January 18, 2005 4:00 AM PST

Electronic Arts plays hardball

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clear that he planned to sell his stake in Ubisoft, EA executives decided they needed to make sure the shares didn't fall into hostile hands.

"Somebody was going to buy those shares, and we thought it was strategically important that we be the one," Brown said, adding that EA currently has no plans to expand its stake in Ubisoft. "We intend to act as good shareholders of that company," he said.

"They're going to rape the NFL in five years--you've got to respect them for that."
--Michael Pachter, analyst, Wedbush Morgan Securities

The Ubisoft deal is subject to review by U.S. antitrust authorities, but experts says there's negligible chance of interference in this or other EA deals.

Hillard Sterling, a partner and antitrust specialist at Chicago law firm Freeborn & Peters, said stable prices and ongoing competition argue against any regulatory interference in the video game market.

"Antitrust law isn't meant to perfect the marketplace--it's not enough to say the market would be better off without this conduct," Sterling said. "It would be very difficult to show an antitrust violation in a market like this where there are a number of competitors with new products emerging almost daily and prices are stable or decreasing."

Although the Ubisoft bid mainly rang bells in the business community, consumers complained about EA's business tactics early in December when the publisher announced it had signed an exclusive five-year licensing agreement with the National Football League. The move protects EA's cash-cow "Madden NFL" franchise, which received serious competition this year from "ESPN NFL," a joint project by game makers Sega and Take-Two Interactive Software.

"Sports games are EA's bread and butter," Cole said. "When they start seeing that being attacked, they're going to react very strongly."

Neither EA nor the NFL disclosed the cost of the deal, but Pachter said EA likely paid way too much--this time. In five years, though, when it's time to renew the contract and no other publisher remembers how to make a pro football game, EA is likely to get its payoff by negotiating a much cheaper deal, he said. "They're going to rape the NFL in five years--you've got to respect them for that," he said.

EA's Brown said the NFL came up with the idea of awarding an exclusive license for video games, a practice that has worked well for the league in other merchandising areas. Once it was clear there was only going to be one winner, EA adjusted its bid accordingly to protect the "Madden" franchise.

"I think it's amusing that some of the people who are saying this is bad for the industry were bidding aggressively for the exclusive license," Brown said.

Besides competitors, the NFL deal drew widespread criticism from consumers, including the 17,000 to date who have signed an online petition protesting the deal.

Steve Bell, the Lansing, Mich., computer technician who started the petition, said the quality of "Madden" games has slipped in recent years and is unlikely to improve now that EA has an effective monopoly on pro football games. "They have no competition, so why bother working hard to improve the game?" he said.

Brown said that's not the case, as much of EA's "Madden" revenue comes from repeat customers. "We don't compete with Sega so much as ourselves, and that dynamic doesn't change at all," he said. "Every season, 'Madden' has to get better, so the people who bought it last year will buy it again."

Further behind the scenes, EA last April bought up development

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14 comments

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Add your comment
What goes around, will come around, again and again.
I honestly think there isn't anything wrong with what is going on. I think there will be a few very large players in the games industry because of what is going on. However those companies will have the cash needed to develop higher quality games. I think there are a lot of titles coming out with below-par graphics and spotty operation that could be much better if developed by a company with the means to fully polish and refine them.

In any case, this is all cyclical. New companies will emerge. The talent base of game designers and technical grunts will expand. We'll be back to square one in five years.

NWLB
*******
<a class="jive-link-external" href="http://www.nwlbnet.blogspot.com" target="_newWindow">http://www.nwlbnet.blogspot.com</a>
Posted by NWLB (326 comments )
Reply Link Flag
Polish
When I think of EA, I do not think of polish. I think of shameless advertising within a game, a game that was paid for with no discounts. Burnout 3 (while I love the game) lacks polish, but EA sure found the time to shove their horrible "EA Trax" and ads for their games and perfume. But I feel that Burnout 3 was rushed out, probaly because all EA wanted was Renderware and do not care what happens to NFS competetors.
Posted by Andrew J Glina (1673 comments )
Link Flag
What goes around, will come around, again and again.
I honestly think there isn't anything wrong with what is going on. I think there will be a few very large players in the games industry because of what is going on. However those companies will have the cash needed to develop higher quality games. I think there are a lot of titles coming out with below-par graphics and spotty operation that could be much better if developed by a company with the means to fully polish and refine them.

In any case, this is all cyclical. New companies will emerge. The talent base of game designers and technical grunts will expand. We'll be back to square one in five years.

NWLB
*******
<a class="jive-link-external" href="http://www.nwlbnet.blogspot.com" target="_newWindow">http://www.nwlbnet.blogspot.com</a>
Posted by NWLB (326 comments )
Reply Link Flag
Polish
When I think of EA, I do not think of polish. I think of shameless advertising within a game, a game that was paid for with no discounts. Burnout 3 (while I love the game) lacks polish, but EA sure found the time to shove their horrible "EA Trax" and ads for their games and perfume. But I feel that Burnout 3 was rushed out, probaly because all EA wanted was Renderware and do not care what happens to NFS competetors.
Posted by Andrew J Glina (1673 comments )
Link Flag
not that relevant
the most important part of the game industry is the developers. Without them, you've nothing. That said, some of the best, and most popular, games are original titles. You buy a company, you buy the franchise licenses, but the talent, the people behind those games, are free to quit. You develop the next hot, original game, and you'll find someone to publish it. Big fish, small fish, the ocean's not going anywhere.
Posted by mortis9 (370 comments )
Reply Link Flag
not that relevant
the most important part of the game industry is the developers. Without them, you've nothing. That said, some of the best, and most popular, games are original titles. You buy a company, you buy the franchise licenses, but the talent, the people behind those games, are free to quit. You develop the next hot, original game, and you'll find someone to publish it. Big fish, small fish, the ocean's not going anywhere.
Posted by mortis9 (370 comments )
Reply Link Flag
3d0 Part Deux
Now I wonder if EA will once again try their hand at the console market.. Considering they almost have a stranglehold on the publishing for the console market.. They say renderware is not important.. But I see where; when, a game company competes and then all of a sudden EA can just convieniently pull the license and then sue said company for using an unlicensed product... So right there they have a non-percieved monopoly; because, now they have control over a tool which is used by about 90% of current game developers...
If the DOJ was smart they would force some very strong measures on how this "middleware" was regulated, OR, hopefully some open source gurus will develop something better.. ;-)
Posted by nzamparello (60 comments )
Reply Link Flag
You learn something every day
I was going to rant at you about how 3DO was developed by the creators of Amiga and the Lynx, but I checked my facts first and found that you are largley right. (The CEO of 3DO was the founder of EA.) Hmmmm. Scarey. I used to love EA due to my love of the old Bards Tale games but that was a long time ago now.
Posted by Andrew J Glina (1673 comments )
Link Flag
3d0 Part Deux
Now I wonder if EA will once again try their hand at the console market.. Considering they almost have a stranglehold on the publishing for the console market.. They say renderware is not important.. But I see where; when, a game company competes and then all of a sudden EA can just convieniently pull the license and then sue said company for using an unlicensed product... So right there they have a non-percieved monopoly; because, now they have control over a tool which is used by about 90% of current game developers...
If the DOJ was smart they would force some very strong measures on how this "middleware" was regulated, OR, hopefully some open source gurus will develop something better.. ;-)
Posted by nzamparello (60 comments )
Reply Link Flag
You learn something every day
I was going to rant at you about how 3DO was developed by the creators of Amiga and the Lynx, but I checked my facts first and found that you are largley right. (The CEO of 3DO was the founder of EA.) Hmmmm. Scarey. I used to love EA due to my love of the old Bards Tale games but that was a long time ago now.
Posted by Andrew J Glina (1673 comments )
Link Flag
corporate ripoffs
i would just like to inform the general public of how a company like electronic arts makes money from ripping off the general public at will and arbitrarily denying any recourse to their abuse of power if a news source such as cnet actually did the homework a whole new story would come to light it just takes a little research and investigation i found out some very interesting facts and i am just the average american person so it tends to make one think why a company as big as electronic arts is so afraid of the public that they have no customer support contacts or phone number to call and the one option they have is e mail which is never responded to. well in my opinion the public in every country should boycott electronic arts and then lets see how much money they make from our children and maybe they will learn to respect the everyday consumer and provider of their income without customers they would be nothing
Posted by kidgraphics (2 comments )
Reply Link Flag
corporate ripoffs
i would just like to inform the general public of how a company like electronic arts makes money from ripping off the general public at will and arbitrarily denying any recourse to their abuse of power if a news source such as cnet actually did the homework a whole new story would come to light it just takes a little research and investigation i found out some very interesting facts and i am just the average american person so it tends to make one think why a company as big as electronic arts is so afraid of the public that they have no customer support contacts or phone number to call and the one option they have is e mail which is never responded to. well in my opinion the public in every country should boycott electronic arts and then lets see how much money they make from our children and maybe they will learn to respect the everyday consumer and provider of their income without customers they would be nothing
Posted by kidgraphics (2 comments )
Reply Link Flag
If you are getting our hopes up then I will send out my minions to find you, drag you back here and then I'll have my mistresses deal with you.
Posted by merchantsolutions (1 comment )
Reply Link Flag
Forbes Magazine said Ea and Maxis are 'sticking to their guns' and 'defending' THEIR vision of the new SimCity. The bottom line is they aren't listening to what WE the consumer want who actually go out and BUY their product. It's a sad day when companies could care less what their buying public is asking for. So go ahead EA and Maxis. Stick to your guns and we'll stick to ours and boycott your company and every title you produce from here on out.
Posted by scottp23 (5 comments )
Reply Link Flag
 

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