01:41 PM CST on Tuesday, January 18, 2005

Associated Press

SAN JOSE, Calif. – Electronic Arts Inc. has signed a 15-year deal with ESPN, giving the video game publishing giant exclusive rights to use the sports network's brand and content in games.

The deal, announced Monday, will solidify Electronic Arts' dominance in sports-related video games and help counter attacks from rivals. It commences in 2006 after ESPN's deals with Sega Sammy Holdings and Take-Two Interactive Software Inc. ends.

Financial terms were not disclosed, but sources close to the deal told the New York Times and Wall Street Journal Electronic Arts will pay at least $750 million.

Though some Wall Street analysts doubt the payout was that really that large, they say the deal is one of the longest-running exclusive deals of its kind in the video game industry, lasting through at least two generations of game consoles.

"EA is trying to destroy the competition," said Michael Pachter, an analyst with Wedbush Morgan Securities Inc. "They're saying, 'If you mess with us, we're going to get in your face."'

Electronic Arts, the largest video game publisher in the United States, has long cornered the sports game market with its popular franchises, "Madden NFL" and "NFL Street" but recently faced stiffened competition and declining sales.

Sports games from Take-Two and Sega are based on the ESPN brand name. Their latest ESPN NFL title, sold for $20 – less than half of Electronic Arts' premium $50 price tag – and received good gaming reviews.

The challenge forced Electronic Arts in November to cut the prices of some of its sports games, including Madden NFL 2005, NBA Live and NHL 2005 to as low as $30.

Then last month, Electronic Arts scored exclusive licensing deals with the National Football League and its players' association, giving the Redwood City-based company exclusive rights to use NFL teams, stadiums and players in its football video games from 2005 until 2009.

"For the first time in quite a while, the Madden franchise was under siege with a game that scored quite well and was $30 cheaper, so EA responded with force," said P.J. McNealy, analyst with American Technology Research. "They went out and cut the check and made it happen – to shut out Take-Two."

Frank Gibeau, Electronic Arts' senior vice president of marketing, said the agreement could help the company create new game franchises "like poker and X Games."

Take-Two said in a statement that it would continue to publish sports games.

"The ESPN license was principally a branding tool and as such does not have a meaningful impact on game play," the firm said.

Perhaps so, but in an era of video gaming that is getting increasingly more realistic in both game play and graphics, analysts say that it will be tough for Take-Two to market their football video game without the ability to use the NFL team names, players, or stadiums.

"Take-Two could sell a generic version, but it's less appealing to not have the NFL teams and setting," McNealy said.

Shares of Electronic Arts were up 2 percent, at $62.03, in morning trading on the Nasdaq Stock Market.