[grunt]

Quote: Originally Posted by Paytonsplace

Assuming that EA got to keep all revenue from Madden (clearly they don't) that would mean that they got $50 * 2.5^6 = 12.5^7 or $125,000,000 in the month of August. subtract off whatever the retailer take was and it may be reasonable to conclude that they made $70 to $80 Million. By the time the year is over Madden profitts may be around $100 Million. So how much is $100 Million? Well it depends. Certainly they have prevented the loss in sales that NFL 2K6 may have delivered. As the Business Weekly article showed, NFL 2K5 did cut into their market share. So by that measure it was a good deal for EA (bad for the consumer of course as prices, unlike last year failed to decline). However if the NFL deal did cost EA 500 million over 5 years (word on the street) then the Madden NFL exclusive deal may not have been the best thing for EA. It would be real interesting to know what the cost of the non-exclusive contracts were to get a real baseline. I suspect that EA knows the risk and that they believe they might be able to make up the difference by using Madden to sell other games (Who has not looked at the game previews ?). TV networks do this with the NFL games. The huge contracts that the TV networks pay to the NFL often result in a loss to the network. However, the networks use these football game telecasts to then sell their own shows. This makes it difficult to quantify the true value of such a contract. However with continuing fragmentation of the entertainment market one suspects that these large contracts will begin to decline in 10 years or less. Indeed, the NFL network is already moving toward telecasting their own games because they, in effect, will be cutting out the middleman who will not be as willing to pay such a hefty sum. The TV model may be apt for the gaming industry. As several have pointed out, the market for football games is only so large and with all the entertainment options open to the consumer, a poor game will not cut it (I have a wife and child, my gaming time must be spent right so I play only the best, MVP Baseball and Winning Eleven Soccer). While I thought Madden 06 was an improvement over 2005, it was not a big improvement (and sadly, for the punting game it was a huge step backwards). It certainly does not merit a purchase of Madden 2007 (and Madden xbox 360 aint lookin' to good). If the Madden product does not keep pace with the rest of the gaming world (not only the sports genre) then it will render the exclusive deal unprofitable .

I doubt EA make more 7 or 8 bones of profit after the game is made. Take out development cost, advertisement and distribution the pie is really small relative to true profit.