Paying for Ideas

By Lloyd Graff

15th Anniversary of Madden NFL from EA-Sports

As we diligently rub metal on metal, producing the stuff that makes the wheels roll smoothly, the big money in the economy continues to flow to the world of ideas, entertainment and health.

A few thoughts to connect.

Monday Amazon agreed to buy Twitch for $970 million. Google thought they were going to get it but Amazon swooped in at the last minute. Twitch is a site that broadcasts online video game competitions. They aspire to be the ESPN of video gaming. Who knew?

But this is a big business and growing fast. Twitch is in the top 15 most trafficked Websites. It gets 55 million unique viewers a month as a three-year-old company. The number of hours users spend on Twitch is the same spent on MTV and a tad behind CNN. For Amazon it means an advertising vehicle for the company and a big opportunity for growing ad revenue to reach a prime demographic that is hard to reach – young men.

One of the video game competitions Twitch broadcasts is Madden NFL, which came out with its 15th edition Monday. The 25-year history of this game is fascinating. The game’s creator, Trip Hawkins, was a football player at Harvard. He wanted to combine his love of the game with his passion for computers. As a child he had played the board game Strat-O-Matic and wanted to bring a version of it to the Apple II, the computer gaming platform of the day. While he was not banging helmets on the field for the Crimson, he worked on the code for his video game, which became the genesis of his multi-billion dollar firm, Electronic Arts. Hawkins admired John Madden as a student of football and wanted to get his input and possibly even his name and voice for the game. John Madden was famous for his fear of flying and traveled to every game on a land conveyance. Through a friend of a friend, Hawkins located Madden traveling on an Amtrak train in 1984. He bought a ticket and found the famous coach and commentator in the club car. He introduced himself and told Madden about his project in the hope that Madden would buy into the idea even though he was not computer savvy.

The game’s popularity has grown steadily through the years, with total sales of $4 billion since its inception. They have an estimated 6 million active players today. Madden receives $2 million a year from Electronic Arts, a nice royalty but paltry compared to the $50 million Electronic Arts pays the NFL and NFL Players Union for the exclusive gaming rights. With Twitch under Amazon’s flag I can imagine those numbers rising significantly.

Meanwhile, Kevin Durant, the NBA’s Most Valuable Player last season, weighs shoe offers from Under Armour and Nike. Under Armour has offered him a $265 million 10-year deal to endorse its shoes. Current shoe endorsement Nike probably will not match it. Kevin Plank started Under Armour in his basement and has come a long way toward challenging Nike in athletic apparel. He is hoping that Kevin Durant will be his Michael Jordan, or his Madden.

But the Durants and the Maddens are the tiny exception. Consider the lock the NCAA and its schools have had on their huge cash cows, the college football and basketball players who have always worked for nothing except their scholarships. The NCAA cartel has really taken advantage of its players. The organization rakes in billions of bucks each year and then terrorizes the players if they get a hamburger from an alum.

The era of athletic serfdom is beginning to end now with smart lawyers blitzing the NCAA from all directions. Some players will be getting a little money soon, and considerably more of the pie down the road.

A side note. The Libman family, which owns a 118-year-old cleaning products family business that started with brooms manufactured in downtown Chicago in 1896, recently signed a smart endorsement deal with the Big Ten Conference. Libman is the exclusive floor mop at all 12 of the conference’s schools.

Every time a kid swoops onto the basketball court of an Indiana vs. Ohio State game to mop up sweat, you see the Libman brand. It’s a nice branding device for the company and another piece of money for the colleges. Of course, the players don’t see a penny.

What these disparate dots on the economic map illustrate is that money gravitates to good ideas and where we spend our time and cash. When we go to IMTS in a few days, the emphasis will be on better machines to make things, which is crucial in the machining business. There will be a little booth in the corner where a geeky young woman or man will have a better idea for your business, like Trip Hawkins offered John Madden on the Amtrak train in 1984. Maybe you will feel a twitch when you see it.

Question: Should college athletes be paid?

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7 thoughts on “Paying for Ideas

  1. Emily Halgrimson Post author

    It’s funny to me that Libman would choose to advertise in sports. Women buy mops, and the percentage of women attending or watching games is small. There must be 50 better places to put that wad of cash. Maybe the CMO of Libman is a huge basketball fan and is enjoying his free luxury box seats that come along with a huge ad contract 🙂

  2. Misterchipster

    Of course, they provide the talent and make the sacrifices why not pay in relation to the income they generate. Where are the colleges and universities when these athletes end up with a career ending injury? The they can pay their fair share of the tuition they consume like most other students.

  3. Kim

    That’s a tough one. I was a student athlete, though not at a division 1 school, and I was a walk-on. There were no athletic scholarships at my alma mater at the time (though that has now changed.) However, that doesn’t mean even we did get certain benefits though to meet the rules some things were jus plain stupid. They couldn’t buy us shoes to keep, but they could offer us new shoes we could use but had to return at the end of the season. (I was a runner so shoes were our only real equipment.)

    When one team got new gym bags, they had to throw away the old ones because they weren’t allowed to give them out. (So the locker room lady told us she would throw them out in a specific dumpster at a certain time.) Small things, but just silly.

    Now it’s a bit different when you’re getting paid a scholarship, because arguably you are getting something in return – a free education. Not only are you getting something, for some it’s launching them into the next stage professional athletics. I don’t know how many make it to the pros without playing college, but if it was that easy, more might skip that step. I believe there are rules preventing early transfer to pros, but I don’t know if there are rules preventing one from skipping college completely. If there are, then I think that is the problem. I don’t see a problem with not allowing one to change in the middle, because if you’ve made a contract (accepted a scholarship), you should live up to your committment.

    My only issue I think is the university profiting off of a person’s image/brand/name for years and years to come like that one player who is a character in a video game that makes money for the university but not for him. I don’t think they should have the right to license your brand for profit.

  4. Vicki

    I have a son who played 4 years of football at an Ivy League school. That means we still paid the tuition in full, and he studied and played football. Of course, this wasn’t Big Ten action, and if I had to guess, I’d say Cornell loses money on their football program!

    If the college athletes get paid, doesn’t that mean tuition goes up? I haven’t examined a college’s budget, but I have to believe that the money would have to come from somewhere, and that the money they make off their teams reflects, to whatever degree, on their tuition charges.

  5. Wayne

    I do not know how stupid I was for playing football in college. I am from the era in the 60’s where head spiking was the order of the day. In other words, you must block with your head against the defensive player to knock them down. I have lots of neck problem, shoulder problems also. Had the right arm redone in the 1980’s. The left shoulder is now so painful that getting to sleep is difficult and dressing has become very painful again. I got a ring as a senior at the end of the season. It was not worth it. I am in constant pain. What is my college doing? They are just asking for money. No one should be allowed to play football. When Teddy Roosevelt put a ban on football it should have stayed on till now. Morning headaches, trouble dressing, pain in the shoulders and neck are not worth it. The Ivy League owes every player alive a lot of something for what went from Teddy ban on football till today. I would not care if it bankrupted, Penn, Harvard, Princeton , Yale, Brown, Cornell and Columbia. I did not get a penny in aid and I paid for my education by service in the US Navy as an officer. I got a ring that I can’t find.

  6. Steve Ruoff

    Colleges in this country have become strictly for profit businesses! The guidance and loans given to people are not always in there best interest and the government knows this but will never admit. A high percentage made should go back into making it affordable to get a degree for the people that choose this path. The government continues to say we must better educate our people but does nothing about it to make it more affordable.
    There are thousands of for profit schools in this country and they should be kept at a 15% or so profit and make it affordable for the good of our country. Also if outsiders come in they should not get the same benefit as a US citizen.


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