Sports E-games: How High Is Up?

While many are concerned that the most strenuous exercise many of today's kids get involves pushing a mouse across a desktop or banging away on a game console, big league sports properties aren't among them. At a time when apparel, the long-time cash cow of league licensing departments, is in the doldrums, videogames are not only one of their largest licensed product categories, they are also one with the most potential for growth and cross-marketing.

As leagues wonder how to connect with kids and teens at a time when they are distracted by the Internet and non-traditional sports, gaming is the most palpable answer.

"Any time a kid or tween is playing baseball, whether it's in the virtual world or outside, it's good for us," says Carol Ann Dunn, senior director of new technology, Major League Baseball Properties.

Videogames cement younger consumers to sports in much the way that trading cards used to.

"They've become more important for us, and all the leagues, as a way to resonate and reach

League licensors also gain a new way to spread their message, often piggybacking on the multi-million-dollar advertising budgets of the major console producers, Sony for Playstation, Nintendo with its new Game Cube and now Microsoft for X-Box.

"They spend a lot on TV and print ads, so it's another way to get our message out there," says Greg Lassen, director of videogames, NBA Properties.

While leagues are typically loathe to provide detailed numbers, videogames for all platforms including PCs now account for 10% to 20% of their total royalty income. Of the top 100 selling videogames in the U.S. last year, 16 were licensed by one of the four big sports leagues. Within the past few years of lean times in sports licensing, there have been several cases where videogame revenues have made the difference between growth and non-growth years for some leagues.

Now the landscape is changing. Heavyweight Microsoft is entering the videogame market, and as high-speed Internet connections proliferate, the long overdue promise of online gaming is coming ever closer. A key question for each of the sports properties - already profiting from videogames - is how high is up?

"I believe videogames of one form or another are going to eventually become the dominant licensing component for all sports leagues," predicts NBA Commissioner David Stern. "We still haven't really developed much as far as online gaming, and that notion of playing [videogames] against anyone, anytime is very intriguing for a lot of consumers and for us."

Other league officials aren't quite as optimistic, pointing out the dynamics of the videogame market are unlike any other. While demand for apparel, for example, ebbs and flows with the popularity of a team or a sport, the videogame market changes every time a new hardware platform is introduced.

"This industry reinvents itself every four years, as the installed base [of game consoles] grows and shrinks," points out Brian Jennings, NHL group VP consumer products marketing.

With Microsoft entering the market and Nintendo having introduced the new Game Cube console this season to battle market leader Sony PlayStation, there is a chance that the three brands could successfully share the market, something that's never been done before.

"You've got the 800-pound gorilla coming in Microsoft, and no one really knows," says Goldberg.

"Three platforms have never survived at the same time," observes MLBP's Dunn, "but we've never had three companies with the size and resources of Sony, Microsoft and Nintendo competing at the same time, either."

Licensed sports games usually enjoy better sales the year after new hardware platforms are introduced, as the installed base expands. By the same token, league licensed sports games have an inordinate amount of influence over which game console is purchased. "People won't buy Game Cube, X-Box or Playstation 2 just because it's a cool piece of hardware," says the NBA's Lassen. "They are buying it because there's a great game that they have to play."