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Game Publishers Play Exclusives Game

1 Feb, 2005 By: John Gaudiosi

The sports video game market — which accounts for about one-fourth of annual video game sales in the United States — has become more competitive in the past two months.

Take 2 Interactive has signed a reported $90 million seven-year, third-party publishing exclusive video game deal with Major League Baseball beginning in 2006. While Sony, Microsoft and Nintendo will be allowed to make first-party baseball games for their individual platforms, Electronic Arts (EA) and Midway Games will be shut out of America's pastime after this year. The deal includes simulation, arcade and manager-style baseball games on current and next-generation PlayStation, Xbox, Nintendo, PC and handheld video game systems.

Michael Pachter, SVP of research for Wedbush Morgan Securities, believes Take 2 will cut a separate deal with MLB for about $20 million over seven years, giving the game publisher full access to all big-league players and teams. Pachter estimates that Take 2 will spend about $30 million per year to make baseball games.

Take 2 last week bought Sega's California-based sports game development studio Visual Concepts Entertainment and its wholly owned studio, Kush Games, for $24 million.

“Take 2 appears to us to be confident in its ability to compete in the sports video game arena and appears intent upon challenging Electronic Arts' leadership in the category,” Pachter said.

This baseball deal is the latest salvo in a sports battle between EA and Take 2. EA fired the first two shots, securing an exclusive five-year NFL deal worth a reported $300 million last December that shut out all game publishers from the lucrative NFL business.

Earlier this month, EA signed a 15-year deal with ESPN, at a reported $850 million, to incorporate the network's talent into its sports games and for cross-promoting and marketing EA Sports games beginning in 2006.

These two deals locked out Take 2 from the NFL and also stole its marketing power. Take 2 had used the ESPN Videogames brand and on-air talent in its sports games, but now is dropping the ESPN brand from its name starting with Major League Baseball 2K5.

In another sports exclusive, EA signed a four-year deal with Arena Football League (AFL) to begin developing games in 2006 for the indoor football league, which airs games on NBC. The deal will give EA a share in the proceeds of future AFL expansion team sales, effectively giving EA financial interest in the league beyond the gaming aspect. When factoring in EA's exclusive “NCAA Football,” “NFL Street” and “Madden” franchises, EA owns the lucrative football category.

“EA could conceivably make exclusive deals with other sports leagues, including the NBA and the NHL,” said Billy Pidgeon, video game analyst, Go Play. “This would give their sports titles an extra edge.”

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