no matter how justifiable Electronic Arts’ beef with Sega might’ve been, their public stand against the system signified an attitude that had grown at EA after years of unrivaled success.

In an e-mail interview with Machinima, former EA Sports designer Ernest Adams explained that the company’s outlook had shifted over time as their industry position solidified:

“As EA got bigger, the company got rather cocky and inclined to act as if success were its due. It was no longer an eager young success hungry for more; it became a middle-aged success that thought it could do no wrong.”

The Dreamcast’s demise spurred Sega to quit the console-making game, devoting all its time to making software. By the end of 2001, Sega and Visual Concepts released NFL 2K2 as one of the Dreamcast’s last titles, but it also appeared on the PS2 and Xbox. While other rivals had tried to get a taste of Madden NFL’s pie, Sega’s new franchise began carving out a serious slice.

The 2K series kept pace with Madden—and according to many critics, outstripped it in terms of visuals and gameplay. Sega released critically praised installments every year, even partnering with media-giant ESPN in 2003.

Then, Sega went in for the kill. They released ESPN NFL 2K5 for the PS2 and Xbox in July 2004.

The suggested retail price? A mere $19.99.

Releasing a top-tier video game at such a bargain basement cost was unheard of, and gamers knew a great value when they saw it. Compared to Madden NFL 2005’s price tag of $49.99—then the industry standard for a new game—NFL 2K5 was too good a bargain to pass up. In fact, only three months after its release, EA slashed Madden 2005’s price to $29.99, clearly reacting to Sega’s strategy.

According to one source, a Madden developer summed up EA’s response to the twenty-dollar tactic succinctly: “It scared the hell out of us.”

But the fear would be short-lived. In December 2004, Electronic Arts and both the NFL and the NFL Players Association signed a five-year exclusivity contract, guaranteeing that EA Sports would be the only publisher offering real NFL teams and players. While the first Madden titles could get by without the license, by this point gamers wouldn’t even sniff at a football game without it. With one stroke of the pen, Electronic Arts dealt a fatal blow to their competitors—Sega’s 2K franchise, Midway’s NFL Blitz, and 989’s NFL Gameday. That same year, EA also signed exclusivity deals with the AFL, and NCAA. All three agreements ensured EA Sports’ complete football domination through 2009.

According to a 2004 GameSpot article, EA had been trying to secure exclusive rights to the NFL license for a few years. And after the deal was struck, it was revealed that it was the NFL itself that made the decision to go exclusive—Electronic Arts was only one of several publishers bidding for the license. Said an EA spokesperson at the time: “Obviously exclusives are more expensive. We are most certainly paying a premium.”

But that detail was lost on critics of the contract. Take-Two, NFL 2K5’s distributor at the time, said that the deal would “do a tremendous disservice to the consumers and sports fans whose funds ultimately support the NFL, by limiting their choices, curbing creativity and almost certainly leading to higher game prices.” The next year, Madden 2006 debuted at $49.99.

An analyst quoted by GameSpot said out loud what the gaming world was collectively thinking: “EA is both evil and really smart.”

Even Electronic Arts’ founder, Trip Hawkins, saw problems with the agreement. Hawkins had left the company in 1994 to start a new video game venture, 3DO, but weighed in on EA’s NFL exclusivity in an e-mail interview with Machinima:

“I think it is unfortunate when any fundamental category license can be exclusive or even semi-exclusive.  It inhibits competition.”

Consumers agreed. In February 2008, EA and the NFL extended their contract through 2012. Four months later, gamers filed a class-action lawsuit against Electronic Arts, alleging that the publisher had “the ability to raise the price of its interactive football software substantially for a significant period of time without consumers substituting another product…EA now has a monopoly on the market for interactive football software.”  Despite reports that the NFL had been the driving force behind the exclusivity deal, the plaintiffs’ attorneys argued that EA’s similar contracts with the AFL and NCAA proved it had a monopoly on the genre, limiting customers’ choices.

After four years, the lawsuit ended in July 2012 with a $27 million settlement for the plaintiffs. But it was a Pyrrhic victory for gamers: consumers who bought a Madden title between 2005 and 2012 for Xbox 360, PlayStation 3, or Wii could claim a paltry $1.95, while Madden games for Xbox, PS2, or GameCube entitled consumers to $6.79. And while EA agreed to a five-year moratorium on exclusivity deals with the NCAA and AFL after their current contracts expire in 2014, the settlement still allows them to retain exclusive rights to the NFL license. In fact, that agreement won’t end until 2013—it was extended yet again in February 2011.

No one can dispute the monetary value of holding the reins to one of the most popular licenses in the world. But while the contract effectively ended competition between EA and rival game publishers, Electronic Arts wound up fighting with its own fans instead—both in court, and in the court of public opinion. Their hard-fought victory raises an important question: is any contract—even one with the NFL—worth the wrath of your own audience?

Tune in next time for the final score…

Click for Part 1, Part 2 and Part 3…