MyFondia VirtualLawyer
August 20, 2015

Why Electronic Sports is the New Holy Grail of Digital Age Entertainment

When discussing the topic of electronic sports – playing of popular video games in tournaments and leagues in a competitive manner – I regularly hear the argument that this is actually no sports at all. The athletes supposedly resemble much more the ostracized nerds and weirdos of 90’s high school comedies than the trimmed and muscular superstars strolling onto the fields and stadiums. The point and click action on computer screens is either too childish or too incomprehensible to be called anything but tinkering or a marginal hobby. And if all else fails; certainly, it is argued, eSports lacks the professionalism and sheer size of the other more traditional sporting disciplines.

From basements to stadiums

Might be that the critics are right and electronic sports does not resemble traditional sports (at least in any form known to us), but no one can dispute that it is currently one of the fastest growing branches of digital entertainment with both consumers and revenue estimated to grow by 40–50 % year-on-year in the foreseeable future . And these are just the conservative estimates. The prize pools of the largest eSports tournaments have already exceeded 18 m$ and keep rising. The largest streaming (online broadcasting) platform for eSports-related activities, Twitch.tv, just sold for a sliver short of 1 bn$ and last year’s world championships of perhaps the most popular eSports title right now, a multiplayer online battle arena game called League of Legends , garnered 32 million online spectators – at least double the numbers of major league baseball and basketball finals. Incidentally, the 2015 championships finale of the game, to be held in October, will take place at the Mercedes-Benz Arena in Berlin before a crowd of 15,000 cash-paying, live spectators. How’s that for a marginal hobby tournament?

In 2017 electronic sports will have over 300 million spectators, making it surpass the viewing figures of NFL and become arguably the most watched sports in the world – and literally all around the world as electronic sports is gaining success not only in Europe and North America but also in Asia and South America. Electronic sports is also gaining traction among formal training institutions : many colleges, high schools and even universities now boast training programs, scholarships and leagues for digital gaming. Players have professional contracts and train according to supervised programs tailored to keep up both their physical and mental capabilities. The competition has become so hard and the stakes so high that some teams have even availed themselves of more questionable measures in order to win, prompting the major eSports associations into adapting anti-doping and sportsmanship rules. It is therefore quite evident that a phenomenon of this size has also attracted a growing amount of legal concern and scrutiny.

Contract Woes of a Digital Age

One of the major regulatory and legal issues concerning electronic sports has to do with the organization of the professional eSports teams and their relations to the players (a.k.a. eAtheletes). Depending on the particular game, a professional player might have a contract with a pro team, the pro league or even the game developer itself. Whatever the case, most of the organizations wish to portrait the players as independent contractors in order to avoid many of the legal consequences stemming from being an employer. It is actually easier to do this in electronic sports as the players may get their pay from sponsors or strictly from tournament prizes instead of a regular salary from the contract party, and the team or professional league might only provide some equipment and other necessities for individual training. In many cases, however, the real conditions of the eAthletes do resemble those of more traditional team athletes, with preplanned schedules and more team-led and coordinated action under a manager or coach, suggesting the existence of an employment relationship.

The player contracts also come in quite a myriad forms (legally and otherwise) and are, at least partially, skewed in the favor of the teams and pro league organizers with provisions like 1 year non-competition clauses after leaving a pro team or otherwise unethical conditions like miniscule revenue shares of streams of the player’s games. The problems of player contracts have been tackled through varying means: Riot Games (the gaming company behind the League of Legends title) put forth a set minimum requirements for the player contracts made in its South Korea pro league and there has been some initial talks about establishing a player union to uphold the players’ rights and to establish a more employee-like status for them. Many players have come to understand the importance of a well-done and thoroughly scrutinized contract and have contacted a lawyer in order to get a legal opinion on the documents. Still there remain many issues with the whole player contract system and new questions regarding insurances, taxation and liabilities still emerge.

All your rights are belong to us

Another major legal issue in electronic sports has to do with the proprietary intellectual property (IP) rights the game developers hold in their titles. Unlike traditional sports such as soccer, football and ice hockey, the major eSports titles are copyrightable and/or otherwise IP protected and therefore the developer wields a much more absolute power over the use of the game itself. The differentiating factor here is that unlike federations, the gaming companies hold even stronger legal rights over their games, in effect making them monopolies or at least significant market powers. Many legal observers have pointed out that the gaming companies’ right to regulate who, when and how plays and broadcasts (streams) their games might constitute a real restraint of trade or infringement of equality rights among the players . It is also unclear to which extent the gaming company holds rights over user-generated content like avatars and in-game personae. Although no actual case law exists yet, it is clear that the issues pertaining to IP rights and competition law permeate the whole field and might lead to some restrictions on how the game developers can dominate or control the use of their titles in competitions, marketing and broadcasting. Some commentators have expressed concerns in the other direction , too: namely how to restrict the unlawful use of proprietary games in unsanctioned tournaments all over the world damaging the revenue of the game developers.

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All in all, it seems that the emergence of eSports as a major pastime entertainment has brought with it both major disruptions to established ideas of what a “sport” is and a plethora of new business opportunities and models, but also an unregulated playing field full of both legit and less savory characters.