Electronic Arts Inc. (EA:US) agreed to pay $40 million to settle a lawsuit by former college athletes over use of their images in video games, after it canceled its college football title for next year because of legal issues.
The parties will submit the proposed settlement to the judge within 30 days, Michael Hausfeld, an attorney for the plaintiffs, said today in a telephone interview.
The athletes will be required to submit claims to partake in the settlement and the criteria that will be used to determine the proceeds, such as the number of games they’re depicted in, are still to be worked out, Hausfeld said.
Electronic Arts, the second-largest U.S. video-game publisher, is evaluating “the future of the franchise” after the National Collegiate Athletic Association and some regional athletic conferences withdrew their support for the game, the Redwood City, California-based company said yesterday in a statement.
The settlement between Electronic Arts and former players in the NCAA, which was announced yesterday without the amount being disclosed, doesn’t resolve litigation between the college association and ex-players, according to the company. Some regional conferences have declined to be part of the game, complicating Electronic Arts’ ability to publish a title.
“The ongoing legal issues, combined with increased questions surrounding schools and conferences have left us in a difficult position, one that challenges our ability to deliver an authentic sports experience,” Cam Weber, general manager of American football for the company’s EA Sports unit, said in the statement yesterday.
Electronic Arts shares fell less than 1 percent to $25.95 at the close in New York, taking their gain this year to 79 percent.
“When we filed the case, we felt very strongly that EA’s appropriation of student-athletes’ images for a for-profit venture was wrong, both in a legal sense and from a more fundamental moral perspective,” Steve Berman, another plaintiffs’ lawyer, said in a statement. “These guys were busting their butts on the field or the court trying to excel at athletics, oftentimes to help win or maintain scholarships so they could get an education.”
The agreement, which must be approved by the presiding judge, resolves claims against Electronic Arts and Collegiate Licensing Co., and doesn’t affect those against the NCAA, according to a court filing yesterday.
Former NCAA basketball player Ed O’Bannon sued the group and its licensing company almost four years ago, alleging in a complaint that they blocked him and other former athletes from being paid for their likenesses after they left college. The case was combined with a lawsuit by former NCAA athlete Sam Keller, who sued both the NCAA and Electronic Arts.
Stacey Osburn, an NCAA spokeswoman, said the organization would have no comment on the decision to cancel the game by Electronic Arts.
Former college players and the NCAA are at odds over association regulations that ban student athletes from receiving any form of compensation other than education for their participation in college sports, even if their likenesses are used after they graduate.
Electronic Arts’ current college football game, “NCAA Football 14,” went on sale in July. The NCAA announced that same month it wouldn’t renew a contract expiring in 2014 with the video-game manufacturer, and Electronic Arts said the series probably would continue under a different name and without NCAA logos and symbols.
John Reseburg, a company spokesman, declined to comment beyond the settlement.
Electronic Arts this month named EA Sports head Andrew Wilson to replace John Riccitiello as chief executive officer. Wilson won credit for growing sales in the core sports unit.
Electronic Arts is in the middle of a transition from a maker of console games sold mostly at retail stores to one that plans to generate the bulk of its revenue from digital downloads within the next five years. Online sales in its fiscal first quarter rose 17 percent to $378 million.
The case is Keller v. Electronic Arts Inc., 09-01967, U.S. District Court, Northern District of California (Oakland).
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