NBA 2K licensing deal gets lucrative long-term extension

The publisher of the NBA 2K series of basketball video games has signed a lengthy extension of its licensing agreement with the NBA and its players’ union, the companies announced Tuesday, securing the future of America’s most popular sports gaming franchise.

It’s going to cost Take-Two Interactive, parent company of NBA 2K publisher 2K Sports and developer Visual Concepts, a significant chunk of change: The new deal is worth up to $1.1 billion over the next seven years, reports the Wall Street Journal, citing a source familiar with the contract. The source also told the newspaper that the figure is more than twice the cost of the parties’ previous licensing agreement, which they signed in 2011.

Representatives for Take-Two, 2K Sports, and the NBA all told Polygon that they do not comment on the financial terms of their deals; a spokesperson for the union, the National Basketball Players Association, did not return a request for comment.

2019 marks the 20th anniversary of the NBA 2K franchise, and considering the series’ recent success, it stands to reason that the NBA and NBPA would raise the asking price for a contract extension. The fee is based on a percentage of Take-Two’s NBA-related sales, according to the Wall Street Journal. The most recent entry in the franchise, NBA 2K19, was released in mid-September 2018; as of the end of November, it was the best-selling sports title of the year (and No. 3 among all games) in the U.S., according to NPD Group data. Its immediate predecessor, NBA 2K18, is the most commercially successful NBA 2K game ever, with more than 10 million units shipped.

Take-Two’s NBA portfolio continues to grow. In addition to the blockbuster NBA 2K simulation franchise, the company publishes the mobile game NBA 2K Mobile; the independently developed NBA 2K Playgrounds 2; and, through a partnership with Tencent, the China-only free-to-play games NBA 2K Online and NBA 2K Online 2. The company also teamed up with the NBA in 2017 to launch the NBA 2K League, an esports organization whose inaugural season took place last summer.

All of the games in question offer microtransactions, which serve as an increasingly lucrative revenue stream for Take-Two. In its 2019 fiscal year’s second quarter, which ended Sept. 30, 2018, the company reported that just under half of its total net revenue came from “recurrent consumer spending,” aka add-ons and in-game purchases. NBA 2K18, NBA 2K19, and NBA 2K Online 2 were all listed among the largest contributors to Take-Two’s digitally delivered revenue during the quarter.

Basketball is one of just two major professional sports, the other being soccer, in which there is still legitimate competition in the challenging market for simulation video games. Electronic Arts also has a licensing agreement in place with the NBA and NBPA for its long-running NBA Live franchise, which is still working its way back from a disastrous series of miscues in the early years of this decade. Asked about the status of EA’s deal, which also took effect in 2011, an spokesperson told Polygon that the company does not comment on the length or terms of its licensing contracts.

Although the publishers are direct competitors in this space, EA will presumably not have to commit to paying nearly as much as Take-Two did when EA chooses to re-up its own agreement; NBA Live’s sales lag far behind those of NBA 2K. But a deal like the one announced Tuesday is another reminder of the barriers to entry in the sports gaming field. For instance, the PlayStation 4-exclusive MLB The Show series has been the only simulation baseball title in the console space since 2013. There are no indications that any other publishers are interested in getting into the market anytime soon. Not only would they have to compete with an established franchise with a decade of critical acclaim, they’d also have to secure licensing agreements with MLB and its players’ union. None of that comes cheap.