College Football

O'Bannon vs. the NCAA: The EA settlement means TV money is now the battle

EA Sports and the CLC are out. The NCAA is threatening to go as far as they can. Where are we after a day of big news in the biggest challenge to the NCAA's status quo yet?

By Patrick Vint Sep 27, 2013, 9:11am EDT

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Thursday was the busiest day in months in the Ed O'Bannon lawsuit, as the day saw the proverbial game board knocked over and the exit of all but two players. Two of the three primary defendants are effectively out of the game; in EA Sports' case, literally. Meanwhile, the NCAA is issuing statements indicating that it has no intention of settling. So where do we sit after Thursday's developments?

What happened?

The day opened with rumors swirling of a pending settlement between the O'Bannon plaintiffs, video game developer EA Sports, and the Collegiate Licensing Company. EA and the CLC had filed a string of motions this week, asking the United States Supreme Court to review decisions of the District Court and Court of Appeals, likely to add pressure to the plaintiffs to accept a settlement.

In the meantime, the NCAA told USA Today that it had retained separate legal counsel to pursue appeal should they lose the O'Bannon case through a lawyer, Donald Remy, who told Steve Berkowitz that "we're prepared to take this all the way to the Supreme Court if we have to. We are not prepared to compromise on the case."

Such a move is not uncommon for a lawsuit as complicated as the one now contemplated, especially if the party hiring additional counsel is contemplating an appeal before the original suit has been resolved (known as an interlocutory appeal). But the fact that it came on a day where no hearings were planned was odd. The settlement watch was on.

Later Thursday afternoon, EA announced through a lawyer, Eugene Egdorf, that it would no longer make college football video games, a contradiction of its earlier statements and a giant red flag that settlement was imminent. Less than an hour later, attorneys for one of the O'Bannon plaintiffs were telling reporters that a settlement had been reached that would "change the business model for major college athletics":

"Today's settlement is a game-changer because, for the first time, student-athletes suiting up to play this weekend are going to be paid for the use of their likenesses. We view this as the first step toward our ultimate goal of making sure all student-athletes can claim their fair share of the billions of dollars generated each year by college sports."

No details of the settlement have been released, but both sides promised the court a more thorough disclosure in the days to come. The players' case against the NCAA remains in full effect, and college administrators are already trying to win public support for their side of the case.

What does it mean?

This class action lawsuit, started by former Arizona State quarterback Sam Keller because EA's Arizona State "QB #9" was a bit too close to Keller's actual height, weight, build, and home state, is now a long way from video games and jerseys. Dropping Electronic Arts from the mix nullifies the video game claim, and the CLC's inclusion in the settlement releases a host of other minor player likeness licensing issues. The evidence that EA Sports was matching players to their video game avatars and knew that it was pushing the boundaries of acceptable likeness usage was fairly damning. Spreadsheets showed that EA matched a number of player characteristics, and emails detailed concerns of the NCAA, school administrators, and EA officials over discrepancies in player attributes. All of that evidence is now off the table.

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The O'Bannon case is now about one thing above all others: Television. More specifically, the hundreds of millions of dollars the NCAA, collegiate conferences, and individual programs have made by televising collegiate football and basketball in recent years. The players claim that, as the people who actually play the games and make broadcasts so valuable, they are entitled to a cut of those proceeds. For obvious reasons, the NCAA disagrees.

The NCAA could face damages in the billions of dollars.

Lingering over all of today's events is the pending ruling on O'Bannon's motion for class certification, filed a year ago and argued in June. In short, if Judge Claudia Wilken determines that the players have sufficient similarity so that they can bring a class action claim, the NCAA could face damages in the billions of dollars. If Judge Wilken denies class certification, the named plaintiffs -- O'Bannon, Keller, Oscar Robertson, and a handful of former and current players -- could settle their claims for a pittance, and all unnamed players would be forced to bring their own lawsuits to get their own pennies of royalties (for more information on the class certification ruling, read our primer from May). The bad news for the NCAA is that Judge Wilken has a record for allowing class action cases to go forward, and she did not appear to be particularly sympathetic to the NCAA's arguments in June.

The class certification decision, expected at any moment, will determine what happens next. The NCAA retaining additional attorneys to handle an appeal -- and so publicly announcing it -- is a clear signal that it intends to ask for interlocutory appeal of class certification, should it lose. That appeal will likely be sought by the players if the NCAA wins.

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And the guarantee of appeal extending this matter even further only makes settlement more likely. At this point, both sides have enormous financial reasons wrapped up in winning the class certification argument: The plaintiffs' potential recovery could reach ten figures if they win. That recovery could be a few hundred dollars if they lose. Judge Wilken's decision will disrupt that equilibrium and give one side immense leverage for settlement. And, while both sides gear up for appeal and talk tough in public to preserve bargaining position, the odds of settlement increase dramatically once one side has looked into the abyss.