Electronic Arts’ Monopoly on NFL Video Games
Electronic Arts quickly shut down any speculation that Take-Two Interactive would soon be encroaching on its turf in NFL gaming. EA reached an agreement with the NFL on Thursday to extend its exclusive rights to NFL simulation video games through 2026. That means the lucrative Madden franchise will have another few years with zero competition.
Why it matters: Madden is estimated to rake in more than $600 million in annual revenue for Electronic Arts, according to Jefferies analyst Alex Giaimo. That’s more than 10% of EA’s net revenue for the 12 months trailing March 31, 2020. Since Madden’s debut in 1988, EA has sold 130 million copies of the game. Madden 20 has seen a 30% increase in unique players and more than 330 million hours of the game have been played since it was released last August, according to the company.
With eSports and NFL popularity on the rise, exclusive rights to a simulation game are more valuable than ever. Jefferies notes that NFL popularity has increased significantly over the last 15 years, with average franchise value growing more than 3X over the past 15 years. The deal between the NFL and EA is reported to be $1.5 billion.
Jefferies remains NEUTRAL on shares of EA with a price target of $115: “we would still like to see a more consistent non-sports portfolio before becoming more constructive on the stock.”
Neutralized threat, for now: Take-Two Interactive announced in March it will produce its first NFL-licensed football games since 2005. While initially perceived as a danger to EA’s grip on simulated NFL games, Take-Two’s deal with the NFL is for non-simulated games and is likely to be arcade-style and be like NFL Blitz. EA’s new deal gives the company some breathing room.
