License international

EA is on the verge of losing its exclusive FIFA license: here’s what it means for the stock

Big rumbles have circulated in the sports video game world, with the publisher Electronic arts (NASDAQ: EA) and the international football governing body, FIFA, publicly clashing with the upcoming renewal of their licensing agreement.

EA publishes the Soccer video game every year, one of the world’s most popular games and EA’s biggest franchise. However, to call the franchise by its current name, EA must license the name FIFA, which it pays a hefty price for each year. With the license due for renewal after Qatar’s World Cup next year, reports have revealed that the two organizations are at an impasse and the exclusive naming license is unlikely to be renewed.

Here’s what’s going on in the EA-FIFA dispute right now, and what it could mean for EA’s stock if it loses that license.

Image source: Getty Images.

FIFA is not happy with EA at the moment

This news began with a press release on October 7 from EA which informed its investors of the launch of FIFA 22, which was released on October 1. The game has broken records so far, with 9.1 million players joining the game and 460 million matches played. At the end of the press release, the company included a specific section on name rights. Here is the exact statement:

In the future, we are also exploring the idea of ​​renaming our EA SPORTS Global Soccer Games. This means that we are reviewing our naming rights agreement with FIFA, which is separate from all of our other official football partnerships and licenses.

It was a bit ambiguous but was clarified by other reporting on the negotiations. FIFA issued a press release in more specific language, stating that “the future of gaming and eSports for football stakeholders must involve more than one party controlling and exploiting all rights”. The only company this could refer to is EA and gives a hint that FIFA is not happy with the company at this time.

It was not clear exactly why the two organizations were upset, but a New York Times article has been published explaining why talks have stalled. According to the report, FIFA is asking for a huge license fee increase to $ 1 billion for each four-year World Cup cycle. It also limits what EA can do with the exclusive license. EA wants to put the highlights of real football matches into the video game and explore digital products like NFTs, which it apparently can’t do at the moment.

How this could impact Electronic Arts

With the FIFA license covering only the naming rights for the video game franchise, EA probably thought that $ 250 million a year was a bit huge to ask for FIFA, and that’s why it is stepping away from that. relationship. He still owns the majority of football licenses in the world, with over 300 licenses giving access to 700 teams, 100 stadiums and 30 leagues for his matches, so it’s not as if the game will lose the rights of stars like Lionel. Messi. and Cristiano Ronaldo.

Additionally, EA has already registered a trademark for a new franchise name called EA Sports FC, indicating that the company has decided to leave FIFA.

How could this impact Electronic Arts? Honestly, it could be good for the company. He will lose one of his biggest annual spend and can now explore different monetization strategies with more freedom. Yes the Soccer The brand is well known around the world, so there is a risk of loss of brand quality with consumers if the FIFA name is associated with other franchises. However, with most of the leagues / players still having a relationship with EA and its only major competitor eFootball 22 getting horrible reviews, it’s hard to imagine players changing just because the franchise is now called EA Sports FC.

EA’s football franchise is its most important asset. The company isn’t specifically closing the amount the franchise brings in each year, but its Ultimate Team feature, which is a part of most of its sports games, accounted for 29% of the company’s overall revenue during the year. fiscal year 2021, the majority of which goes to FIFA Ultimate Team. If EA ends its relationship with FIFA, it will be important for investors to know if this affects sales of its football games, which could impact the stock in the long run.

This article represents the opinion of the author, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are heterogeneous! Questioning an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.


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