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Tuesday
Sep222015

Will EA Sports be collateral damage in FIFA corruption scandal?

Today EA Sports is releasing FIFA 16, the 23rd installment of its acclaimed video game. The FIFA franchise is the best-selling sports video game ever and the race for this distinction isn’t even close.

Last year’s edition accounted for 15% of EA’s revenues, exceeding $600 million.

It will be interesting to see what kind of effect the FIFA bribery scandal may have on the video game’s popularity.

Fans’ views differ. Some have called for boycotts of the game. A corollary of this argument is that EA Sports does not need FIFA’s brand to market the game anymore, so EA should end the relationship. At the other end of the spectrum, some consumers have said they're more likely to purchase the game now, because they didn’t want to buy anything while FIFA’s corruption went unaddressed.

Analyzing the sales figures will be difficult because the new version will also feature women players for the first time, introducing a confounding variable.

In our attempt to project future developments, we might look at EA’s history with Tiger Woods. When Tiger’s scandal first became public, EA Sports was one of the few sponsors who did not cut ties with him. As sales of its Tiger Woods PGA Tour games continued declining, EA pulled the plug on the relationship. (The inaugural Tiger-less version was released this July to mixed reviews.)

And yet, the primary issue for the direction of the FIFA franchise is neither public opinion nor EA’s policy toward scandals. Instead, it revolves entirely around licensing and the practicalities that accompany it.

Licensing is a contractual issue, and the current licensing agreement between EA Sports and FIFA runs through the end of 2022. Though protections for damaged goodwill are almost certainly included, it is unlikely that EA would have gained significant contractual leverage just because charges were filed against FIFA officials.

Whereas the PGA Tour franchise only risked its relationship with a single player, the FIFA franchise has much less flexibility. Through its licensing agreement with FIFA, EA Sports can streamline its licensing of the vast majority of the major leagues and players. Without a license from FIFA, EA Sports would have to approach all clubs and leagues individually, making it much more difficult to create an authentic product.

EA’s primary competitor for soccer video games is Konami with its Pro Evolution Soccer franchise. Konami trails FIFA in popularity in large part due to the difficulties it faces licensing teams and leagues.  On the other hand, Konami has been able to hang on to an exclusive license from UEFA – the Union of European Football Associations – something that EA has wanted to acquire for years. UEFA also happens to be the association most opposed to the current FIFA leadership, threatening to exit FIFA.

The prospect of mutiny at FIFA places EA Sports between a rock and a hard place. If a cataclysm occurs within FIFA that causes the secession of member associations, then EA will be forced to deal with licensing in the same way as Konami. This would almost certainly dilute the quality of EA's product, or EA would have to spend significantly more on licensing. As a result, the prosperity of FIFA and EA's soccer game are intertwined for better or for worse.

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Ilya Zlatkin is a Chicago attorney focusing on business planning, intellectual property, and international entrepreneurship. He's also a Certified Fraud Examiner. He can be contacted here.