The National Basketball Assn. signed long-term videogame licensing deals with five publishers on March 22, bucking the trend of sports leagues making exclusive arrangements with a single company.
(Reuters) -- The National Basketball Assn. signed long-term videogame licensing deals with five publishers on March 22, bucking the trend of sports leagues making exclusive arrangements with a single company.
Electronic Arts Inc., Take-Two Interactive Software Inc., Midway Games Inc., Sony Corp. and Atari Inc., all current NBA partners, signed new deals with the league.
Industry sources pegged the total value of the five- and six-year contracts at $400 million, including both direct payments to the league and marketing spending with the league's broadcast partners. NBA executives declined to comment on financial details of the arrangements.
But they said they preferred the non-exclusive arrangements because they believe it enhances the quality of the games.
"It's been our experience that relative competition among the [publishers] has inspired a tremendous amount of creativity," said Sal LaRocca, senior VP of global merchandise for the NBA.
"We felt that having a real diverse offering of products that runs the gamut in terms of demographics ... that we would maintain a greater share of mind day in and day out," he said.
In the past few months, the National Football League struck an exclusive deal with EA, and Major League Baseball agreed to a deal with Take-Two (though that deal is exclusive only among independent publishers; the console makers can produce their own baseball games as well).
"We had discussions about exclusivity with some of our current partners and with a company that is not a partner of the NBA," said Adam Silver, president/CEO of NBA Entertainment.
"We got to a dollar number, which is a significant increase off our current deals, but at the same time we're able to maintain relations with our current partners," Silver said.
Take-Two said earlier this month it was close to a nonexclusive license with the NBA, which was in line with the expectation among most financial analysts that the NBA would not sign up with just one publisher.
Sports videogames accounted for $1.18 billion in sales in 2004, according to the NPD Group, and basketball was the second-most popular category in the genre behind football.
Under the terms of the deals, both EA and Take-Two will get to do simulation-style games every year for multiple platforms, while Sony will make a simulation game every year for its own PlayStation 2 and PSP hardware.
EA and Midway will alternate years with their arcade-style games, "NBA Street" and "NBA Ballers" respectively. Atari will be able to publish its kids game "Backyard Basketball" yearly.
A crucial part of the new arrangements will be advertising. In-game ads are a fast-growing revenue stream for publisher and licensors, and Silver said the NBA planned to take full advantage of the opportunity.
"In the online games, we can insert virtual signage in the same way we do during the telecasts," he said. "As part of the reality we're going to be selling advertising in the same way we do in our arenas."