NBA, Take-Two ink licensing deal of up to $1.1 billion
Agreement more than double the value of the previous deal for sports video games
Take-Two Interactive Software Inc. will pay the National Basketball Association and its players’ union up to $1.1 billion over seven years, a person familiar with the matter said, a window into the steep costs videogame makers can face in securing star power for their sports games.
The agreement allows Take-Two’s 2K studio to continue making its NBA 2K videogame franchise and other NBAbranded games, including smartphone apps.
The company and the league are expected to announce the partnership Tuesday morning.
The value of the deal, based on a percentage of sales of Take-Two’s NBA games, is more than double the organizations’ prior licensing tie-up in 2011, the person said.
It reflects the growing popularity not only of NBA 2K but the revenue-swelling power of microtransactions—small digital purchases gamers can make while playing. Such purchases, introduced to the series in 2013, have become integral to Take-Two’s business. Some gamers protested the volume of virtual goods in “NBA 2K18,” prompting the company to scale them back in its latest version.
Game publishers traditionally pay licensing fees to the major sports leagues ranging from 10% to 15% of a game’s revenue, analysts say. Take-Two, which also makes the Grand Theft Auto and Red Dead Redemption series, doesn’t disclose revenue for individual games. But based on analysts’ estimates for the NBA 2K series, it appears the company is paying a licensing fee at the top end of that spectrum or higher.
Take-Two in June said the 2018 installment of NBA 2K sold a franchise record of more than nine million units in its first year. The most recent installment, released in September, was the best-selling sports game—and third- best-selling game overall—last year in the U.S. as of November, the latest data from NPD Group show. While Take-Two could have made a basketball game without NBA support at far less cost, people “want to play with NBA players and NBA teams,” said Jason Argent, head of business operations for Take-Two’s 2K studio. “We’ve had a good run.”
Terms of the deal aren’t expected to be disclosed. The NBA also has a licensing agreement with Electronic Arts Inc. for that videogame publisher’s NBA Live series. With NBA 2K, Take-Two gets to tap into one of the most popular sports in the world, particularly in China, a massive market for both videogames and smartphones. The game, meanwhile, helps the NBA reach a young demographic of fans.
These sports games have been a very successful and enduring way for the leagues to bring younger fans into the fold,” Jefferies analyst Tim O’Shea said. “If you want to reach a younger audience, this is the way.”
The association has made other strides to appeal to gamers. In 2017, it reached a deal to bring minor-league basketball games to Twitch, Amazon.com Inc.’s live-streaming platform. Last spring, it jointly launched an NBA 2K esports league with Take-Two.
NBA 2K is “a great entry point for fans of the NBA to learn about the players and how the game works,” said Matt Holt, head of videogames and other consumer products at the NBA. “We’re always trying to reach out to younger fans.”