Back in the day, there was a debate in the gaming world about who made the better NFL video game. Electronic Arts' (NASDAQ:EA) Madden franchise has been a fan favorite going back to the 1990s, but many gamers believe Take-Two Interactive's (NASDAQ:TTWO) NFL 2K5 (released in 2004) is the all-time greatest football game.
That debate is due for a revival, as Take-Two recently announced an agreement with the NFL to make "multiple football video games" that will span several years starting next year.
The EA Sports label is the home of two of the best-selling video games in the industry, which just happen to be sports titles -- FIFA and Madden. EA doesn't disclose revenue from individual games, but the company generates more than one-fourth of its annual revenue from the Ultimate Team game mode featured in its EA Sports titles.
With so much revenue dependent on sports games, some investors may be wondering whether the competition over the next several years will hurt EA's business. Even though this is a big deal for Take-Two, EA investors don't need to worry about competition.
Take-Two will make a different kind of football game
Details about the upcoming games from Take-Two were vague, but there is enough to suggest that both companies will be able to grow sales of their respective football titles. In a press release, David Ismailer, President of the 2K studio for Take-Two, said that the games will be "fun, approachable, and social experiences." 2K is the studio that published the NFL 2K franchise from 1999 through 2004.
EA's Madden will likely keep its player base intact. The new agreement between the NFL and Take-Two is authorizing a different kind of gaming experience than the football simulation experience in Madden, which tries to deliver the authentic feel of playing a real NFL game.
After the NFL announced the agreement with Take-Two, EA released a statement that said, "EA Sports is the exclusive publisher of NFL simulation games, and our partnership with the NFL and NFL Players Association remains unchanged."
EA has been the exclusive publisher of simulation football games for the NFL since 2004. That agreement is apparently still in place. As EA explained, "Our agreements have always allowed for non-exclusive development of non-simulation games on various platforms."
It's a win for all
Some sports gamers are likely disappointed that Take-Two won't be able to revive its own simulation experience with the NFL 2K franchise. The "fun and approachable" description of the new football games sound like experiences that are primarily designed to help the NFL build its brand with a new generation of sports fans.
The NFL is obviously trying to keep its momentum going after experiencing its second straight year of rating increases during the 2019 season. More licensed football games could translate to more people tuning in on Sundays, but that may have to wait until after 2020. With the COVID-19 situation remaining fluid, there is the possibility that collegiate and professional sports could see upcoming seasons cancelled.
From a business perspective, this deal is good for all parties involved. NFL fans get some new video games to experience football besides playing Madden every year. Madden will continue to be the go-to game for players looking for a more realistic football experience, especially in esports, where EA is investing to grow its EA Sports franchises.
And clearly Take-Two has a new catalyst to grow revenue over the next five years. However, it's unclear how much revenue the games will generate. Take-Two disclosed that NFL 2K5, the last game it made with an NFL license, comprised only 2% of its revenue in fiscal 2005.
There likely isn't going to be any competition from these old rivals, and the NFL probably doesn't want that anyway. In a statement issued on March 10, EA said that "Madden NFL 20 is the most successful game ever in the franchise, and new modes like Superstar KO and our Madden NFL esports broadcasts are growing the fan base."
Additionally, EA stated it is looking forward to building on that success "with more new and different experiences, on more platforms and with new ways to play, in the years to come."