The NCAA said it will no longer allow Electronic Arts Inc. to use its logo starting next year. The move ends a lucrative business deal with the gaming industry giant and comes as the NCAA fights a high-profile lawsuit that says the governing body owes billions of dollars to former players for allowing their likenesses to be used for free.
The NCAA said it won't seek a new contract with EA Sports, which manufactures the popular game, beyond the current one that expires in June 2014. However, that won't stop EA Sports from producing a college football video game depicting powerhouse schools like Alabama, Ohio State and Oregon, and the Redwood City, Calif.-based company made that clear Wednesday.
"EA Sports will continue to develop and publish college football games, but we will no longer include the NCAA names and marks," said Andrew Wilson, executive vice-president. "Our relationship with the Collegiate Licensing Co. is strong and we are already working on a new game for next generation consoles which will launch next year and feature the college teams, conferences and all the innovation fans expect from EA Sports."
The company reported $3.8 billion in net revenue during its last fiscal year and, aside from its NCAA Football franchise, is well known for Madden NFL, FIFA Soccer and other games.
EA Sports first began making an NCAA Football game in 1998 and it has generated more than $1.3 billion in sales in the U.S. alone, according to a spokesman for market tracking firm The NPD Group Inc. It wasn't known how much of what EA makes from NCAA Football goes back to the NCAA and its members in licensing deals.
Todd Mitchell, senior analyst with New York-based Brean Capital LLC, said losing the NCAA brand isn't likely to hurt EA Sports. He estimated NCAA Football accounts for only about 5 per cent of EA Sports' revenue, or about $125 million.
"It's nice to have the brand, but it's more about the characters," he said.
Analyst Colin Sebastian of R.W. Baird said EA Sports likely expected to lose its partnership with the NCAA.
"I'm sure they have thought about this because of this pending litigation and the worst case scenarios," Sebastian said by telephone from San Francisco. "I don't expect it to have a significant impact on their business."
NCAA Football allows participants to play as any major college football team, though unlike in its professional sports games, the names of players are not used. The similarities between the avatars in the game and actual college athletes are at the root of a fight that could alter the way the NCAA does business in the future.
The NCAA is in the midst of a long court battle that started with a lawsuit filed by former UCLA basketball star Ed O'Bannon after he was shown a video game with an avatar playing for the Bruins that played a lot like him.
The antitrust lawsuit also names EA and the Collegiate Licensing Co. that handles trademark licensing for dozens of schools, the NCAA and various conferences. The suit has expanded to include several former athletes who claim the NCAA and EA Sports used their names and likenesses without compensation and demand the NCAA find a way to give players a cut of the billions of dollars earned from live broadcasts, memorabilia sales and video games.
"We are confident in our legal position regarding the use of our trademarks in video games," the NCAA said. "But given the current business climate and costs of litigation, we determined participating in this game is not in the best interests of the NCAA.
"The NCAA has never licensed the use of current student-athlete names, images or likenesses to EA. The NCAA has no involvement in licenses between EA and former student-athletes," it said in a statement.
Still, the NCAA said its members can seek arrangements with video game manufacturers if they wish.
"Member colleges and universities license their own trademarks and other intellectual property for the video game," the NCAA said. "They will have to independently decide whether to continue those business arrangements in the future."
Michael Hausfeld, the lead attorney on the O'Bannon case, said the NCAA cutting ties with EA could provide greater freedom for EA to make deals with conferences, schools and even players.
"No longer would EA have to pretend the avatars are not the likenesses of the real players," he said.