Electronic Arts Needed FIFA in 1993. Not Anymore.
(Bloomberg Opinion) -- Electronic Arts Inc. is considering the unimaginable: dumping the FIFA name from the company’s billion-dollar soccer video-game franchise. Given the excessive demands from the global soccer governing body, ending the partnership might be prudent.
On Wednesday, the New York Times said FIFA was seeking to more than double the current $150 million a year licensing fee it receives from Electronic Arts. The two-party deal that started in 1993 and enabled the game maker to use the FIFA brand on its soccer video-game titles is set to expire next year.
The publisher seems to be laying the groundwork for a non-FIFA future. In a blog post last week, EA told its customers that it was exploring renaming its soccer game. While that might be a negotiating tactic, EA is already making serious moves. The blog post made a point of noting that the soccer video game has deals allowing the use of names of thousands of athletes and hundreds of teams.
In other words, EA would do fine without the FIFA branding. Although some might argue that spending more to keep the world's most famous sports name is worth any price to attract casual consumers, I disagree. As long as EA’s future soccer titles have fans’ favorite players and teams, gamers won’t be thrown by the title name switch.
It doesn’t make sense, financially, for EA to double what it pays FIFA. An additional $150 million would slice into the company’s earnings, amounting to about 18% of its net profit for the fiscal year ended in March. So it is smart of EA to play up its strengths.
In fact, EA’s market position has never been stronger. In its latest reported quarter, the company said more than 31 million players had used FIFA 21 since the game’s release last year. The game’s popularity has led to robust revenue. MoffettNathanson gaming analyst Clay Griffin estimates EA’s FIFA Ultimate Team game mode, where gamers purchase card packs to create their virtual teams, generates nearly $1.6 billion for the company annually.
Frankly, FIFA has no strong alternative. The only other soccer game maker of any significance is Konami Holdings Corp.’s eFootball, formerly known as Pro Evolution Soccer. But it is floundering — critics slammed the game’s latest release — and will likely generate negligible sales going forward. If FIFA were to seek out a new publisher and create a game from scratch, it would take years to develop a full-featured rival that could compete with Electronic Arts.
Ultimately, EA doesn’t need the FIFA name anymore. Unlike three decades ago, the video-game publisher is now holding all the cards.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron's, following an earlier career as an equity analyst.
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