EA Stock: Will Joe Montana Football 16 Threaten Madden?

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Electronic Arts Inc. (NASDAQ:EA) and its longstanding monopoly on NFL-based video games is on its last leg. A new title called Joe Montana Football 16 is in the works, and EA’s iconic Madden franchise will be put to the test next football season. EA stock responded swiftly to the news, falling nearly 3% on Tuesday.

Electronic Arts ea stock nfl football maddenJoe Montana Football 16, though originally rumored to be a release by Microsoft Corporation (NASDAQ:MSFT) on Xbox One and PC, is instead a product of Unreal Engine, according to Joe Montana’s Twitter account.

The game will reignite the competitive spirit that once forced EA to seek an exclusive licensing agreement with the NFL back in 2004. And, after a remarkable 80% rally over the last year, the EA stock price has room to fall if Joe Montana’s namesake game catches on.

Madden‘s NFL Deal Isn’t So Exclusive After All

EA is one of the video game industry’s premier outfits, with a slew of popular titles to its name. With titles like Battlefield, Mass Effect, Need for Speed, The Sims, FIFA, Madden, and Star Wars in its arsenal, the fate of EA stock doesn’t hinge on the Madden franchise alone. But, football is America’s most popular sport, so surrendering market share is no small deal.

How has EA managed to monopolize the pro football gaming area? Easy. It inked an exclusive deal with the NFL in 2004.

Ten years ago, EA felt threatened by the 2K franchise, which posed a serious threat to Madden at the time. NFL2K5, which retailed for just $19.99, was an instant hit and is now considered by some as one of the best sports games of all time. It was so successful it forced EA to cut the price of Madden 2005 from $49.95 to $29.95, as the company failed to move units off the shelves.

Since then, EA hasn’t had to worry about competition, as the exclusive licensing deal with the NFL prevented other developers from using the NFL logo, actual team names, or even stadiums and players’ likenesses.

But, the NFL is separate from the NFL Players Association, which means former players don’t operate under the same licensing agreements. The exact wording of the EA-NFL pact is unknown, but questions have swirled about the extent of its exclusivity for years.

A pro football game with retired players and knockoff jerseys might not sound like a big draw, but if the gameplay is smooth enough, EA could be in trouble. For the last decade, gamers have complained that the lack of competition caused Madden to lose its innovative edge; new releases are even sometimes derisively called “roster updates.”

Joe Montana Football 16 won’t be a game-changer. But, I expect it to force EA to try a little harder to innovate, and that will mean throwing more money into game development.

And, who knows, if it gains enough converts, it could spark a legitimate bidding war for the next exclusive agreement with the NFL when EA’s current sweetheart deal runs dry.

As of this writing John Divine was long Jan. 2016 $50 EA calls. You can follow him on Twitter at @divinebizkid or email him at editor@investorplace.com.


Article printed from InvestorPlace Media, https://investorplace.com/2015/03/ea-stock-joe-montana-nfl-football-threaten-madden/.

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