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?
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.