Could anybody have guessed which sport Electronic Arts (Nasdaq: ERTS) would lock up next? After all, the king of video game sports had just in the past half year signed exclusive deals with the NFL and the Arena Football League and stole Disney's (NYSE: DIS) ESPN brand away from rival Take-Two Interactive (Nasdaq: TTWO), as Take-Two similarly cornered Major League Baseball.
The answer: college football.
That's right. Monday morning, EA announced a six-year deal with the Collegiate Licensing Company (CLC) for the exclusive right to develop, publish, and distribute games using college football team names, stadiums, and schools on all video game consoles and handheld devices. Essentially, the deal ensures that EA will be the only company making football simulations for the foreseeable future.
The two questions that come to mind are why, and is EA going overboard?
While Take-Two and Sega's NFL 2Kseries represented legitimate competition to EA's Madden, EA's NCAA Football series has long been without a rival. But it is also true that the NCAA series has long been a top seller and the second-best selling football game on an annual basis. And being second to Madden, the third most popular video game for 2004, according to the NPD Group, is nothing to sneeze at: Another NPD Group stat, this one cited by GameDAILY.com, claimed revenues of $770 million (through February, 2005) in the current console generation for Madden, versus a still-respectable $263 million for the NCAA Football series. So it does make sense for EA to want to cover that base, particularly with next-generation consoles from Microsoft (Nasdaq: MSFT) and Sony (NYSE: SNE) not far away.
In truth, I think the far bigger foul would have been for EA to pour money into the development of a hit college football game for these next-gen consoles, only to have Take-Two sign an exclusive deal. While college football is overshadowed by the Madden umbrella in EA's camp (it also shares shelf space with a quiver of almost 30 EA titles) it could be a significant foothold for a smaller player like Take-Two.
Most observers probably would have guessed a deal with the National Basketball Association or the National Hockey League would have come next. Of course, now college basketball has to be a possibility as well. But if I had to pick who's next, I'd have to choose the NHL, as it would behoove either EA or Take-Two to strike a deal on the cheap while hockey is out of favor.
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Fool contributor Jeff Hwang owns shares of Electronic Arts.
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