Distraught fans of the former 2K Sports NFL video game franchise may finally have their day in court, nearly seven years after EA Sports locked up an exclusive license to produce video games featuring NFL teams and players. In 2004, a year during which EA Sports’ Madden NFL 2005 sold for $50 and Take-Two’s NFL 2k5 sold for $20 (thereby taking a considerable chunk of EA’s market share), EA Sports signed a contract with the NFL, granting the video game giant the exclusive rights to publish content with the NFL’s teams, players, and stadiums (a contract which was later extended in 2009). Take-Two, publisher of the 2K franchise, assailed the contract as destructive to sports fans and consumers, by limiting choice, creativity, and competition. Over the next year, EA Sports acquired exclusive licenses to produce video games featuring the Arena Football League and NCAA football, effectively removing all competition from the football market.

222388203_53115b2992Since the exclusive agreement, EA Sports has effectively cornered the football video game market. Visual Concepts, the creative team behind the 2k franchise, released a generic game (featuring some former NFL players) entitled All Pro Football 2k8 in 2007, but its competitive impact was minimal, given the lack of NFL teams, players, and stadiums. Likewise, a contingent of loyal NFL 2k fans, have utilized computer software to modify game saves for the 2k franchise, effectively enabling them to update team rosters to current status. However, for consumers and fans seeking updated uniforms, stadiums, commentary, and graphics, the Madden and NCAA Football franchises have been the only options.

In 2008, Geoffrey Pecover & Andrew Owens filed suit against Electronic Arts in the U.S. District Court for the Northern District of California, alleging price gouging and anticompetitive behavior. EA responded, stating that its behavior was neither anticompetitive nor burdensome on consumers. In early April (2011), however, the lawsuit was certified as a class action and now surges forward. Plaintiffs are class eligible if they purchased an EA Sports football game after January 1, 2005.

However, at least one observer is doubtful that the suit will get much further than class certification, noting that although EA’s move was potentially predatory toward Take-Two, it has not been unduly so toward consumers, as Madden and NCAA Football have launched with the same price point as all other Electronic Arts releases, thereby effectively reducing any likelihood of injury finding. Likewise, exclusive creative rights licenses are commonplace in the video game industry, complicating claims of anticompetitive behavior.

Although exclusive licenses may be commonplace in the video game industry, the NFL is in a unique situation in granting such licenses, as demonstrated in the Supreme Court’s recent American Needle decision.  In American Needle, the Court was faced with a challenge to a decision by National Football League Properties – a corporation formed by the 32 individual NFL franchises, to develop, license, and market each of the teams’ individual intellectual property as a whole – to grant exclusive apparel rights to Reebok.  Lower courts determined that the NFL franchises were incapable of conspiring (under the Sherman Act) because they were, effectively, a single entity.  The Supreme Court reversed, finding that NFL franchises are effectively independent entities for Sherman Act analysis, citing competition for fans, on the playing field, and in the intellectual property arena (sales). Although the teams may have common interests, the Court continued, such interests are not directly aligned in the case of intellectual property. The Court reasoned that although certain concerted actions by NFL franchises may be exempt from antitrust law when necessary for the promotion of their common product, such was not the case for apparel licensing.

Although the Supreme Court did not rule on the merits in American Needle, its reasoning could have some application to the Pecover class action. Admittedly stretching the Court’s reasoning, plaintiffs could argue that EA Sports, in concert with the NFL Franchises, acted in an anticompetitive manner in securing an exclusive license to the NFL franchises’ intellectual property, as the negotiations occurred with a single entity, the NFL, and to the exclusion of the rest of the market. As discussed above, injury may be very difficult to prove, but at least there is a starting point. Whatever the result, it appears, at a minimum, that in this era of lockouts and exclusivity, somebody is trying to remind the giants of the fans – a laudable result on its own.

- Alex Payne

Image Source

Tagged with:

Comments are closed.