An argument for licence exclusivity

economistsEA Sports has pretty much a cart blanche when it comes to its stranglehold over key sporting licences – now more than ever with it extending its FIFA licence through to 2022.  Ask anyone and they’ll tell you what a bloody outrage it is, that competition pushes innovation, and that NFL 2K for the Dreamcast was the greatest thing mankind has ever achieved. Competition is good.   In Europe they’ll tell you how they played Pro Evolution Soccer exclusively until it went off the rails and FIFA started to become competitive.  Competition is good.  And across the world they’ll tell you great NBA’s open approach to licensing video games has been because EA’s complacency over its NBA Live franchise pushed developer Visual Concepts to step up to the plate and make massive improvements year on year to continue to leech EA’s consumers.  Competition is good.

This competition though, and an open approach to licensing can lead to marketplace confusion, damage the brand and prevent consumers from making otherwise rational decisions.I can think of no better example of this than the Moto GP series at the beginning of this generation.  Licences for games based on the popular Moto GP racing series, which at one point had games being released over a 12 month period by three developers over three consoles.  Sure you and I, informed consumers, can tell the difference by a simple glance at the logos on the box, but for everyone else it was almost impossible to understand what was going on.  This confusing correlates directly with Black Bean Games’ entry into the two-wheel racing market, swooping in to capitalise on market confusion with the release of SBK-licensed games in direct competition with Moto GP.  The licence was previously held by EA, with its last game based on the competition published in 2001.   

SBK 2008 PS3
SBK 2008 (Black Bean, 2008)

In 2006 THQ and NAMCO held platform specific licences to develop and publish MotoGP games.  While they held exclusive rights to publish on Xbox 360 and PC; and Playstation respectively at a time where consumers were more likely to be platform-agnostic the arrangement likely served to cannibalise respective sales, as both publishers doing little to differentiate their games from one another in order to maximise their market share (Hotelling’s Law).

MotoGP 06 (THQ, 2006)
MotoGP 4 (Namco, 2006)

In 2007 licences changed hands, but didn’t make it any less confusing.  Rather than NAMCO, the 2007 game was again split across consoles with Playstation duties this time being handled by Capcom.

MotoGP '07 (THQ, 2007)
MotoGP ’07 (THQ, 2007)
Moto GP 07 (Capcom, 2007)

It is worth nothing that in 2008 Capcom signed an exclusivity agreement with MotoGP to develop and publish games based on the racing series until 2013.

So while the Electronic Arts strategy of tying up exclusive licences for extended periods may not look, on its surface at least, to be in the best interest of the consumer, there are clear benefits for the licensor, the publisher and the consumer in granting exclusivity.  Profitability and certainty amongst them.  But it also provides for product differentiation.  The Pro Evolution Soccer experience shows that licences alone do not win consumers, as it took the fight to EA’s FIFA series without the full FIFA licence and won, based on a superior gameplay experience.  This is worlds apart the situation where multiple licence holders have a level of certainty over at least covering the costs of their licence if not returning a return without innovation by sticking as close to their competitors and possible and therefore have no real incentive to take the risk and pursue a product differentiation strategy.

As simplistic as the above example may seem, assuming that the existence of an official license is only one factor that a consumer takes into account in making a decision to buy, an argument can be made that granting exclusive licences to a publisher in a market with more than one player targeting the same consumer base may maximise the choice of potential purchasers by encouraging innovation by developers. 

Competition is good.  Just not exclusively the way the video game industry characterises it.