E-sports in the context of international sports law- review of literature

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While interesting in terms of cultural trends, eSports has actually brought some unique concerns from a legal viewpoint. From contracts to endorsements, players, leagues and teams must understand the legalities of this new field of entertainment. In fact, the need for professionals who understand this field of law has grown to the point that the first law firm dedicated entirely to eSports law was opened in early 2017, according to ESPN.

E-sports in the context of international sports law- review of literature
Author Anushree Sharma
ASSN 36587
Published on 14/09/2018
Co-Assn 44792
Co-Author Editor
Last Updates 14/09/2018

As the popularity of this field grows, so will the demand for legal services. Those studying law who can get the right training to position themselves to help in this field could find profitable career potential in this up-and-coming specialty. Here are some of the considerations that have come to light through the growth of eSports.

Esports – competitive videogaming – has taken both the sport and media industries by storm in recent years. Those operating in this area require an understanding of cutting-edge technology, innovative use of media and the complex framework of sports regulatory and commercial issues that will become increasingly important as the sector continues to develop.

The blend of experience within Bird & Bird's market-leading sport, media and technology practices enables the firm to comprehensively advise clients on the full spectrum of issues that arise within esports. We frequently advise stakeholders across esports and a range of other sports (including major games publishers, governing bodies, sponsors, league/event organisers and teams) on issues such as:

Sports governance, including the drafting of constitutional and regulatory documentationAnti-doping and anti-corruptionMedia rights and broadcastingSponsorship and advertisingEvent stagingGamblingAcquisition of sports propertiesEmployment issues affecting teams and athletes Child welfare and age rating system.

Endorsements and Intellectual Property

For professionals to make money in eSports, they often turn to endorsements. These endorsements usually involve a player’s name, image or likeness. An endorsement contract allows a company/brand to use the player’s image, name, and likeness in connection with the advertising of a certain product/service/brand. Players should pay close attention to endorsement contracts to ensure they are benefiting from them appropriately – for instance, players have to pay close attention to how much and when they get paid, the length of the contract, the countries in which the contract applies (or doesn’t) and exclusivity terms (among other concerns).

Intellectual property is another concern that affects the eSports world. Game play and game content is, legally, the intellectual property of the developer. This can lead to licensing issues when the professional leagues and tournament organizers use the game at a public event. Those who wish to use a game must seek a license from the developer.

This licensing must extend past the overseeing body and to the players, as well. Players who choose to stream their play or create YouTube videos for additional profit need permission from the developer. Some developers have banned players from streaming or creating content from specific games, and players who ignore these rules could end up in legal trouble.

Esports continues to grow. Hardly a week goes by without a new development – from events, establishment of teams, lucrative sponsorships, and even suggestions that esports become an Olympic event Esports, or competitive video gaming, has enjoyed a rapid rise in popularity in recent years thanks largely to advances in internet technology.The operation, governance and commercialisation of esports raises important legal issues such as intellectual property ownership, governance, corruption, integrity, sponsorship and player welfare.As an emerging industry, esports is in a somewhat fragmented state of play which means industry participants need to ensure they appropriately regulate their activities and protect their legal and commercial interests.

What is esports?

“Esports” is an umbrella term given to competitive video gaming in an organised format. In essence, esports is video gaming where players compete, either individually or in teams, against other players in a specific video game. Competitive computer gaming dates back to the early 1970s,1 however, it is only more recently that esports has emerged into mainstream consciousness.

Just as the term “sports” encompasses numerous games or competitions, esports should be seen as a collective of different individual video games rather than a single identifiable competition. These games cover different genres such as Online Battle Area, Real-Time Strategy, First Person Shooters, Fighting, and Sports Simulation. While sports simulation games such as FIFA and NBA2k are popular, it is other video games such as League of Legends, StarCraft II, and Counter-Strike: Global Offensive (CS:GO) which are among the most popular.2

The growing popularity of esports is due largely to advances in internet technology. Faster bandwidth has not only enabled more complex and strategic games to evolve but it has, through digital streaming platforms such as Twitch, allowed fans to observe and engage with their favourite esports.

The participation and viewing levels of esports would be the envy of many traditional sports.3 In 2017 the total viewing audience for esports was expected to be close to 400 million.4 The large participation rates and fan base create many commercial opportunities. In 2017 revenues from esports were estimated to reach US$696 million, with that figure expected to double by 2020.5 eSports is the playing, and, just as importantly, the watching, of competitive video games. Its fundamentals are similar to “traditional” sports: skilled players compete against each other in live events, supported by passionate spectator fans and sponsors. eSports is growing fast: a recent estimate put 2015 revenue at around $325 million and the fan population at 256 million, due to grow to approximately $463 million revenue in 20161 and over 300 million fans in the next two to three years alone.2 By 2019, the global eSports market is predicted to grow to over $1.9 billion.3 The prizes are also growing fast: one of the largest eSports tournaments reached a prize pot of $18 million in 2015, with this year’s prize pool on target to top $20 million.4

In many ways, the rise of eSports echoes the growth of the wider video games industry out of which it was born, itself now said to be worth around $85–$90 billion and continuing to grow strongly.5 As with video games, the eSports audience is more likely to draw from the millennials audience compared to traditional sports and entertainment industries.6

Although there is considerable media buzz about it now, eSports is not actually a new phenomenon. There have been at least two previous waves of eSports: the first in the 1990s and the second in the early to mid-2000s. The first wave was built partly around Nintendo tournaments and one of the first great eSports games, StarCraft. The second wave was fueled by a range of factors, including the rise of modern PC and consoles games and the spread of high-speed broadband and game playing venues and events. But this current, third wave of eSports is by far the largest, most successful, and most sustainable.

Modern eSports

The modern eSports ecosystem is young, complex, and fast-growing, but essentially its constituent elements are: spectator fans; skilled players (i.e., the athletes of eSports); amateur and professional teams that focus on preferred video games; event/league organizers; games publishers (which actually create and distribute the video games that are used in eSports); broadcasters; and finally ancillary players such as advertisers, sponsors, and merchandisers.

It is important to bear in mind that “eSports” is an umbrella term for many different games, just like the term “sport.” The popularity of eSports games fluctuates over time, and there is no guarantee the top games of today will remain in place in two, five, or 10 years. That said, the most popular and/or successful eSports games at present include: League of Legends, Dota 2, Counter-Strike: Global Offensive, StarCraft II, and Hearthstone. New challenger titles are appearing often, such as Rocket League or Overwatch, from both established developer/publishers as well as newer entrants.

eSports is a global industry with significant fan populations in North America, Asia (especially South Korea and China), and the European Union (particularly Germany and the United Kingdom).

eSports Governance

One of the biggest, if not the biggest, questions for eSports at present is how best to build a durable governance structure that fits the unique features and circumstances of eSports. At present, this is nascent at best. There is no overarching pan-eSports governance structure and few real national organizations (though that is beginning to change7), which in turn complicates matters at a regional or international organizational level (one of the first bodies to appear was the International e-Sports Federation8).

There is a current trend toward league/broadcaster regulation, with Twitch, FACEIT, ELEAGUE, and ESL all becoming involved in the rollout of rules and regulations in relation to particular games and tournaments. ESL has become particularly active in the past year, with the cofounding of the World Esports Association (WESA)9 and the Esports Integrity Coalition (ESIC). WESA has commercial aims and also involves a co-ownership structure with founding eSports clubs for the first time. ESIC is a not-for-profit members’ association that states it will look at integrity issues such as match fixing, betting fraud, and doping.10 Both organizations have high ambitions, although it is fair to say that they are nascent and there is not universal agreement regarding them in the eSports industry.

On a national level, the United Kingdom, France, and Germany have all looked into eSports regulation in different ways. France recently passed a large body of reforms known as the Digital Republic bill, which includes eSports. The bill recognizes eSports as its own distinct entity (rather than as a “lottery scheme” under French gambling law); gives players “social status” so they are eligible for certain tax and social benefits systems; and requires minors to obtain parental consent to participate in tournaments.11 In Germany, meanwhile, it has been reported that the Berlin House of Representatives has recently decided that eSports should not be reclassified as a sport.12 The United Kingdom is looking into the eSports business and regulation.13

Meanwhile, individual eSports games tend to be regulated by the games publisher, albeit usually in a rather light touch manner, with the principal exception being the Riot Games’ League of Legends, which has the most advanced and prescriptive regulatory model of any eSport. The development of both national and international bodies and commercial businesses creating their own rule sets means it will be interesting to see how they fit in alongside the game publishers in the future.

Underlying this is the growing industry consensus that eSports need to be organized and governed better for the future in order for it to grow on a sustainable and long-term basis. Issues are arising to which the eSports industry does not yet have a good answer. There are concerns over a proper and sustainable environment for player/team relations. eSports still (very often) sees avoidable contractual and other legal issues between players and teams. From a more general integrity perspective, issues do occur from time to time of cheating, match fixing,14 and even doping.15 These issues happen relatively rarely, and certainly there is no empirical data regarding the extent to which they are a serious issue in eSports.

There is a lively debate within eSports regarding to what extent these matters need to be tackled better through regulation and, if so, when and by whom. There are proponents of pan-eSports regulation or guidance, as well as supporters of free-market development without outside interference. There are some who look to traditional sports governance, but there are as many who believe eSports needs its own model. There is no easy answer here, but eSports has entered into a period of regulatory experimentation. As discussed above, there have been moves toward pan-regional regulation, national regulation, eSport-specific regulation, and tournament-specific regulation, almost simultaneously. It is entirely unclear how these different approaches will mesh together, if at all. Time will tell.

Should There Be eSports Laws?

Although traditional sports are largely governed by internal self-regulation (policed by a combination of self-regulatory enforcement with ultimate recourse to local courts if necessary), there is a substantial body of law governing traditional sports, whether from statute, case law, or regulatory action. It is yet to be established how much of this will or should apply to eSports. For example, there are unresolved questions over if and how eSports may qualify for government grants, subsidies, tax reliefs, or even unique taxes, applied to traditional sports in many countries. Could eSports organizations qualify as charities? Could an eSport be admitted as an Olympic sport in the future? Should eSports player immigration require its own rules, or follow sports immigration rules?

There is an analogy here to the early days of the video games industry where—for want of a better legislative or judicial alternative—video games were for some time unsatisfactorily treated under existing laws as a type of film or as computer software or both16 (indeed, this is how most intellectual property (IP) statutes worldwide still view video games). For example, in the United Kingdom, video games are treated as “computer software,” whereas the United States and South Africa currently treat them as literary works and films, respectively. However, in practice the view is fast-growing that video games are separate works in themselves meriting their own legal treatment.17 Thus, with respect to eSports and traditional sports law, there will be common elements, but ultimately video games are sufficiently different to be assessed separately. Indeed, on a range of issues such as child protection, age ratings, and consumer affairs, it is video games regulation that provides the greatest assistance to eSports.

Commercial Issues

Another key challenge and opportunity for the growth of eSports is the evolution of its commercial practices. Historically this was a major stumbling block for eSports and it suffered as a result. Now there is substantially more money flowing into eSports than ever before, but nonetheless there is still a deficit in comparison with the heights reached by traditional sports.

Some of the key drivers of revenue for eSports are advertising, sponsorship, merchandise, live event revenues, and potentially publisher partnerships. In all of these areas, there is relatively little industry consistency on deal structures or terms. In principle, broadcast revenues could be a significant revenue driver (as in traditional sports), but historically there has been no meaningful “traditional broadcast” (i.e., to TV) of eSports until this year, all broadcast to date being effectively via digital platforms such as Twitch where it generally has been viewable for free by default. However, there is developing interest now by traditional broadcasters in eSports. The most notable eSports offering via traditional broadcast has been Turner’s ELEAGUE in the United States, with season one airing between May and July of this year.18 Recently, Turner commenced a new competition featuring up-and-coming eSports titled Overwatch.19 eSports broadcast is beginning to undergo a period of change and competition,20 but it is too early to tell yet what impact this may have from a commercial perspective.

There is a link here between eSports governance and the growth of eSports commercial opportunities. A frequently stated concern from existing and prospective eSports commercial partners, including big global brands, is that there needs to be a sufficient degree of commercial sophistication, IP protection, and reputation management before the partners are willing to make substantial investments into eSports. It will take time and improvements in the applicable eSports business and legal practices before a solution is found.

Intellectual Property

eSports raises a considerable number of important IP issues. Some of them are unique to eSports. For example, to what extent does a publisher’s ownership of a game give it legal control over the game’s exploitation as an eSport? Who owns the rights in an eSports tournament broadcast, bearing in mind the unique (and potentially conflicting) contributions made to it by the publisher, tournament organizer, broadcaster, producers, commentators, teams, and players? Some issues already exist elsewhere, but have yet to be clearly answered for eSports. For example, how (if at all) are eSports mechanics to be protected under copyright law? Are they patentable? What is the best trademark classification model for eSports, given its combination of video games, traditional sports, live events, and technology?

Historically, game publishers were considered the ultimate guardians of eSports created around their game because those publishers could use their IP rights and practical control over the relevant game to assert control. Whether their IP rights actually would work in that way if tested is an immensely complicated question that has not yet been reviewed or tested in any detail.

However, in practice this has been supplanted by a more straightforward contractual power over a publisher’s game. Nowadays, for the larger scale tournaments, contracts between the game publisher and the tournament organizer are becoming more commonplace, which at least partly sidesteps the IP rights issue. These contracts deal with legal points such as the licensing and use of the game intellectual property in eSports events, including how the events are run and marketed. Nonetheless, the question of what IP rights are held by the publisher and which are fragmented among other stakeholders including organizers, broadcasters, clubs, and players will make its presence felt as the industry matures.

Trademark protection is not common in eSports. For the few eSports businesses that have trademarks, there is a lack of consistency or industry practice regarding how, where, and in what classes these trademarks should be obtained. Indeed, given the newness of eSports and the already complex and overlapping nature of trademark classification across different systems, it is not clear what the natural or ideal specification should be. This will evolve fairly rapidly in the next few years, due to the competition between different businesses and the legal demands that will be made by investors and commercial partners, such as sponsors.

In traditional sports, image rights and other player-focused intellectual property is big business; for example, sportspeople Michael Jordan21 and Roger Federer22 have trademark arsenals. While some degree of image rights exploitation takes place in eSports, it is nothing like the level of traditional sports and is often controlled by clubs. It will be some time before eSports sees meaningful individual player sponsorship or endorsement where a player has taken control of and exploited his or her own IP and image rights. Image/publicity rights in eSports will highlight some unique issues. For example, no player has obtained a trademark registration for his or her gamer tag, which is the core of his or her identity as a professional player.

Patents are an area that has not yet been explored to any great degree in eSports, in particular for eSports mechanics in games or other technology. The complicated position of software patents around the world could make it complex, because they are permitted in some countries and not in others, quite apart from the cost and time required to obtain them from an eSports perspective. Any future patent applications for eSports software will likely then share the same challenges as those encountered by video games. It may be that some areas develop faster than others. For example, one area of eSports that may look to patent protection quicker than others may be companies focused on gambling, betting, and integrity solutions.23

As with IP issues in traditional sports, these are not dry matters of law. Considerable commercial opportunities and challenges for eSports businesses will depend on their IP law position. However, as with many legal matters, the average eSports business tends to be relatively unsophisticated in IP matters. This will change in the future as the landscape becomes more competitive. Although eSports has followed video games in being relatively free of litigation compared to other big creative industries, this may not stay the case in the future.

Match-fixing and betting

Betting is big business in esports and, for some bookmakers, is more lucrative than more established sports such as golf and rugby.14 While betting can be a source of fan engagement, it also raises integrity issues.

Given the number of young people who compete and watch esports, there are concerns around the normalisation of gambling and the role video games may play in conditioning young people to become more frequent gamblers. In particular, “skins betting”, where certain video games allow players to make in-game purchases for virtual items such as skins, or digital designs, introduces young persons to softer forms of betting and gambling. Secondary markets have arisen in the trading of skins with a real market value attributed to the skins which in turn allows them to be used as currency to bet on esports.

Betting also raises serious integrity issues by tempting players to fix matches and competitions. This can be a particular problem for players who are not earning significant money from their esports activities. There have been numerous match fixing scandals involving esports, such as Alex Berezin who was found to be betting against his own team and losing on purpose when playing DOTA 2.15 In 2015 Valve banned seven players who were linked to fixing CS:GO games.16 This match fixing involved not only bets placed on matches but also the exchange of several high value skins and other in-game items, highlighting the additional risk that in-game economies pose to the integrity of esports.

Software cheats, applications and server attacks

The use of software cheats, applications and server attacks are unique integrity issues for esports. These cheats generally work by allowing:

the computer to automate actions (such as automatic aiming or triggering of actions)a player to see through objects (such as walls, structures and storage containersa player to acquire additional powers (such as the ability to fly, gain strength, or immunity to weaknesses).

Most software cheats are external tools or applications. These cheats have become more advanced, faster and accurate as technology has developed. One of the difficulties with trying to police this form of cheating is that it can often go undetected because it is inherently hard to identify without close analysis of gameplay or special software. ESIC banned a CS:GO competitor for two years for using a cheat which had gone undetected by Valve’s anti-cheat software (VAC).17

Anti-cheat software such as VAC, which seeks to identify the source code of cheat software, is one way to address this form of cheating. Technology is also being developed which directly tracks the movements of a player’s keyboard and mouse to ensure these movements reflect what actually plays out on the screen. Some competition organisers are taking more extreme measures, such as requiring professional players to maintain unopened equipment to ensure cheat software cannot be installed prior to the commencement of the competition.

Doping

Just as drugs can assist athletes to build and improve their physical performance, they can also assist the minds of professional gamers to perform at a higher and more efficient level. Drugs such as Adderall, Ritalin and Selegiline have been used to assist players by increasing concentration, calming nerves, reducing fatigue and boosting reaction times.

The use of drugs in esports had, until recently, been largely ignored. Very little consideration had been given to incidence of drug use and the potential damage it could do to esports. However, esports leagues and competition organisers are now starting to take a more proactive approach. The IeSF is an official signatory of the World Anti-Doping Agency18 and work continues in identifying drugs which may be considered performance enhancing, developing rules and policies to make the use of those drugs illegal, and putting procedures in place for testing.

Sponsorship and merchandising

Sponsorship of esports players, teams, leagues, competitions and events presents a good opportunity for organisations wishing to associate their brands with the industry. The demographic which esports attracts, largely males aged between 18 and 35 with relatively high disposable income, is a key market for many of these sponsors.19

In crafting sponsorship arrangements, both sponsors and sponsored parties need to consider similar matters to those that arise with traditional sponsorships, such as clearly identifying the benefits and deliverables and ensuring that the interests of the parties are adequately protected in the instance of damage to reputation.

The large fan base for esports also lends itself to merchandising opportunities. These opportunities arise at different levels. The IP owners in the game will generally own not only the IP associated with the game itself, but also the IP in any fictional characters and other merchandisable aspects of the games. Teams also have the opportunity to merchandise their brands and players, while players may have the opportunity to merchandise their image and likeness (if they have not already contractually licensed away these rights).

Player welfare

The esports labour market is relatively disorganised and unregulated. Generally there are no fixed working conditions and no standard playing contracts. If they exist at all, player agreements can be basic, and players have sought to move to other teams notwithstanding they may have an existing contract in place. Participation of teams in leagues and events is not assured, with teams coming and going depending on their performance, which can quickly leave even the best players without exposure to top level competition. For esports which are controlled by the game developer, players may also have little bargaining power. As a result, players can often make the majority of their esports income through sponsorships, endorsements and deals to stream their games online, rather than through their playing contracts. This is changing, with Riot now mandating a permanent roster of teams, minimum player salaries of $75,000 and a guaranteed share of league revenue for the LCS.20

Players also often have to deal with online abuse via chat functions on streaming platforms, which allow fans to publish comments in real time to the rest of the participants and viewers. Awareness of, and attention to, the welfare of participants will become increasingly important. In traditional sports welfare issues have been addressed by player unions which seek to advocate collectively on behalf of players. Player associations are now starting to be established in esports, with Riot providing players with the resources to set up a Players’ Association for the LCS.21


REFERENCE

l ://www.americanbar.org/publications/landslide/2016-17/november-december/the_esports_explosion_legal_challenges_and_opportunities.html

l onlinellm.usc.edu/resources/articles/esports-law-growth/

l www.twobirds.com/en/in-focus/esports