July 17 (Bloomberg) -- Electronic Arts Inc. fell 1.6 percent after the National Collegiate Athletic Association said it won’t renew a contract with the video-game manufacturer because of legal action over athletes’ likenesses.
The sports organization cited “the current business climate and costs of litigation” for the decision not to renew its contract with Electronic Arts, the second-largest U.S. game publisher, after their existing accord expires in June 2014, according to a statement today.
The NCAA and Electronic Arts are defendants in a federal lawsuit alleging they didn’t compensate athletes for using their likenesses in football and basketball games the company produces. Electronic Arts began selling the latest version of its NCAA Football game last week. It’s one of 11 major releases this year from the company, including FIFA soccer, Madden football and titles with the National Hockey League and National Basketball Association.
Electronic Arts, based in Redwood City, California, declined to $23.81 at the close in New York. The stock has gained 64 percent this year.
The company said it’s working with Collegiate Licensing Co., a trademark licensing agent, to include participating institutions’ teams and leagues.
“EA Sports will continue to develop and publish college football games, but we will no longer include the NCAA names and marks,” the company said in a statement.
Member colleges and universities will have to decide on their own whether to license trademarks and other intellectual property to Electronic Arts, the NCAA said.
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.
“We believe this is occurring because the NCAA knows that the use of the players’ likenesses is a violation of their publicity rights and that a court will rule that these players must be compensated,” said Steve Berman, lead counsel for the plaintiffs.
Ed O’Bannon, one of the lead plaintiffs in the lawsuit and the college basketball player of the year in 1995, didn’t return a message left at his office.
The case is Keller v. Electronic Arts Inc., 09-cv-01967, U.S. District Court, Northern District of California (Oakland).
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