Lawsuit Over EA’s Exclusive Sports Licenses Settled

A class-action lawsuit over EA Sports’ exclusive licenses with the NFL, NCAA, and several others reached a proposed settlement on Thursday.

The lawsuit, filed in 2008 by Hagens Berman Sobol Shapiro LLP, alleged the following in its long form notice (PDF):

The class action lawsuit alleges violations of California’s antitrust and consumer protection laws in connection with the sale of football video games. Plaintiffs, purchasers of Electronic Arts’ football video games, claim that Defendant Electronic Arts entered into a series of exclusive licenses with the National Football League (NFL), National Football League Players’ Association (NFLPA), National Collegiate Athletics Association (NCAA), and Arena Football League (AFL), which plaintiffs claim foreclosed competition in the alleged football video game market. Plaintiffs allege that this series of exclusive licenses resulted in customers who purchased certain football video games to be overcharged.

Individuals who purchased any title from Madden NFL 06 through Madden NFL 11, NCAA Football 06 through NCAA Football 11, or Arena Football and its follow-up title Arena Football: Road to Glory, were eligible to participate in the lawsuit.

EA responded (PDF) to the legislation, denying that it had done anything illegal:

Plaintiffs are barred from recovery because EA’s actions were, in whole or in part, privileged, justified, and/or excused by operation of law. Without limiting the foregoing, Plaintiffs’ claims are barred from recovery because an intellectual property owner has the unqualified right to license unilaterally its intellectual property to a single non-competitor licensee, or no licensee at all.

EA went on further to claim that their exclusive licenses did not threaten competition:

Plaintiffs’ clams are barred, in whole or in part, because EA’s actions have not unreasonably restrained trade, injured any competitor, or tended to destroy competition in any relevant market, nor do they threaten to do so.

After four years, Hagens Berman proposed a settlement on Thursday, which would create a $27 million consumer fund to reimburse individuals who purchased the offending titles. The specific terms of the settlement state that individuals who purchase a GameCube, PlayStation 2, or Xbox title would receive $6.79 per title, and those who purchased a PlayStation 3, Xbox 360, or Wii title would receive $1.95 per game.

Furthermore, the settlement bars EA from either negotiating an exclusive license with the AFL or renewing its exclusive licenses with the NCAA for five years after it expires in 2014.

The settlement is not final and has not yet been approved by the court.

Analysis: It looks like EA got what they deserved. They started to act greedy and monopolistic, and before long, they get one of the premier class-action lawsuit firms barking down their alley.

Let’s just look at the prices here. Madden NFL 2005, the last title before the exclusivity deal hit, had an MSRP of $29.99; whereas Madden NFL 13, the most recent title, weighs in at $59.99 USD. Not all of that is due to the price rise of recent years because Madden NFL games were relatively cheaper than their non-annual counterparts even when prices maxed out at $49.99 for a new title. So there is some truth to the fact that the lack of competition has allowed EA to jack their prices up from $20 below a standard new title to on par with a new title.

Furthermore, EA claims that it has not hindered competition with its title, but when was the last time you remember playing an NFL2K or ESPN NFL title? Looking back at it, 2K Sports stopped making the game after its 2005 edition, right when the exclusivity deal hit. Similarly, when was the last NFL GameDay title? 2005, it looks like.

These series didn’t suddenly stop becoming profitable. Sure, NFL GameDay was on the decline when the exclusivity deal hit anyway, but it seems silly to believe that either 2K Sports or 989 Sports wouldn’t have kept putting out new editions if it weren’t for the exclusivity deal. In fact, 2K Sports even tried to do that, releasing All-Pro Football 2K8, which featured a fictional NFL league. So it’s clear that these studios want to be producing NFL games but can’t due to EA’s licensing deal. The exclusive licenses are reducing competition that would otherwise exist in the market.

Ultimately, a $27 million slap on EA’s hand will set a good precedent. Then, when the NCAA becomes open for business again, I think it might be interesting to see the amount of competition that will come out of the woodworks. EA might have to work again to be on top instead of buying its way there, and that would be a good thing for all of us.

Connor Horn

About Connor Horn

Connor is a laid-back long-haired California hipster who listens to music "you'll never find on the radio" and who voted for Ron Paul to "make a difference." His favorite kind of games are MOBAs and rogue-likes, and he is a huge fan of PC gaming and the future of digital distribution.