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Gamasutra editor-at-large Chris Morris looks at the potential impact the recently ended four-month NFL lockout might have on the prospects for Electronic Arts and its top-selling Madden series.

Chris Morris, Blogger

July 26, 2011

4 Min Read

[Gamasutra editor-at-large Chris Morris looks at the potential impact the recently ended four-month NFL lockout might have on the prospects for Electronic Arts and its top-selling Madden series.] And so the great NFL labor dispute of 2011 comes to a close. Players get their money. Owners get their salary cap. And fans get their game back. For Electronic Arts, the settlement means the end of the four-and-a-half month long simmering uncertainty about what sort of impact the lack of an NFL season would have on Madden sales – and just in time. Just because the players and owners have called a 10-year truce, however, doesn't mean all of EA's problems are behind it. The deal, of course, is good news in the big picture. Rather than having to succeed entirely on its own merits, Madden can once again ride the luxurious coattails of the NFL (and I don't care how good your game is, having that sort of targeted marketing support is invaluable). From a financial standpoint, that means there could be some notable upside. "They're not going to have the hit that some people thought they would have," says Michael Pachter of Wedbush Securities. EA's management tends to be cautious in its guidance – a wise move given how long the company's recent turnaround took. So when rumblings of labor unrest began to increase, EA prepared for a worst-case scenario. "We plan the business down about one third, $85 to $90 million bucks, on the principle that there's a lock-out for the season," said EA CEO John Riccitiello on a May conference call. "That's a worst-case planning assumption, we expect it to do better if there's a season." Those forecasts, naturally, are now moot. On top of that, EA actually managed to turn the labor disputes to its advantage earlier in the process, getting a one-year extension on its exclusivity deal (which was set to end in 2012) as well as a $30 million royalty discount from the league. That's up to $120 million in found money. Given all of that, you'd expect the company's stock would have popped on Monday. Instead, it was up less than 1 percent as investors took a wait-and-see attitude. Of course, there will be a few headaches that EA will have to endure as part of the newly revived season. Madden is scheduled to hit shelves in just over a month – Aug. 30, to be precise. That means a lot of things in the game, like team lineups, are likely already locked at this point in the development process. Free agency resumes Tuesday, and there's a whole summer's worth of deals to make up for. That could quickly make the starting roster in the game outdated by the time it hits shelves. That's easily fixed with a day one patch (or, in the worst case, a patch issued within the first week), but it's bound to mean some extra scrambling at Tiburon. And while players are likely to be forgiving of that patch in theory, given the timing of the agreement, it's never fun to have to update your game out of the box. Also still to be determined is the fan reaction to the lockout. Sure, ESPN anchors are running around in circles shouting "Hallelujah!" since they won't have to spend the fall and winter giving in-depth updates on World Curling Tour semi-finals and update on that other troubled league – the NBA. But some fans take these sorts of disputes personally, focusing solely on the greed of the parties involved, and it can take a while to lure them back. And while this lockout occurred exclusively during the off-season, meaning no missed games, it was still the longest labor stoppage in the league's history. Meanwhile, Take-Two is certainly watching the news with interest, since its NBA 2K franchise faces a similar situation with the ongoing NBA lockout. That company didn't bother to factor the labor dispute into its earnings forecast, a move that confused many investors. In the long run, that might have been a wise decision, though. No warning meant no dip in the stock price. And if the NFL can settle its differences, many believe the NBA will follow suit. "One would think if the football players can settle, then basketball players can settle," says Pachter. "They have less to gain from a strike."

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About the Author(s)

Chris Morris


Gamasutra editor at large Chris Morris has covered the video game industry since 1996, offering analysis of news and trends and breaking several major stories, including the existence of the Game Boy Advance and the first details on Half-Life 2. Beyond Gamasutra, he currently contributes to a number of publications, including CNBC.com, Variety and Official Xbox Magazine. Prior to that, he was the author of CNNMoney's popular "Game Over" column. His work is cited regularly by other media outlets and he has appeared on The CBS Evening News, CNN, CNN Headline News, CNN International, CNNfn, G4 and Spike TV.

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