By Aaron Orheim
Electronic Arts Inc. (“EA”) recently settled a major class action lawsuit brought by gamers who purchased some of the most popular video game titles over the last decade. The lawsuit alleged that EA held an illegal monopoly on sports licenses and used that anticompetitive edge to drive up the price of its games. Parties settled for $27 million, and EA will not renew some of its exclusive licenses in order to increase competition in the future.
The litigation can be traced back to 2004 when EA entered into exclusive licensing agreements with the NFL and NCAA. Its long running game franchises—NCAA Football, Madden NFL Football, and Arena League Football (AFL)—became the only officially licensed football games. Only EA could produce the likenesses of players and teams. Immediately EA raised its prices. For example—with competition out of the way—EA raised the price of Madden $29.99 to $49.99 in one year’s time.
The plaintiff class and EA settled in late July. Of course class action lawsuits often benefit the attorneys more than the class itself. But customers who purchased these EA titles within the last eight years will be eligible to recover monetary damages. Plaintiffs will be eligible to recover anywhere from $1.95 to $6.79 per game. Moreover, EA will not renew its AFL and NCAA exclusive licenses when they expire in 2004.
Naysayers will argue that EA still gets to keep its lucrative deal with the NFL. That game is one of the highest selling annual titles, and no other serious competitor challenged the NCAA and AFL titles before EA signed exclusive agreements. In fact, EA has not produced an AFL game since 2007. Moreover, critics will point out that many class members may fail to recover their damages or prefer that EA maintain its current dominance of the market.
This case presents a very interesting case study for litigants. The stakes are high, as these are some of the most well-recognized games, even among non-gamers. EA made a very smart settlement. By agreeing to pay a large sum now, it maintained its cash cow—the Madden franchise—for years to come. Intellectual property litigants should follow this example and clients’ long-term plans in mind when settling a case.
It will take several years for gamers to see a change, if any, in the status quo. This settlement could lead to better games at lower prices. Alternatively, EA could be so far ahead in the game that its competitors can only stand and watch as it continues its solo run towards virtual gridiron greatness.