Professional sports are no strangers to antitrust and other anti-competition based legal actions. More or less every major professional sports league has faced these suits in the past, and some of them even hold specific anti-trust exemptions. For example, the Sports Broadcasting Act of 1961 is a specific anti-trust exemption for the NFL to be able to negotiate the broadcast rights for all teams. While none of the leagues have a true monopoly over the sports they represent, the barriers to entry are fairly great and most leagues are ultimately unable to compete (need I remind you of the XFL?). From the perspective of the NFL or MLB, exclusive licenses are likely viewed the way TV rights are, and I'm somewhat surprised that exclusivity has only become an issue in recent years.
"It wasn't about the efficiencies of competition; it was about breaking into the marketplace." |
EA has a fairly solid position, and if I were in EA's shoes, there would be a few points I would want to make off the bat in terms of the factual issues brought up in the complaint. Specifically, the complaint alleges that there was a price hike on Madden 2006 to $49.95. Really, this whole pricing section is misleading in terms of the actual game market and is presented largely without context. Gamers know that prices of games drop over time, and it wasn't terribly surprising that the price of Madden 2005 dropped in November, about four months after the game came out. What was surprising was the amount of the drop, which was due in large part to Take-Two's bargain pricing of NFL 2K5. Take-Two was trying to attract gamers from the Madden series by pricing below the industry standard ($19.99), potentially at a loss. It wasn't about the efficiencies of competition; it was about breaking into the marketplace. We will never know what pricing would have come with NFL 2K6, but a $49.95 pricetag for a game is standard, and it's unusual for such standard pricing to exist in most markets.
The difficulty here goes into determining damages. Since the last NFL 2K game, we've seen Madden NFL 2006, 2007, 2008, and we will soon see 2009. Each of these games is priced at the standard game rate for each generation of consoles. More importantly, we have no idea if Take-Two would or could have sustained a budget price point for multiple years.
Another factual point left out of the complaint is that Madden was the only football game with any actual competitor. The AFL and NCAA Football leagues had no other games in production. Is it possible someone else would make an NCAA football game today, if the exclusive license weren't present? It is possible, but seems unlikely given the number of years where the license was available and no one took advantage of it. To the best of my knowledge, the Arena Football series has never enjoyed the sales of the other football titles, and it would be even less likely that a competitor would take advantage of that license.
Of course, there are a number of legal issues EA would be likely to present as well. First and foremost, the license with the NFL is legal. There's a solid argument to be made in that the NFL is violating anti-trust laws by aggregating its bargaining power for all the teams in the league in absence of a specific anti-trust exemption, as there is with TV rights. Beyond that point, EA is merely licensing the use of a trademark, something that happens daily in the video game world. That's the basis for all tie-in games, from movies to TV shows to sports leagues.
"Exclusive licensing is important to the gaming industry as a whole." |
Exclusive licensing is important to the gaming industry as a whole, not to mention the concept of intellectual property rights as a whole. If you believe that someone should be able to protect their brand, then licensing is a necessary component. The NFL has an interest in being able to protect the its brand, and thus they can control who televises its games and what products bear its logo. While I haven't seen the NFL license agreement, I would not be surprised to find a quality control clause, so that if EA either fails to deliver a quality product or a product each season, then the license would terminate. It is also interesting to note that both the Madden and NFL 2K games had additional exclusive licenses, one for the use of Mr. Madden and the other for the use of ESPN.
More critically, there is not a viable alternative to allowing the NFL to exercise its license rights as they see fit. If exclusive licenses are banned, then what is to stop a company from simply only issuing one license? You can't force a company to license its product. Even if you were to say that sports leagues were themselves somehow an exception to exclusive licensing, there would be no practical, objective way to accomplish forced licensing to multiple parties while achieving brand protection. It's contrary to the fundamentals of trademark law.
Stepping back from the factual and legal to a more meta view, this is really par for the course with professional sports. In fact, it's all part of the same quagmire that the consolidation of pro leagues has consistently created. It's likely impossible to ever create a new football league to rival the NFL or a baseball league to rival MLB. The barriers to entry are simply too great, between the cost of establishing the teams, the difficulty in securing broadcast rights, and the immense reputation of the established leagues.
If this suit ends up being successful, then I would expect that the MLB license will be next. However, I don't see a practical way for a judge to reconcile the plaintiff's desires with the realities of trademark law. Even the idea that somehow money damages based on the price of future iterations of the game is difficult to reconcile. I would anticipate that EA's lawyers will likely make many of the points I've set out above, but until the response is filed and made public, we won't know what legal points they opt to focus on, be those ones I've set out or an alternative approach.
Mark Methenitis is the Editor in Chief of the Law of the Game blog, which discusses legal issues in video games. Mr. Methenitis is also a licensed attorney in the state of Texas with The Vernon Law Group, PLLC and a member of the Texas Bar Assoc., American Bar Assoc., and the International Game Developers Assoc. Opinions expressed in this column are his own. Reach him at: lawofthegame [AAT] gmail [DAWT] com.
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