The U.S. Supreme Court is scheduled to hear the case of American Needle v. NFL next week and perhaps give the NFL broader protection against antitrust lawsuits.

At the heart of the case is an exclusive deal that the NFL has with Reebok as the official seller of hats,. jerseys and clothes using team insignias. American Needle lost its right to sell those items when the league reached the deal with Reebok in 2000.

Where this impacts the videogame industry is the exclusive license that Electronic Arts has with the NFL as the sole purveyor of an NFL-branded videogame with the Madden NFL series. According to a Reuters article:

A broad ruling could insulate professional sports leagues from antitrust claims over video-game licenses, television rights, franchise relocation and even player salaries. Only Major League Baseball is exempt from antitrust laws now.

In the past, the court has kept a tight rein on antitrust suits, and legal analysts say that the mere fact that the court has agreed to hear the case means it could be sympathetic to the NFL's claims for broader protection.

The case for the NFL, according to brief it filed:

“A sports league produces a single entertainment product, a structured series of athletic competitions leading to a championship, that no member club could produce on its own."

However, American Needle countered with:

“The teams are separately owned and controlled profit- making enterprises. They are actual and potential competitors in numerous areas, including the licensing of intellectual property.”

Electronic Arts has come out on the side of the NFL for obvious reasons, and the antitrust protection for the NFL could ensure EA's deal from outside interference as long as the NFL sees fit to continue the contract.

Late last year, NFL retirees won a massive $28 million verdict against their former union, the NFLPA, when a federal court jury in San Francisco decided that the old time players' images had been used in EA's popular Madden series without their authorization.

Following an appeal, the retirees accepted a just slightly less massive $26.25 million settlement. Although EA was not a defendant in the case, there has been talk by at least one militant former NFL player that a similar suit against the publisher may be in the offing.

It's very clear that, despite the big settlement dollars, hard feelings linger among the retirees. One of the more outspoken ex-players, former Oakland Raider Dave Pear, bitterly notes that EA has licensed realistic weather for Madden, but won't pay to use former players, who no longer appear in the game. Pear writes:

Retired players are so sick and tired of getting ripped off every time they turn around. We recently came across an article that Electronic Arts was partnering with The Weather Channel to pay them for weather statistics to make Madden Football X more “realistic” – but they DON’T want to pay the retired football players themselves for their stats in order to make the game more “realistic”. I wonder when they’re planning on screwing around with the weather so they won’t have to pay for that either...

Gamers who purchased a copy of Madden from August, 2005 onward may be eligible to join a class action suit against publisher Electronic Arts.

Pecover vs. EA (all GP coverage here) is currently proceeding in the U.S. District Court for the Northern District of California. The suit alleges that EA's exclusive licensing deal with the NFL and NFL Players Association created a monopoly situation which EA exploited by substantially raising the retail price for a copy of Madden.

In a story broken recently by GamePolitics, an expert witness hired by the plaintiffs theorized that EA's exclusive NFL/NFLPA license may have cost consumers nearly a billion dollars. Lawyers for EA have disputed that claim in court documents.

In a press release issued on Friday, Hagens Berman Sobol Shapiro, the law firm representing consumers in the case, provides a link where Madden buyers can learn more about the suit and potentially join as additional plaintiffs.

Lead attorney Steve Berman, quoted in the press release, pulled no punches in his assessment of EA's position regarding Madden:

There is nothing wrong with good, strong competition in a free market, but we believe EA rigged the game to take advantage of consumers.

EA knows that the demand for these games is based on how realistically the players and teams are portrayed. When EA signed into exclusive agreements it knowingly killed the only competing game of comparable quality, [Take-Two's] NFL 2K5.

The sports video game business is clearly in a period of legal upheaval as yet another class-action suit involving the licensing of athletes' images has emerged.

In the latest development, former UCLA power forward Ed O'Bannon is the lead plaintiff in a federal class action suit charging that the NCAA unlawfully deprived former student athletes of compensation for the use of their likenesses in, among other things, video games, DVDs, jerseys and stock video footage.

O'Bannon led UCLA to the 1995 NCAA Championship and played for three seasons in the NBA.

Michael Hausfield, whose firm, Hausfield LLP is representing O'Bannon and other members of the plaintiff class, offers this comment in a press release issued this morning:

No one has a right to own or control another person’s image or likeness for eternity without providing fair compensation. Former student athletes should have a voice in how their own images or likenesses – once they are no longer students – are used throughout their lifetime.

In his Sports Law column for Sports Illustrated/CNN, Vermont Law School professor Michael McCann terms the stakes in the case "enormous." McCann's full column is worth a read. Here's a taste:

There are two core areas of law implicated by O'Bannon v. NCAA.

First, by requiring student-athletes to forgo their identity rights in perpetuity, the NCAA has allegedly restrained trade in violation of the Sherman Act... Student-athletes, but for their authorization of the NCAA to license their images and likenesses, would be able to negotiate their own licensing deals after leaving college...  For example, if former student-athletes could negotiate their own licensing deals, multiple video game publishers could publish games featuring ex-players. More games could enhance technological innovation and lower prices for video game consumers.

Second... the [former players argue that] NCAA has deprived them of their "right of publicity." The right of publicity refers to the property interest of a person's name or likeness, i.e. one's image, voice or even signature...

It's important to note that the O'Bannon lawsuit is directed at the NCAA, not video game publishers. In addition, it deals only with licensing issues relating to former, not current NCAA athletes. On that score, however, O'Bannon requests that a trust be established with any funds won in the case; such proceeds would benefit today's players when they are finished with their collegiate careers.

In addition to the O'Bannon case, a pair of recent class-action suits by former college football players Sam Keller and Ryan Hart target the NCAA and Electronic Arts over similar licensing issues. And, as GamePolitics reported last month, retired NFL players won a $26.5 settlement with the National Football League Players Association over their unlicensed use in EA's popular Madden series. EA was not a defendant in that case, but some militant voices among the retired players advocate pursuing the Madden publisher at some future point.

Turbulent times, indeed...

Yesterday's GamePolitics report detailing a University of Michigan economist's estimate that EA's exclusive NFL deal cost Madden buyers as much as $926 million raised a number of eyebrows, including those attached to the forehead of Michael Pachter (left).

In an e-mail exchange with GamePolitics, the Wedbush-Morgan analyst scoffed at the monopoly theory offered by Dr. Jeffrey MacKie-Mason in a filing last week with the U.S. District Court in San Francisco. MacKie-Mason was hired as an expert witness for the plaintiffs in a class-action suit filed in 2008 by a pair of gamers who allege that EA exploited its exclusive NFL deal to jack up the price of its popular Madden series.

Here's what Pachter had to say:

What kind of fool is this U of Michigan economics professor? ...Madden (according to NPD) sold 23 million units in 2006 - 2009, not the 30 million that Dr. MacKie-Mason claims... The total retail sales were $1.034 billion, meaning that EA's cut was around $800 million (retail margin is 20%).  How in the world does [MacKie-Mason] conclude that EA overcharged by more than they generated?

For the four year period, EA's average retail price was $44. For the period 1995 - 2005 (when either Sega or Take-Two provided [NFL 2K series] competition), EA generated $1.548 billion of sales on 36 million units, for an average price of $43. In other words, WITH competition, the price was $43, and WITHOUT competition, the price was $44.18...

I rarely read anything that gets me so incensed... They may have some odd estimates I'm not aware of, but based on what you printed, they should be embarrassed. You can quote me.

Here's more: Take-Two discounted [NFL 2K5] to $19.99 to gain market share, and lost their butts in the process. It's the same as a dollar menu at McDonald's that is a loss leader in order to gain share, and McDonald's hopes people buy the high-margin soft drink. There is no "right" among consumers to receive a perpetual discount just because one retailer decides to discount below cost... 

It strikes me as irresponsible that the professor would focus on the NFL exclusive as if there is some god-given right for consumers to have all intellectual property available for exploitation by any business that chooses to do so in the name of competition... 

The ONLY I/P that has ever been licensed to multiple video game parties is team sports.  The NFL, Major League Baseball, FIFA, and NCAA Basketball have all chosen to go the exclusive route for games, similar to the contracts for all movie-based games.

GP: As GamePolitics reported yesterday, MacKie-Mason acknowledges that his analysis is based on incomplete data. In a response filing, attorneys for EA (who were similarly contemptuous of MacKie-Mason's theory) agreed to furnish available documentation dating back to 2001.

A University of Michigan economics professor estimates that Electronic Arts collectively overcharged Madden buyers between $701 million and $926 million during the years 2006 through 2009.

Dr. Jeffrey MacKie-Mason made his claim in a document filed last week with the U.S. District Court in San Francisco. Mackie-Mason was brought into the case as an expert witness by attorneys representing Geoffrey Pecover and Jeffrey Lawrence. The pair of gamers are named plaintiffs in a class-action suit alleging that EA used its exclusive licensing deal with the NFL to eliminate Take Two Interactive's competing NFL 2K series. The suit charges that EA then exploited the resulting competitive vacuum to dramatically raise the retail price of Madden.

While MacKie-Mason acknowledges that his estimates are based on incomplete data, he writes:

I provide this information for the limited purpose of allowing the Court to assess in rough terms the burden on Electronic Arts in relation to the magnitude of potential damages... Under California's antitrust statute, it is my understanding that these damages would be trebled.

MacKie-Mason arrived at the eye-popping figures using an estimated overcharge percentage that ranged from 50% to 66% for the 30.04 million units of Madden sold during the 2006-2009. He writes:

When Take-Two was able to compete unhindered, Madden NFL's competitive price was in the range of $19.95 to $29.95. I assume for this exercise that these would have been Madden's prices but for the alleged [monopolistic] acts.

Based on Mackie-Mason's estimate, attorneys for the plaintiffs have requested additional data for Madden sales going back to 2001. In a response, attorneys for EA agreed to supply as many of the requested documents as they could locate, but were unsparing in their assessment of Mackie-Mason's analysis:

EA respectfully submits that Dr. MacKie-Mason's analysis is fundamentally flawed on multiple levels. Indeed, Dr. MacKie-Mason's estimated magnitude of damages is nothing more than pure fiction - it has no basis in fact or law...

As GamePolitics reported last month, U.S. District Court Judge Vaughn Walker ruled that the plaintiffs' monopoly suit could go forward, but limited the scope of the case to claims arising in California and Washington, D.C. where Pecover and Lawrence reside.

DOCUMENT DUMP: Read Dr. MacKie-Mason's estimate here... Read EA's response here...

A U.S. District Court Judge in San Francisco has ruled that monopoly claims filed against Electronic Arts by a pair of Madden buyers may continue.

EA had previously requested that Judge Vaughn Walker dismiss claims by Geoffrey Pecover and Jeffrey Lawrence. The two Madden buyers, serving as named plaintiffs in the class-action suit, alleged that by eliminating competition for NFL-licensed games EA had acted in a monopolistic fashion and unjustly enriched itself at the expense of consumers. On Friday Judge Walker issued a ruling denying EA's motion. The Judge did, however, rule that only claims in California and Washington, D.C. would go forward since that is where the two named plaintiffs in the case reside.

Significantly, in turning down EA's request to dismiss, Judge Walker wrote that "interactive video football software" is a recognizable product market for anti-trust purposes:

As the court understands these allegations, interactive football software will not sell if it does not use the names, logos and other markers of teams that actually compete in the NFL; there is, in effect, no market for interactive football software in a virtual or fictitious setting. If true —— as the court must at this point accept —— this adequately alleges that there are no substitutes for interactive football software without the markers of actual teams and players.

The suit, essentially following a line of reasoning laid out here on GamePolitics, describes how EA, faced with competition from Take-Two's excellent NFL 2K5, reduced the price of Madden from $49.99 to $29.99 in order to stay competitive with NFL 2K5, which was aggressively priced at $19.99. However, once the exclusive NFL and NFLPA deals were inked, the unlicensed NFL 2K series was discontinued and EA, facing no competition, jacked the price of Madden back up to $49.99.

DOCUMENT DUMP: Grab a copy of Judge Walker's ruling.

SEE ALSO: Spirited courtroom argument in Pecover vs. EA... Read all GamePolitics coverage of Pecover vs. EA...

Old school NFL players, angered by their uncompensated depiction in EA's best-selling Madden series, have won a huge victory against their former union in the case.

The Associated Press reports that National Football League Players Association has settled the lawsuit filed by NFL retirees for a whopping $26.25 million. GamePolitics readers will recall that in November, 2008 a federal court jury awarded the players $28.1 million, with 3/4 of that figure representing punitive damages. Jurors were clearly appalled by e-mails which showed that NFLPA officials conspired with EA to obscure the identities of retired players depicted on Madden's classic teams.

The NFLPA promptly appealed the verdict, but has now settled for an amount equal to 93% of the jury award. In other words, the NFLPA has capitulated. Attorney Ron Katz, who represents the retired players, praised new NFLPA president DeMaurice Smith and called the settlement "a real step to a reconciliation" with the union.

A formal announcement of the deal will come this morning in Washington, D.C. Former Packers and Cowboys DB Herb Adderley, a named plaintiff in the class action suit, is scheduled to speak, according to ESPN.

With the NFLPA suit resolved, the question now looming is whether the retired players will pursue legal action against EA for use of their unlicensed images in Madden. Although a key entity in the NFLPA suit, EA was not a named defendant. However, militant NFL retiree Bernie Parrish said in April that the retro players were looking into suing both EA and John Madden once the NFLPA case was over. Toward that end Parrish urged the establishment of a legal war chest. We note that former NFL player Dave Pear wrote on his blog yesterday:

We all need to put $1,000 into a war chest so we can continue our battle for justice and vindication! Bernie, please let me know where to send the money once we receive a check.

Kotaku reports that "legacy" teams from past NFL seasons will no longer be included in any version of EA's best-selling Madden football game.

An unnamed EA spokesperson told Kotaku's Stephen Totilo that the decision was not entirely due to last year's class action suit in which NFL retirees won a staggering $28 million judgment against their former union, the NFLPA. While EA wasn't a defendant in the landmark suit, evidence at the trial showed that the NFLPA conspired with EA to "scramble" the identities of retired players so as to avoid individual licensing issues.

More recently, militant NFL retiree Bernie Parrish has been making noises about suing EA and John Madden himself over the use of the old players' images. The EA rep told Totilo:

[To say that the decision was based on the lawsuit] wouldn't be entirely accurate, because we haven't had legacy teams in Madden next-gen ever, and it was just a matter of getting some consistency across the entire franchise.

However, Fourth and Goal, a site dedicated to the interests of NFL retirees, has a different view on the news:

You’ve got to think that once the union was pounded with the $28.1M verdict the folks at EA Sports got more than a little nervous. After all, it was their company that produced the game and their employees that communicated with the union to scramble the images.

As GamePolitics has reported, Electronic Arts may soon face a lawsuit by retired NFL players who believe their likenesses were unlawfully incorporated into EA's best-selling Madden game. But former college players now want their slice of EA's money pie as well.

SF Weekly reports that a one-time college quarterback is now making the same claim as NFL retirees in regard to EA's popular NCAA Football and NCAA Basketball franchises. Samuel Keller (left), formerly of Arizona State and Nebraska, is the lead plaintiff in the class action suit.

From SF Weekly:

The suit [claims] in its first sentence that it "arises out of the blatant and unlawful use of [NCAA] student likenesses in videogames produced by [EA]... to increase sales and profits." This, the complaint continues, is abetted with a wink-and-nod assist from the NCAA, which "intentionally circumvents the prohibitions on utilizing student athletes' names in commercial ventures by allowing gamers to upload entire rosters, which include players' names and other information, directly into the game in a matter of seconds..."

This, the suit alleges, is a symbiotic relationship between the NCAA and EA that leaves the student athletes -- who make this whole venture possible -- empty-handed.

 

So it rankled Keller to note that "with rare exception, virtually every real-life Division I football or basketball player in the NCAA has a corresponding player in Electronic Arts' games with the same jersey number, and virtually identical height, weight, build and home state. In addition Electronic Arts often matches the player's, skin tone, hair color, and often even a player's hair style."

DOCUMENT DUMP: Grab a copy of the lawsuit here.

His days of calling NFL games on T.V. may be done, but John Madden's just-announced retirement might not be as idyllic as he had hoped.

According to a report on the blog of former Oakland Raiders lineman Dave Pear, NFL retirees are planning to sue both Madden and Electronic Arts, publisher of the best-selling pro football game which bears the former coach's name.

GamePolitics readers may recall that retired players won a staggering $28 million verdict against the National Football League Players Association last fall when evidence showed that the union suggested to EA that identities of retired players on historical teams be "scrambled" to avoid paying them royalties. E-mails revealed in the trial also showed that the NFLPA acted to block Take-Two Interactive from acquiring rights to former NFL players, thus preserving EA's monopoly position with regard to pro football games.

But militant NFL retiree Bernie Parrish, who was deeply involved in last year's win against the NFLPA, writes that EA and Madden himself are squarely in the players' legal sights:

The retired NFL players who were used in Madden EA video games will be suing Madden and EA for using us in those games without compensating us. Madden’s agent Sandy Montag boasts he and Madden collected over $100,000,000 in royalties while paying the retired NFL players used in those games absolutely nothing. Madden knows that the ugly truthful litigation is coming and is probably factoring that into his retirement. I doubt he wants to answer all those fans who will be asking, “Why, John Madden? Why did you screw all those retired players over, you seemed like such a friendly, good-natured buffoon?”...

No deals are going to be made because John Madden is moving his act to his home office where he will continue to screw over the retired players without having to face the fans around the country. Madden and Montag plan to continue licensing Madden without compensating retired players...

It's not exactly a video game story, but John Madden has announced his retirement from broadcasting televised NFL games.

NBC Sports broke the news this morning. In a statement, Madden explained his reasons for making the move:

It’s time. I’m 73 years old.  My 50th wedding anniversary is this fall. I have two great sons and their families and my five grandchildren are at an age now when they know when I’m home and, more importantly, when I’m not…

 

It’s been such a great ride… the NFL has been my life for more than 40 years, it has been my passion – it still is...  I still love every part of it – the travel, the practices, the game film, the games, seeing old friends and meeting new people… but I know this is the right time.

Inside Bay Area reports that Madden will continue to do a local radio show on KCBS.

It is unknown how - or whether - the legendary coach and broadcaster's retirement will affect the best-selling Madden NFL video game.

As GamePolitics reported last June, a class-action suit filed against Electronic Arts  alleges that game consumers were penalized by EA's exclusive licensing deal with the NFL and NFLPA.

Pecover vs. Electronic Arts claims that the EA-NFL-NFLPA deal essentially created a Madden Monopoly, killed off Take Two's excellent NFL2K series, and significantly jacked up prices for consumers of pro football games. Here at GamePolitics we've been saying the same thing for years.

As it now stands, the case is scheduled for trial on September 14th in U.S. District Court in San Francisco. In the meantime, GamePolitics has obtained the just-released transcript of arguments made by lawyers in the case before Judge Vaughn Walker on November 4th of last year.

While the middle section of the 48-page transcript bogs down into legalese that will appeal only to attorneys, the transcript is otherwise full of lively and informative banter. Notably, Judge Vaughn seems receptive to the plaintiff's argument - or, at least not dismissive of the consumer view.

In the transcript excerpts below the players are Judge Vaughn Walker (left), attorney Stuart Paynter for plaintiff Jeffrey Pecover, and attorney Daniel Wall for EA.

THE COURT: All right. Now, tell me, Mr. Paynter, do I understand the complaint to allege that each of these license agreements with NFL, NCAA Football and Arena Football are all exclusive license agreements?

MR. PAYNTER: That is correct, Your Honor.

THE COURT: Now, when Take-Two Interactive, the Sego [sic] company, first marketed its branded football video game, I assume it had a license?

MR. PAYNTER: Yes, Your Honor. I hope so. Yes. From the NFL, yes... [from the] the Players Union.

THE COURT: And similarly, it's your allegation that Electronic Arts had a license with the NFL... But neither of these licenses, prior to 2000 -- is it 2004? ... were exclusive licenses? ...Then, in 2004, the beginning of 2004, Electronic Arts entered into exclusive licenses with NFL, NCAA and Arena Football? Is that it?

MR. PAYNTER: Your Honor, it was actually, I believe, toward the end of 2004 that they entered into new licenses. It was during 2004 that they were forced to lower their prices as the result of the release of the 2K5 game.

THE COURT: Let's just talk about the licensing first. My guess is it was December of 2004, was it, when the first of these exclusive licenses was entered into? ...And that was with NFL, correct?

MR. PAYNTER: That was, I believe, simultaneously with the NFL and the NFL Players' Union...

THE COURT: All right. I don't follow these things too closely. Now, are there any other branded football games?

MR. PAYNTER: Your Honor, I believe... that the Take-Two does have a game that utilizes some former players. I believe that that is the case, Your Honor. I do not believe they are or could be any football, interactive football software utilizing NFL, Intellectual Property or Players Union Intellectual Property [other than EA].

THE COURT: These are individual football players?

MR. PAYNTER: I believe, Your Honor. And again, Your Honor, I don't know this for a fact, but I believe that's the case, that these are... they have a game (GP: Take Two's regrettable All Pro Footbal 2K8). You know, I think we would -- we don't believe it's commercially successful or viable or a competitor, but I think they do offer a game that uses ex-players. You know, players who aren't part of the Players' Union agreement. And I believe, although I'm not positive, that that is sort of a diminishing pool of
25 players, I think.

THE COURT: You could probably find some of them up with Judge Allsup... at the moment...

GP: This is a bit of judicial humor on the part of Judge Walker. At the time of this hearing, the trial in which  NFL retirees alleged that their former union, the NFLPA, had screwed them out of Madden royalties was going on in another courtroom.

Hit the jump for the rest of the excerpted transcript.

The recent class action lawsuit in which retired NFL players won a $28 million judgment from the National Football League Players Association continues to yield a treasure trove of information concerning the inner workings of EA's best-selling Madden franchise.

For example, transcripts of court testimony which were unsealed this week by the U.S. District Court in San Francisco show that NFL star Brett Favre's decision to retire from the Green Bay Packers in early 2008 almost got him dropped from the cover of Madden 2009.

EA exec Joel Linzner, who was called as a witness at the NFLPA trial, testfied about the dilemma which Favre's on again-off again retirement caused for EA:

Q: ...Madden NFL Game. And, in fact, that's been a very successful game for EA, correct?

 

JL: Yes, over 20 years.

 

Q: 20 years. In fact, the 2009 version was the 20th anniversary edition, right?

 

JL: It's the 20th of the Madden NFL series, that's correct.

 

Q: Right. And you chose to put on the cover of that a retired player at the time, right?

 

JL: Uhm, well, Brett Favre at the time we decided to put him on the cover was not retired, had not announced his retirement. He subsequently announced his retirement. We thought about replacing him to have an active player. But the logistics of making the packages are kind of complicated, and we decided to stay with Brett Favre. And I think as most people subsequently know, he revoked his retirement and is currently an active player with the New York Jets. 

Linzner also testified about EA's deal with Madden 2004 cover athlete Michael Vick, who was later arrested and jailed for animal cruelty. Hit the jump for more official testimony about Madden cover athletes Vick and Donovan McNabb.

Yesterday, GamePolitics broke the news that Madden publisher Electronic Arts paid the National Football League Players Association more than $35 million in licensing fees during 2007.

We asked a couple of financial gurus to comment on the eye-popping figure, which is buried within a massive document filed by the NFLPA with the U.S. Department of Labor.

Wedbush-Morgan financial analyst Michael Pachter told GP:

The [Madden licensing] deal is likely a guarantee of around $50 million total, and $35 million [going] to the players makes sense. The old deal was around $15 million per year, and I know that it went up substantially when renewed in 2005.
 
[EA sells] around 5.5 million copies a year, so they're burdened with [about] $9/unit in licensing. That's reasonable, on par with the royalty paid to the console manufacturers.

So, Mike, yesterday GP speculated that the league would get at least as much as the NFLPA from EA. Are you saying we were wrong and that the NFLPA actually gets more than the NFL?

Most definitely.

 

The product is the players, and the league used to get most of the money. The reason the royalty went up was the players, not the league. The league looks at the game as a marketing tool, but the players want to be paid for their likenesses.

Meanwhile, analyst Doug Creutz of Cowen and Company termed the $35 million paid by EA to the NFLPA "a gigantic number," adding:

I’d estimate Madden generates $350-400 million in revenue for EA annually.

We always knew that EA's Madden franchise was a cash cow, but we didn't really appreciate the scale of the dollars involved.

Until now.

Despite winning a $28 million federal court judgment against the National Football League Players Association in November, militant NFL retirees continue to play offense against their former union. In fact, they're digging up all sorts of dirt.

During the class-action trial last fall, GamePolitics reported on damning e-mails between EA execs and NFLPA officials which showed the Madden publisher and the union conspiring to keep a lid on payments to retired players.

Now, former Oakland Raiders defensive tackle Dave Pear has posted the NFLPA's 2007 LM-2, a financial report required by the U.S. Department of Labor. The numbers contained therein are eye-popping, particularly EA's licensing payments to the NFLPA: $35,141,950.

Because the $35 million went to the player's union, we assume that figure does not include EA's licensing fees to the NFL for use of team names, logos, uniforms, stadiums and other data. We'd also guess that EA pays the league as much or more than the union for Madden licensing.

Big money, indeed.

For its part, the NFLPA is expected to appeal the $28 million verdict to a higher court.

GP: We should note that we do not at this point have any information on the number of years covered by the $35 million contained in the NFLPA's LM-2. However, we strongly suspect that it is for a single year, since all of the payments listed occurred within a 12-month window between March 1, 2007 and February 14, 2008.

The Pittsburgh Steelers will win Super Bowl XLIII by a score of XXVIII - XXIV.

At least, that's the word from EA Sports. The publisher used its best-selling Madden NFL 2009 to predict the outcome of today's big game.

An EA Sports press release says that the game will be close:

Holding off a fourth quarter comeback by the Cardinals, the Steelers bring the Vince Lombardi trophy back to the Steel City for the second time in the past four years and for a sixth time in franchise history, setting an NFL record.

GP: So, GamePolitics readers, who do you think will win? Leave a comment with your prediction of the final score...

The fallout continues from last month's $28 million federal court verdict which ruled that the NFL players union scewed retired players out of licensing revenue from the best-selling Madden NFL game.

It's a bit complicated, but the short version is that the union (NFLPA) gave retired players the option to sign onto a group licensing authorization (GLA) by which Electronic Arts was entitled to use their image for Madden's classic teams. The retirees, however, alleged that they never received any payments based on Madden. The money went to active players, instead.

Yesterday, former Oakland Raider Dave Pear, a veteran of the silver-and-black's 1980 Super Bowl-winning squad, maintained that the NFLPA continually overinflated the number of players who actually signed the GLAs. At its worst, according to Pear, the NFLPA 's 2007 annual report claims that more than 2,900 retirees authorized their image to be used while court records obtained from last month's trial show that only 22 retired players actually signed a GLA that year. Pear writes:

Does this mean that any players who hadn’t signed a GLA or been included in the list can now sue Electronic Arts directly for copyright infringement if their images were used in their Madden video games without their permission? And does it also mean that the retired players who were excluded from signing GLA’s have been misrepresented by their union, the NFLPA?

While EA is not a defendant in the case, which is under appeal, Madden revenues were by far the largest economic point of contention. If EA has a potential problem going forward, it could be with retired players who never signed the GLA yet were portrayed in Madden. As GamePolitics has reported, the NFLPA conspired with EA to "scramble" the images of retired players. A critical piece of evidence in the recent federal court trial was an e-mail message from former NFLPA exec LaShun Lawson to Madden producer Jeremy Strauser:

For all retired players that are not listed... their identity must be altered so that it cannot be recognized [by Madden players]... Hence, any and all players not listed... cannot be represented in Madden 2002 with the number that player actually wore, and must be scrambled.

Will Barack Obama take on the video game industry once he is sworn in?

That remains to be seen. The President-elect's plate is mighty full, of course, with more critical issues like the economy, Iraq, Afghanistan, healthcare, homeland security and the formation of a coherent energy policy.

But in a lengthy, impassioned column for Gamasutra, longtime video game designer Ernest Adams, co-founder of the International Game Developers Association (IGDA), worries that games may eventually appear on Obama's radar:

I don't entirely trust [Obama] on this issue. Obama is a centrist who believes in bringing parties together and trying to find compromises that both can live with. That's great when we're talking about the tax code or immigration policy. It's not great when we're talking about the First Amendment...

He's no hardcore apocalypticist who believes that the End Times are imminent and video games are a sign of man's depravity; nor is he such a bleeding heart that he thinks that game content must be federally-controlled for the sake of the children. However, he will undoubtedly be lobbied by people who do believe such things. The question is, will he stand up to them and tell them to get stuffed? I'm not sure yet...

 

My greatest hope lies not with Obama or the Democratic Congress, but with the judges that Obama will appoint. He has the power to influence the judiciary for many years to come, and I strongly doubt that he will appoint anyone who is likely to whittle away at the First Amendment. Politicians are easily influenced by moral panics; judges less so...

In addition to his game design experience (primarily with the Madden series), Adams is an author and a professor.

Here at GamePolitics I've been complaining (some might say whining) since 2005 that EA's exclusive arrangement with the NFL is, at best, a bad deal for gamers.

At worst, it's a monopoly.

Ultimately, the Federal Trade Commission, looked at the Madden issue in relation to EA's merger dance with Take-Two Interactive. But, inasmuch as the FTC pre-approved the EA-T2 deal, its regulators apparently came down against the monopoly view.

But that was before secret e-mails from officials of the NFL Players Association were made public in September during a bitter court fight between retired players and the NFLPA. As GamePolitics reported last week, the retirees were ultimately awarded $28 million by a U.S. District Court jury in San Francisco. Three-quarters of that amount was levied as punitive damages. The NFLPA says that it will appeal.

While millions in Madden licensing fees were central to the case, EA itself was not a defendant. Despite that, incriminating e-mails clearly show that EA knew it was "scrambling" the likenesses of retired players on Madden's classic NFL teams. More relevant to the monopoly issue, however, is an e-mail which demonstrates that the NFLPA was complicit in helping EA maintain its status as the sole publisher of a pro football game. A February, 2007 e-mail from NFLPA executive Clay Walker to an NFLPA attorney makes this quite plain:

I was able to forge this deal with the [Pro Football Hall of Fame] that provides them with 400K per year (which is significantly below market rate) in exchange for the HOF player rights. EA owes me a huge favor because of that threat was enough to persuade Take Two to back off its plans, leaving EA as the only professional football videogame manufacturer out there.

 

...The per player price for most of these guys was tens of thousands of dollars less than what they were guaranteed by Take Two Interactive so it’s a real coup that we were able to pull this off so cheaply. You have to remember that EA’s total cost is only $200,000 per year. We know that Take Two offered six figure deals to several former NFL players so the total cost is millions below market prices...

Will the revelation that the NFLPA was actively assisting EA by keeping Take-Two on the sidelines raise any red flags at the Federal Trade Commission? Will FTC regulators revisit the Madden issue?

That remains to be seen. If you're asking yourself, "why is this issue important to gamers?" There are several very good reasons; all revolve around the concept of competition:

• When Take-Two published the NFL2K series, EA had competition.
• Competition forces companies to put out a better product.
• Some gamers even preferred NFL2K to Madden.
• Without an NFL license, Take-Two could not compete with Madden and gave up on pro football.
• After EA's exclusive deal killed NFL2K, EA's raised the price of its next version of Madden by $20.
• The price has remained at a higher rate ever since.

Finally, we should point out that a class-action lawsuit, Pecover vs. Electronic Arts, is currently working its way through U.S. District Court in California. Pecover essentially argues that game consumers were screwed by EA's Madden monopoly.

Last week a federal court jury in San Francisco returned a stunning $28 million verdict against the NFL Players Association in a class-action suit filed by more than 2,000 former players

In their ruling, jurors decided that the NFLPA had screwed retired NFL players out of substantial licensing fees, paricularly in relation to the best-selling Madden series. A crucial piece of evidence in the trial was a highly incriminating e-mail from an NFLPA official to an EA exec urging that data on retired players such as their uniform number be "scrambled" in order to avoid compensating the retirees for the use of their likeness.

Noting that many of the retired players who are plaintiffs in the suit either played for John Madden or played during his era, Fox Sports columnist Mark Kriegel is calling on the former coach to step into the situation. Madden, after all, had earned millions from the game. Hall of Fame defensive back Herb Adderley, the lead plaintiff in the case, told Kriegel:

If John Madden knew that they were scrambling us, it's a disgrace. If he didn't know, well, no blame to him. ... But I'm sure he's seen some of these video games himself. I mean, I played against the Raiders in the Super Bowl. He can obviously see that the guy on '66 Packers and the '71 Cowboys is Herb Adderley.

 

He should say something. It would really help if he would come out and say something to heal the animosity between the current and the retired players. It's been a real bad thing.

Kriegel writes that he has been unable to track Madden down for a comment on the case and has gotten the run-around from EA, NBC and Madden's agent: 

"It's not really a 'Madden' story," says Rob Semsey, the PR guy at EA Sports, which had revenues of $3.67 billion last fiscal year. "It's a dispute between the retired players and the NFLPA."

 

I always love when they tell me what the story is. What are my chances of speaking with John Madden, I ask.

 

"Slim and none," he says.

 

An hour or so later, Rob Semsey's boss calls me. His name is Jeff Brown and he tells me to call Madden's agent.

Former NFL defensive standout Jack Youngblood, however, doesn't hold the old coach responsible:

Trying to say that John has some responsibility, I think, is stretching it. It's EA's responsibility. It's on the union. At some point in time," said Youngblood, "John Madden will stand up and do the right thing. I trust him as one of the great coaches in the league, and a great man. I firmly believe he will do what's honorable.

The Orlando Sentinel reports that several members of the Tampa Bay Buccaneers will celebrate Veterans Day by gaming with U.S. troops stationed overseas.

Pro vs. G.I. Joe, the nonprofit group which arranged the event, reports that Madden 09 and the brand-new Call of Duty: World at War will be the weapons of choice. Tamps Bay CB Phillip Buchanon, LB Cato June, TE Alex Smith and CB Aqib Talib will take on service personnel in Germany, Japan, Kuwait and a secret Middle-east location to be revealed during the match.

UPDATE: Activision deserves some kudos here as well. In a press release the publisher points out that it supplied CoD:WaW for today's event and will continue to do so for future Pro vs. G.I. Joe matchups.

A U.S. District Court jury in San Francisco has awarded $28 million to a group of 2,062 retired pro football players in a class-action lawsuit against the National Football League Players Association. The NFLPA is the union which represents active NFL players.

The jury returned a $7 million verdict against the NFLPA and then piled on $21 million worth of punitive damages.

While Madden publisher Electronic Arts was not a party in the case, the NFLPA's negotiations with EA over licensing the images of retired players was a central piece of evidence in the trial, which lasted for three weeks.

As GamePolitics reported before the trial began, lawyers for the retired players uncovered several "smoking gun" e-mails which indicated that the NFLPA not only sold rights to the retired players at below market value, but deliberately undercut potential competition from rival sports publisher Take-Two Interactive.

Those critical e-mails include a message from former NFLPA exec LaShun Lawson to Madden producer Jeremy Strauser:

For all retired players that are not listed... their identity must be altered so that it cannot be recognized [by Madden players]... Hence, any and all players not listed... cannot be represented in Madden 2002 with the number that player actually wore, and must be scrambled.

In an apparent reference to Take-Two's failed All-Pro Football 2K8, an e-mail from NFLPA exec Clay Walker touches on how Take-Two lost out in the union's deal with EA:

Take Two... went after retired players to create an “NFL” style video game after we gave the exclusive to EA. I was able to forge this deal with [the Pro Football Hall of Fame] that provides them with $400K per year (which is significantly below market rate) in exchange for the HOF player rights. EA owes me a huge favor because that threat was enough to persuade Take Two to back off its plans, leaving EA as the only professional football videogame manufacturer out there.

At issue was the depiction of old school players on classic NFL teams included with Madden. The Los Angeles Times reports that each retired player involved in the lawsuit will receive $13,000. Lead plaintiff Herb Adderley, who wept when the verdict was read, told the L.A. Times:

If you look at the 1967 Green Bay Packers in that game, you'll know that the only left cornerback that year had to be Herb Adderley, but they scrambled my face and took the number off of my jersey. Yet, they had my correct height, weight and years of experience.

The San Francisco Chronicle reports that defense lawyer Jeffrey Kessler expects the jury's verdict to be overturned, calling it "unjust as a matter of law." An appeal to the 9th Circuit Court by the NFLPA seems virtually assured.

Bloomberg reports that Electronic Arts is considering allowing the highest bidding player to become the cover athlete on its best-selling Madden NFL franchise.

All money received from the winning bidder would go to NFL charity partner the United Way.

The news comes by way of EA Sports president Peter Moore, who told Bloomberg:

I bet you can find 50 players that would say, `I'd pay good money [to be on the cover of Madden]. The league does a lot of work with them to make them realize how lucky they are and a lot of them have come out of poor circumstances and they give back...

 

Our research tells us we don't see a huge up-tick or down-tick depending on who's on the cover -- [gamers are] buying Madden.

The Associated Press reminds us that today is the opening of Adderley et al vs NFL Players, Inc.

As GamePolitics reported last month, the suit was brought by retired NFL players who believe that they have been denied royalties from a variety of licensing deals arranged by the NFLPA, the union for active players.

The biggest point of contention in the case is Electronic Arts' best-selling Madden series. EA, however, is not a defendant in the lawsuit. From the AP report:

Retired players complain that, even though they signed licensing agreements with the NFLPA during a four-year period that ended in February 2007, they have earned little from the union's lucrative contract with EA.

The $35 million annual contract is the union's largest marketing deal, and the lawsuit is the latest salvo in the increasingly rancorous relationship between retirees and a union they say has given them short financial shrift...

In our previous coverage, GamePolitics carried excerpts of what the retired players view as smoking gun e-mails. An e-mail from PI exec Clay Walker discusses how Take-Two lost out in the deal. This would appear to refer to 2K Sports' failed All-Pro Football 2K8, which used names and likenesses of former players:

Take Two... went after retired players to create an “NFL” style video game after we gave the exclusive to EA. I was able to forge this deal with [the Pro Football Hall of Fame] that provides them with $400K per year (which is significantly below market rate) in exchange for the HOF player rights. EA owes me a huge favor because that threat was enough to persuade Take Two to back off its plans, leaving EA as the only professional football videogame manufacturer out there.

A U.S. Marine serving in Iraq bested a member of the Green Bay Packers in an online game of Madden on Friday.

According to the Green Bay Press-Gazette, Cpl. Tim Headricks, a Green Bay native, beat Packers lineman Mark Tauscher in a close game. Headricks controlled the Packers, while Taushcer too the reigns of the Indianapolis Colts.

The competition was arranged by a nonprofit group called Pro vs. Joe, which arranges matches between professional athletes and military personnel serving overseas.

Two other Packer linemen, Mike Montgomery and Tony Moll, played Halo 3 against Staff Sgt. James Wagner, who is stationed in Guantanamo Bay. The Marine lost:

I got slaughtered. I thought my video game skills were better, but we made it credible. The kids took care of business. Those Packers players must have a lot of time on their hands.

Here's a bit more on the Pro vs. Joe program, including news that three Philadelphia Eagles participated in Madden games with military personnel last month.

Yesterday GamePolitics reported on troubling e-mails between representatives of the NFL players' union (NFLPA) and EA Sports which seemed to indicate that retired NFL players depicted in Madden's classic teams were not well represented by the NFLPA and its licensing arm, Players, Inc (PI).

The e-mails are contained in court documents from Parrish, Adderley, Roberts, et al vs NFLPA, a class action suit scheduled to begin on October 20 in federal court in San Francisco. A reading of the e-mails appears to indicate:

• some retired players received far less than their market value to appear in Madden
• some retired players had details such as name and number "scrambled" so they would not be compensated
• Take-Two's competing football game prospects were damaged by the NFLPA's deal with EA

Before going further, it is important to note a couple of points:

1. Electronic Arts is not a defendant in the lawsuit, nor is any wrongdoing alleged by EA. The company paid its licensing money to the NFLPA. The plaintiffs, retired NFL players, take issue with the distribution of those funds by the NFLPA.
2. Madden is not the only licensed product at issue, although it is by far the most lucrative. Others mentioned include such items as Topps football cards. Much of the case, however, revolves around Madden.

To recap the smoking gun e-mails, we'll start with former PI exec LaShun Lawson's e-mail to Madden producer Jeremy Strauser:

For all retired players that are not listed... their identity must be altered so that it cannot be recognized... Hence, any and all players not listed... cannot be represented in Madden 2002 with the number that player actually wore, and must be scrambled.

An e-mail from PI exec Clay Walker touches on how Take-Two lost out in the deal. This would appear to refer to 2K Sports' failed All-Pro Football 2K8:

Take Two... went after retired players to create an “NFL” style video game after we gave the exclusive to EA. I was able to forge this deal with [the Pro Football Hall of Fame] that provides them with $400K per year (which is significantly below market rate) in exchange for the HOF player rights. EA owes me a huge favor because that threat was enough to persuade Take Two to back off its plans, leaving EA as the only professional football videogame manufacturer out there.

GP: We promised the document. Get it here.

Although Electronic Arts isn't a defendant in Parrish, Adderley et al vs NFL Players, Inc., the megabucks generated by its Madden NFL series are at the center of the legal dispute.

The case, which will go to trial next month in San Francisco, alleges that the National Football League Players Association and its marketing wing, Players, Inc., prevented retired players from earning their fair share of licensing revenue. Money generated by EA's enormously popular Madden NFL series is the primary bone of contention.

According to former Buffalo Bills safety Jeff Nixon, newly-uncovered documents in the suit reveal that EA Sports obscured identifying information of retired players to skirt licensing payments. Nixon writes:

The documents... make it is crystal clear that the NFLPA conspired with EA to “scramble” the images of retired players in their Madden NFL Video Games...

 

The Class Action lawyers have more than a smoking gun to prove this; they have the person shooting the gun in the form of a letter fired off by former Players Inc. Vice President of Multimedia LaShun Lawson, to Madden NFL Game producer Jeremy Strauser that was cc’d to Doug Allen, then President of Players Inc. In the letter LaShun says:

 

“For all retired players that are not listed... their identity must be altered so that it cannot be recognized. Regarding paragraph 2 of the License Agreement between Electronic Arts and Players Inc, a player’s identity is defined as his name, likeness (including without limitation, number), picture, photograph, voice, facsimile signature and/or biographical information. Hence, any and all players not listed... cannot be represented in Madden 2002 with the number that player actually wore, and must be scrambled."

 

In the 2007 version of Madden NFL alone, more than 600 retired players... had their images scrambled. They are not identified in the game by their names and numbers, but the game lists their exact weight, height, years in the league, and position they played...

 

When a substantial competitor to EA [Take-Two] began to emerge for use of retired players, EA and Defendants rushed to enter into a contract locking up the most valuable retired players’ rights in exchange for payments that were admittedly below market. PI’s Senior Vice-President, Clay Walker, admitted as much in the following email:

 

“Take Two [the EA competitor] went after retired players to create an “NFL” style video game after we gave the exclusive to EA. I was able to forge this deal with [the Pro Football Hall of Fame] that provides them with $400K per year (which is significantly below market rate) in exchange for the HOF player rights. EA owes me a huge favor because that threat was enough to persuade Take Two to back off its plans, leaving EA as the only professional football videogame manufacturer out there.”

NFL retirees who are seeking a bigger slice of the pie from licensing deals such as the one involving the Madden NFL video game series have appealed to the man himself.

In Parrish, Adderley et al vs NFL Players, Inc., a class action lawsuit scheduled for trial in U.S. District Court in California in October, the former players claim that they have not gotten their fare share of revenues despite being depicted as members of some classic teams in Madden. The retired players are suing NFL Players, Inc., the licensing arm of the players union, the NFLPA.

Jeff Nixon, 51, who played free safety for the Buffalo Bills from 1979-1984 is tracking the lawsuit on his blog. Nixon has penned an open letter to John Madden, calling for the football announcer and former NFL coach to support the retired players:

You are... the face and name behind the wildly popular EA Sports Video Game - Madden NFL... will you sit back and let the NFLPA and EA Sports continue to take advantage of our Hall of Fame players?

 

...Evidence in the Retired Players Class Action suit demonstrates that the NFLPA and Players Inc. were working against the interests of the retired players and in favor of your boss EA Sports. For example, this internal email from NFLPA Executive Clay Walker, confirms that Players Inc. negotiated a deal with EA on behalf of retired Hall of Fame players which was significantly below market rate:

 

“I was able to forge this deal with the HOF that provides them with 400K per year (which is significantly below market rate) in exchange for the HOF player rights. EA owes me a huge favor because of that threat was enough to persuade Take Two to back off its plans, leaving EA as the only professional football videogame manufacturer out there.”

 

...Instead of negotiating the best possible deal for the retired players which it purported to represent, the NFLPA and Players Inc. were doing favors for EA by reducing compensation to retired players, and driving a competitive licensee [Take-Two's NFL2K series] out of the market...

 

And in this February 22, 2007 email from NFLPA Executive Clay Walker to Players Inc. in-house attorney Joe Nahra, the naked truth is exposed to the world:

 

“...The per player price for most of these guys was tens of thousands of dollars less than what they were guaranteed by Take Two Interactive so it’s a real coup that we were able to pull this off so cheaply. You have to remember that EA’s total cost is only $200,000 per year. We know that Take Two offered six figure deals to several former NFL players so the total cost is millions below market prices..."

 

John, these are your fellow Hall of Fame Players they are talking about! Are you going to let them get away with this? I know that EA is your employer, but come on...

 

GP: We're working on obtaining additional documents in the suit. The information concerning the elimination of Take-Two Interactive's NFL2K series is fascinating, to say the least. That's a topic about which GP has railed for some time.

Yesterday we noted a New York Post report on the proposed EA takeover of Take-Two which claimed that the Federal Trade Commission, scheduled to rule on the merger by tomorrow, might require that T2 spin off one or more of its sports franchises so as not to hand EA a stranglehold on the sports segment of the market.

Heidi Moore of the Wall Street Journal digs a little deeper, interviewing Jeff Anderson, CEO of startup online sports gaming service Play Hard Sports (and former Turbine CEO) concerning his view of potential monopoly issues:

It’s in the best interests of consumers to have a choice. I’m always in favor of having more choice in the marketplace. Look at the ESPN football product when it came out. There was no [NFL] exclusivity agreement then. When Take Two changed its price point, people moved toward the Take-Two product and forced EA to reduce its price. You saw how competition can work in the advantage of the consumer.

 

The question we’re looking at, and what the FTC should be looking at, is whether this will reduce competition. If Take-Two’s sports franchise becomes part of EA, will that influence competition for the better or not? And will it influence prices positively or negatively?

 

Generally I’m not a fan of monopolies in the gaming world. We’re interested in providing a new choice to consumers. As a gameplayer, we’d love to see great games produced by these studios. And we’d love to see them compete.