Tuesday, August 2, 2011

ONE BILLION Dollars: It’s in the game (and soon to be in court)

image According to CNBC Sports Business Reporter Darren Rovell, if a class action case now making its way through the Indiana court system goes the way of the plaintiffs, the defendants could be on the hook for as much as $1 billion.

Those aren’t numbers that would balance the federal budget and prevent another debt crisis, but they’d go a long way to shaking up both the video game and the college football industries.

Rovell estimates that the damages due the plaintiffs would be on the order of about $334 million based on the number of players, schools and instances of EA illegally using player names and likenesses.

There’s a lot at stake:

So let me show you how I arrived at the $1 billion estimate.

First, let's figure out how many athletes potentially could be involved.

The NCAA is located in Indiana, where games were also sold. The suit's statute of limitations is two years. The case was filed in 2009, which means that any games made from 2007 on would be covered. Counting all releases on all platforms since then, I have 20 football releases. There are 120 FBS teams and 70 players per team for a total of 8,400 players. There are a total of 125 FCS teams and there are 55 players per team for a total of 6,875 players. The law says that each player can be awarded $1,000 per likeness, per platform. That's a potential of $168 million awarded to FBS players and $137.5 million awarded to FCS players.

Then there are the college hoops games. Using the same $1,000 per likeness, per platform formula, there have been eight college basketball games published by EA on all platforms since 2007. There are 330 Division 1 teams and 11 players per team. That's a total of 3,630 players and a potential total owed of $29.04 million to players.

If all athletes are included in the class, and EA loses the case, the total cost to EA would be $334.5 million, but the Indiana publicity rights statute says that the award could be trebled if the violation was “knowing, willful or intentional.” That means that a loss for EA here could mean more than $1 billion in damages.

EA does not currently reimburse college athletes for use of their likeness and in fact, the student-athletes sign away those rights in perpetuity. EA claims that it has a First Amendment right to use the likenesses of public figures.

The $1 billion hole in the company’s revenue stream would represent one-quarter of the company’s total and would have a devastating effect on the video gaming giant. But granting the power to profit from their likenesses would give college athletes such legal leverage that the landscape of college athletics would likely be forever changed. If the case falls their way, makes its way to the US Supreme Court and becomes the law of the land, forget about college sports as they exist today.

It would certainly end the debate over whether college players should be paid, and it would likely have earthshaking consequences for non-revenue generating programs. How would the NCAA membership  digest such a decision? The suit is now about two years old and a judge has just now decided not to dismiss the case. He’s allowing it to go forward and we are still years away from the final gavel strike.

With as much as a billion in the game, this is something to watch.

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