Esports uncovered – Part 3: The biggest risk factors facing the industry

Published 23 May 2017 By: Andrew Nixon, Daniel Geey, Chris Paget , Jonny Madill, Tim Davies, Rahul Gandhi (Paralegal)

Close up of white gaming controller

This article aims to demystify the esports ecosystem, its structure and landscape, as well as map out some of the present and future trends, and risk factors associated with it.

The article is split into three parts: 

  • Part 1 (available here) – looks at the current esports ecosystem, including: facts, figures and forecasts for the sector; what has fuelled the recent expansion;and who the key stakeholders are.
  • Part 2 (available here) – gives a snapshot into the key participants in the sector and compares them to those in the football industry.
  • Part 3 (below) – looks at the biggest risks currently facing esports, and again offers a comparison to the football industry

The following are some of the most important issues that will shape the development of the esports industry.

 

The need for robust governance and regulatory frameworks

To ensure there is a level playing field, and to safeguard fairness for each of the esports stakeholders and participants, competitions must be credible, reliable and professionally run. In order for esports to continue on its current commercial, participant and fan base growth trajectory, it will need to ensure that it is robustly governed and regulated.

At present, there is a lack of a centralised structure within the industry. At its core, esports mirrors the traditional elements of sport (as set out above): participants; teams; leagues; agents; sponsors; fans; broadcasters; software providers; and venue owners. However, in reality and unlike the majority of mainstream, established sports, there is a clear lack of uniformity. In football, there are local, national, confederation and world governing bodies that are responsible for the sport as well as having overarching powers to enforce particular rules and regulations.

It is worth noting that ensuring suitable regulatory and governance structures are in place across all leagues will not necessarily lead to uniformity across those entities. One of the key differences to consider is that in the context of traditional sports, no person or entity owns the core game, whether football or otherwise. But within esports the games areusually owned by the publishers giving them an element of control in the regulation of leagues that feature their game. 

 

The issue of player rights including minimum player contract terms 

Fifpro is the global union representing football players. The World Esports Association (WESA) appears to be Fifpro's equivalent at present though it is worth mentioning that regional associations have formed such as the Professional Esports Association (PEA) based in North America.[1] The Fifpro guidance on minimum player contract terms is to ensure that football player contracts throughout Europe and across the globe meet certain minimum standards, for example:

contracts must be in writing, they must define the rights and duties of club and player and they must address matters such as salary, health insurance, social security or paid leave. Contracts also must refer to the duty of players to participate in training, to maintain a healthy lifestyle and to comply with disciplinary procedures. Standard contracts will also contain provisions on dispute resolution and applicable law.[2]

League of Legends (LoL) announced proposed changes for player team contracts for 2016.[3] Among the proposals were maximum contract lengths (three years), minimum compensation, safeguards so that a player could join a competitor after their contract expires and more opportunities for terminating contracts.

A number of important contract terms that esports players and teams should consider include:

  • Financial benefits (salary, bonus arrangements , streaming compensation etc.) and non-financial benefits (medical insurance any payment of salary during incapacity holiday entitlements, health and safety safeguards);

  • player obligations on issues including both performance-enhancing and recreational drug use, as well as gambling and match fixing, behaving in a sporting manner towards all stakeholders, not being charged with/convicted of a crime, abstaining from participating in potentially dangerous activities not approved by the player’s team;

  • a right for the player to terminate their contract if a team fails to pay remuneration or other payments; and

  • commercial revenue discussions, for example, revenue share agreements in relation to a team’s sponsorship arrangements.

Interestingly, publishers and league organisers are taking more of an active role in the enforcement of contractual terms such as those listed above. Riot Games disclosed[4] that HUMA (one of the European LoL Challenger Series Teams) was banned from competing in any Riot sanctioned league due to its failure to pay its players the minimum player compensation rate during the spring and summer splits (splits being play-off tournaments that allow teams to qualify into the LoL World Championships).[5]

 

Compliance: Betting and integrity issues such as match and spot fixing, use of insider information and in-game cheating 

Cheating is a problem that plagues both traditional sports and esports alike. Esports can learn from some of the hard-earned lessons learned and challenges faced by more established sports, but it must also grapple with an array of new, tech-related issues all of its own. 

Match fixing

In a similar manner to traditional sports, including football, people like to place bets on the outcome of esports matches and tournaments. What makes esports betting different (most notably for CS:GO) is that individuals can place online bets using in-game assets (including customised weapons, known as “skins”). Individuals can purchase these skins for cash and subsequently place bets in online forums, such as CS:GO Lounge (a Counter-Strike wagering and item-trading website). These skins maintain a cash value. Therefore, individuals can place bets on esports matches with these skins, and then sell any skins "won" after the match for cash. 

This particular mode of betting was the cause of a huge match-fixing scandal in the CS:GO community in early 2015, which involved 7 players being given indefinite suspensions from taking part in Valve (the developer of CS:GO) sponsored events.[6] 

The match in question saw one of the top US Counter Strike: Global Offensive (CS:GO) pro-teams, iBUYPOWER, throw a match in which they were heavy favourites. iBUYPOWER's behaviour during the match was questioned at the time (such as going for difficult kills, and laughing as their online personas were killed), but it was eventually revealed that the match had been rigged and that several members of the pro-CS:GO community had advance notice of the outcome.

The games were rigged in order to win bets on CS:GO Lounge. Valve confirmed that "a substantial number of high valued items" (i.e. skins) won by Duc “Cud” Pham from his betting on the rigged match were later transferred, via another player, to members of iBUYPOWER, as well as the founder of the winning team from that match (Casey Foster, from the team NetCodeGuides).

And it isn’t just CS:GO that has been subject to match-fixing scandals – there have been allegations about match-fixing becoming endemic in the StarCraft 2 scene (especially in Korea), with some pro-players working with bettors to fix match results. In October 2015, a number of StarCraft 2 pro-players and coaches were arrested in Korea for match-fixing.[7]

Match fixing in football continues to be uncovered. Whilst some think it is less likely at the highest levels of the game because there is less inventive for multi-millionaires to be tempted with even larger amounts of money to fix results or events on a pitch, match manipulation across the globe from Juventus being stripped of various championships and relegated because of their behaviour to issues in Turkey, Serie A and South American with their top clubs demonstrate the problem at the elite level of the sport. 

Software and hacking

For as long as there have been video games there have been “cheat codes”, giving players the chance to skip levels, alter a character’s appearance, or get infinite lives in their favourite games. This is not such a problem for players playing video game by themselves, but for competitive gaming (where the stakes and prize pools are high) this is a live issue.

Manufacturing and selling cheating software is also a burgeoning industry and individuals can pay roughly a set amount per month for cheats to "assist" with games such as CS:GO. The types of cheats (known as “hacks” or “bots”) available offer significant advantages to the player, such as an “x-ray” ability that allows the player to see opponents through walls, and an auto-aim “aimbot” that automatically targets an opponent in range. Some of these hacks are easy to spot, and subsequently could not be used in a professional match. However, others are not and some players are savvy at creating software hacks that the developers have not yet uncovered.

Pro players have even been caught by Valve’s anti-cheat software (VAC) in professional tournament matches.[8] This isn’t to say that the players were caught using hacks or cheat during the tournament - VAC can take weeks/months to uncover whether a player has used a cheat at all. But, after the event, one player (Hovik “KQLY” Tovmassian, then at team Titan) admitted to using such cheats. Tovmassian, and other including Gordon "sf" Giry from team Epsilon were banned from all future competitive play, and both teams Titan and Epilson were disqualified from the “Dreamhack Winder 2014” tournament.

One esports commentator gave an explanation of the hacks in question claiming that these do not “have anything visible on the screen”, and that "the only way you'd know if someone did it is if you caught them at the point they installed it on that machine and activated it”. This raises the possibility of there being undetectable hacks within the competitive CS:GO scene.

Tournaments themselves are also a major target for hacking. Whatever the aim, hacking can cause significant damage in esports. The 2015 International for Dota 2 was the target of such a hack, taking the form of a distributed denial-of-service (DDoS) attack (flooding the competition servers with repeated requests causing the servers to grind to a halt).[9] The DDoS attack put the esports tournament on hold – leaving on-stage commentators to explain the situation to a stadium crowd of thousands, before play could eventually continue. 

Underage Gambling 

In a post by Bloomberg it is alleged that betting for skins could be turning underage gamers into serious gamblers, with some underage players losing money gambling with skins with losses running into thousands of US dollars in the worst cases.[10] In fact many of the most popular skin betting sites only require users to be a certain age to create an account – and this is only the case because they require you to link your betting account with a Steam account. Steam is a desktop client that allows users to buy and play games such as CS: GO and you must be 13 years old to make an account. But for many independent skin betting websites there are no measures in place to stop children of any age creating an account and betting hundreds and thousands of US dollars.

However, in recent months publishers have begun to crack down on such types of gambling. In July 2016 Valve issued a cease and desist letters to 23 skin gambling websites stating that they were in breach of the Steam Subscriber Agreement.[11] They made it clear that non-compliance would result in Valve "pursuing all available remedies". As a result a large number of the 23 websites ceased all betting activity with a number of the sites closing down completely.

In July 2016 the ESports Integrity Coalition (ESIC) was launched with the aim of standardising the regulation and governance of a variety of integrity issues. Headed up by Commissioner Ian Smith, ESIC hopes to be recognised as the "guardian of the sporting integrity of esports" via the ESIC Integrity Programme. Commentators have already spoken out about the potential for organised crime to infiltrate an environment where the stakes are high and regulations/governance may be unable to keep up. ESIC's success will be measured on its ability to combat such issues as well.

 

Salary Caps, Cost Controls and Ownership Restrictions 

In football, UEFA, the Premier League, the Football League and other European leagues have cost control measures in place either through wage restrictions or maximum losses that can be posted by clubs. The UEFA Financial Fair Play Rules (FFP) are to ensure a club, more or less, has to balance its books. UEFA has the power to sanction clubs for breaches of the FFP rules.

The Premier League for the upcoming 2016/2017 season has amended its rules ensuring that their teams cannot spend more than £7m more on wages than they did in the previous season with a combined three year loss that cannot exceed £105m[12]. The rationale in football for a form of team cost control was the concern that teams were spending more than they earned through prize money, TV contracts and sponsorship deals which lead to player wages and transfer fee inflation. New owners entered the market with the aim of heavily investing in their team and being successful as a result. Whilst some owners did not saddle the consequent large losses on their team/club, there have been plenty of examples of high profile teams like Leeds United[13] and Portsmouth whose owners could not sustain the levels of spending required leaving large debts owed by the clubs leading to club insolvencies.[14]

With large levels of external investment being pumped in to esports teams at present through, for example, part ownership of team, a similar concern may persist that the team owners with the deepest pockets can subsidise the wages of their top players. The question is for how long that remains possible if prize money and commercial deals do not meet the expected revenue levels. As in football, the question was asked as to how sustainable a sports league would be in the long term if particular wage and salary restrictions are not included in league rules. This is something the various leagues across the esports ecosystem will no doubt be considering too.

In addition, in the Premier League for example, an Owners and Directors Test (ODT) is included in its regulations to ensure that certain individuals cannot own or control a club or be a director of a club. An individual will not be permitted where they: have the power or influence to determine the management or administration of another club, become prohibited by law from being a director; have a conviction where a 12 month prison sentence was imposed or if the act in question was dishonest; become subject of various personal insolvency and/or bankruptcy events; become subject to a ban or suspension from involvement in the administration of a sport by any sports ruling body; or become subject to any form of suspension, disqualification or striking-off by a professional body.

Mainstream Sports Individuals and Teams Investing in Esports

Investors

Team

Type of Deal

Philadelphia 76ers

Dignitas and Apex

Acquisition

Peter Guber, co-owner of the Golden State Warriors and Los Angeles Dodgers, and Ted Leonsis, majority owner of the Washington Wizards and Washington Capitals

Team Liquid

Acquisition of a controlling interest

Former NBA player Rick Fox

Echo Fox

Founded his own team

Boston Celtics forward Jonas Jerebko

Renegades

Acquisition

Sacramento Kings minority partners Andy Miller, Mark Mastrov and Shaquille O'Neal, along with Alex Rodriguez and Jimmy Rollins

NRG

Ownership stake

Co-owner of the Memphis Grizzlies Steve Kaplan

Immortals

Ownership stake

FC Schalke 04

Elements

Purchase of a participation place

Manchester City

N/A

Ambassadorial deals with individuals FIFA players

West Ham

N/A

Ambassadorial deals with individuals FIFA players

Wolfsburg

N/A

Ambassadorial deals with individuals FIFA players

The idea behind such rules is to ensure that only certain types of reputable individuals are allowed to run football clubs. The way that the ODT was phased in, was in part to protect the reputation, integrity and brand of clubs, leagues and organisations. Having a regulatory vacuum where individuals with criminal records and/or bankruptcy issues can align themselves to a high-visibility sport like esports may lead to controversial individuals causing damaging headlines, potentially employing questionable business practices and behaviour and ultimately undermining the reputation of the industry. Such regulations, if they have not already been phased in, should be high on the priority list for esports stakeholders.

 

The collective distribution of commercial and broadcasting monies amongst teams and players

The huge revenue driver for competitions like the Premier League has been the sale of its lucrative TV broadcasting rights. Sky and BT were awarded the latest domestic rights to show live Premier League matches for three years from the 16-17 season onwards. The £5.14bn figure, which equated to a 70% increase in rights fees, was headline news. Sky will pay £4.176bn for 126 live games and BT will pay £960m for 42 live matches per season.

The historical UK domestic Premier League broadcasting revenue growth

Year

Amount (£)

Total Cost per match (£)

1992-1997

191m

0.6m

1997-2001

670m

2.5m

2001-2004

1.2bn

5.6m

2004-2007

1.024bn

2.5m

2007-2010

1.706bn

4.1m

2010-2013

1.773bn

4.3m

2013-2016

3.018bn

6.5m

2016-2019

5.14bn

10.3m

The Premier League distributes its UK broadcasting monies and other commercial partnership monies to its member clubs in the following way: 50% is split equally, 25% is based on the number of television appearances with a stipulated minimum amount (called facility fees) and 25% based on where that club finishes in the league (called merit payments). The overseas broadcasting monies received (not included in the above figures) from broadcasters outside the UK is distributed equally amongst the clubs too.

Esports has traditionally ventured down a different platform distribution path with streaming of matches providing accessibility to the masses. This differs from the more traditional pay-tv subscription model employed by companies like Sky and BT in the UK who purchase exclusive live rights as a driver for their subscription services. There has been no industry-wide coordination to date in esports to provide for the distribution of digital content streaming revenues to players and teams, but this may be an area for change. As the industry continue to grow, we may see more calls from teams and their players to get a bigger slice of the media revenue pie.

As the race to find a place for esports in television heats up, esports’ veteran tournament organiser ESL has launched the 24/7 dedicated esports channel “eSportsTV”,[15] Turner and WME/IMG[16] have formed a new CS:GO league with TBS set to broadcast 20 live events over the course of 2016 (the “ELeague"), and Sky and ITV have announced a partnership to create the UK’s first 24-hour esports TV channel (“GINX esports TV”).[17]

In some territories televised broadcasts are fast becoming the most popular way to consume esports content. In Brazil, where the a large proportion of the population do not have access to a stable, high speed internet connection, the 2016 LoL World Championship Final was broadcast live on TV as well as on streaming platforms and approximately 66.6% of the views came from the television audience with overall viewership reaching approximately 2.1 million across all platforms. [18]

With more people watching the LoL championships in 2015 than the World Series or the NBA finals (but the longevity of esports on TV still being untested), the question is now whether the leagues can (or even want to) cross-over successfully to the traditional pay-tv, subscription based model to drive up revenues – or whether this venture into TV will prove to be a flash in the pan for esports.

Streaming is at the heart of the esports ecosystem and has, without question, been a major driver in the commercial success of esports over the past few years. Various channel/platforms like Twitch, Activision, YouTube, Hitbox.tv and Azubu stream live esports events to millions of viewers worldwide, on a free-to-view ad funded basis). Streaming has firmly consolidated esports and the games, teams and personalities involved in the public consciousness. However, as esports develops as a commercial proposition, the question remains whether the current lack of a traditional media rights market (and the significant revenues that could be derived from it) is holding esports, and its stakeholders, back from fulfilling its undoubted commercial potential.

The success and proliferation of streaming has also led to a democratisation of content. Unlike in traditional sports, where exclusive arrangements place power in the hands of the rights holders, the esports ecosystem has permitted the creation of content, and the ability to commercialise that content, into the hands of many. While this freedom of engagement and commercialisation is undoubtedly embedded in the DNA of esports, we may begin to see rights holders (whether that is the game publishers, tournament/league organisers or teams) moving away from the current democratised and freemium model to more of a hybrid of subscription and freemium.

Future gazing into how the esports market may look in 12/24 months’ time is no easy task. For example, twelve months ago you would be hard pressed to have predicted that a top flight football club, Schalke 04, would have a team in the League of Legends Championship Series or that an NBA team, the Philadelphia 76ers, would purchase Team Dignitas and Apex. It is also true that while esports has the undoubted benefit of being a digitally-native proposition, something that nearly all traditional sports are striving to achieve, it realises (or at least should realise) that traditional TV broadcasters can still play an important role in giving it mainstream credibility.

We already have examples of how TV broadcasters can bring esports successfully onto terrestrial TV: for example, Turner has recently broadcast ECS season one in over 35 countries around the world and ESPN has covered the Dota 2 competition, The International. It is not as if the esports industry will (or should) look to re-invent the wheel: the benefits of the freemium model and digital focus are clear. Indeed, the relative success of introducing TV broadcasters into esports is in no small part due to the fact that the content was also available on the traditional streaming platforms, such as Twitch.

However, as the esports market consolidates, which the authors argue it will inevitably do as market forces take effect, the opportunity to package and sell exclusive broadcast rights to media platforms (which is the bedrock of traditional sports broadcasting) is likely to occur. There will be a delicate balance for esports to strike between the role and involvement of sponsors, and specifically the desire to attract non-endemic brands, with the desire to create a profitable media rights market. In the short term at least, these two commercial strands may pull the esports industry in opposite ways.

On the one hand, the ability of esports to attract significant sponsorship from non-endemic brands is seen as being a key component in the advancement of esports as a commercial proposition. Sponsorship constitutes the major revenue stream in the market, which on the whole has been limited to the involvement of endemic brands. The involvement of other sectors, such as banking and finance, insurance, aviation and fashion, would significantly increase the revenue derived from sponsorship. However, many believe that the attraction of esports to these sectors is the ability to tap into a demographic, namely the millennials and centennials, that they have, as of yet, failed to get exposure to. It is arguable that a potential transition to a subscription model may deter these non-endemic brands as they may see their exposure to this demographic as being inhibited by a paywall.

While this suggestion may hold some weight, it is also true that the core esports enthusiasts are typically young, successful, employed and, according to a recent report by Newzoo, on a higher-than-average income. Indeed, looking at this demographics’ consumption of other mediums of entertainment we can see that they are prepared to spend money on having immediate, exclusive and high quality digital content through subscription services such as Netflix and Spotify.

Therefore, while the gradual introduction of a subscription model may cause an initial ripple of discontent within the esports community, the consumption habits of the core esports demographic suggests that they would, provided the content warrants it, be prepared to pay for access.

The ability for esports to successfully transition from a freemium model to a type of subscription model is not necessarily going to be an easy one. You only need to look at the music industry, and the difficulties it is facing in monetising a subscription model within a freemium landscape, for an example. Furthermore, should the hybrid model begin to gain traction, you would expect the relevant games publishers, as the owners of the underlying intellectual property in the games (who, with the exception of Riot, have taken a relatively passive approach to date), to also become actively involved and expect to participate in the media rights revenues.

While there are clearly hurdles to overcome, it is important for the future sustainability of the ecosystem and the stakeholders within it that esport broadcasting is monetised. Indeed, if the current status quo is upheld, and one platform (namely Twitch) continues to host the vast majority of esport content then the industry could well find itself beholden to an incumbent monopolist that holds too much power and influence.

Whichever way the media rights market goes, it cannot stay as it currently is where, to take a traditional sport analogy, you can access FA Premier League, Champions League and World Cup content on one platform for free. It is, of course, highly unlikely that esports media rights revenues will ever compete with top level traditional sport but if it were able to demand even a tiny fraction of those revenues then you imagine that it would go some way to unlocking esports’ commercial potential.

 

Disciplinary matters and stakeholder disputes

Esports has seen several high-profile players banned across the range of competitive games. Nearly a year after the CS:GO match fixing scandal featuring members of iBUYPOWER, Valve applied permanent bans from Valve sponsored events to all players involved. However, this still means that the banned players can still compete elsewhere in other CS:GO events not organised by Valve. Until there is an overarching sanctioning body that has the power and authority to sanction across leagues, such a problem is likely to continue.

Football governing bodies like FIFA, UEFA and the Premier League all have sanctioning guidelines for particular types of offences that have been brought against, for example, teams, players, coaches and supporters. Sanctions can include suspensions, fines, points deductions, expulsion from competitions and transfer restrictions. Clubs like Manchester City and PSG have been severely sanctioned for FFP breaches, Barcelona[19] for breaching the youth transfer regulations and players like Luis Suarez and John Terry for racist behaviour.[20]

There has also been controversy that the rules applied for banning players have not been applied evenly. Alexi “Solo” Berezin, a professional Dota 2 player is still allowed to compete at Valve-sponsored events despite having been confirmed to have been involved in match-fixing. There was a loophole that allowed for Berezin to continue to play as the rules at the time did not explicitly prevent players from betting against themselves. Valve introduced new rules in reaction to this incident, but decided that because Berezin was a “first offender” in Dota 2 he would not be penalised with a life-time ban.[21]

There is also feeling that life-time bans for young adults, who could potentially play competitively for another ten years or more, may be too harsh and are disproportionate. For instance, does a player who bet on himself to win (and won €50) be subject to the same lifetime ban as another player who bet on his team to lose and won €100,000. Valve confirmed in a statement that although “bans can be disruptive and painful to some members of the community, they are sometimes necessary”.[22]

Interestingly there does seem to be some support from the esports community for life-time bans. Blizzard, publishers of the recently released first person shooter Overwatch, has been stringently clamping down on cheaters even within non-competitive, casual matches. The system imposed means that creating a new account or buying a new copy of the game will not allow a player to bypass bans imposed by Blizzard. GamesRadar+ reports:

Incredibly, one particular cheater has bought the game four times since messing around with the code in the beta and has been banned every time, despite changing MAC address, processor ID, BiosDate and using a VPN.[23]

It is conceivable that in the near future a player that receives a lifetime ban may challenge such a sanction (including through the national civil courts). A question may arise as to what the appropriate forum or court would be to challenge and/or appeal against the decision of the league regulator. In football, the highest appeal body that has jurisdiction to arbitrate in various national and international regulations is the Court of Arbitration for Sport. 

Indeed, Riot has published guidance as to sanctions for particular offences to:

  • create consistency and set clear expectations around penalties, we are releasing a “penalty index,” or list of common offenses and their associated penalties, to make penalties more predictable and transparent"; and

  • a “public-facing penalty tracker which will keep track of all penalties levied during the LCS season.[24]

So for example, match fixing or cheating in professional matches carries a minimum sanction of ten competitive months and a maximum sanction of an indefinite suspension. A consistent approach to sanctioning with tariff ranges is certainly to be applauded. Such guidance and increased regulatory overview will certainly become more widespread across leagues and competitions in the coming seasons.[25]

As recently as May 2016, Riot expelled Renegades and Team Impulse from its North American LCS and gave the teams only a small time frame to sell their slots in the competition.[26] This was seen by some as controversial due to the disciplinary process that had been undertaken in coming to the sanctioning decisions.

 

Doping (specifically in relation to cognitive enhancement substances which help players stay responsive and alert for longer periods) will become headline news 

Traditional sports have become accustomed to athletes taking performance enhancing drugs to gain a competitive advantage (think Ben Johnson, Marion Jones, and Lance Armstrong)[27], and esports is no exception. Last year pro-gamer, Kory Friesen, made comments in an interview stating that he and his entire team has taken Adderall during a major ESL CS:GO competition.[28]

Video game players have no need for the same levels of athleticism, or physicality of traditional sport athletes. As such doping appears to have no obvious role in competitive esports. However, both Ritalin and Adderall are particularly well suited to esports, where victory depends on a competitor's alertness, ability to concentrate and hand-to-eye-coordination. 

Adderall and Ritalin are available by prescription in the US, and are used to treat narcolepsy and attention deficit hyperactivity disorder (ADHD). The effects of Adderall, a type of amphetamine, and Ritalin, a similar CNS stimulant, are an increased ability to concentrate as well as improved reaction and cognition. Therefore, in esports such as CS:GO where millisecond reaction times are the difference between winning and losing, the appeal of these drugs is obvious.

It should be pointed out that ESL has acknowledged that there is no proof that Friesen’s allegations are true. However, regardless of whether a drug problem existed, Friesen’s statement could have created such a problem, with non-doping pros and amateur players feeling pressured to use substances to improve.

In July 2015, ESL announced a partnership with NADA (Nationale Anti Doping Agentur) to develop an anti-doping policy that is “fair, feasible and respects the privacy of players”, while still providing effective measures against the use of performance enhancing drugs at pro-game tournaments. The prevention program applies to all players participating in esports competitions organised, hosted or produced by ESL.

A consequence of the tests is that the players have to disclose a significant amount of personal data, including medical conditions. Theoretically this should allow players who require medication, including Ritalin and Adderall, to continue to do so where their use addresses genuine medical conditions. Such a programme has not yet spread across all esports leagues and competitions. The challenge in the coming months and years will be whether there is enough appetite from the publishers and/or league organisers to devote resources to put in place a robust anti-doping framework. That said, ESIC is already working on developing an anti-doping policy that could apply uniformly across all leagues (if publishers and league organisers agree to their programme). Organisers such as ESL are already on board.

By way of contrast, the Football Association for example explains that they “conduct drug testing both in competition (post match) and out of competition (at training sessions and player’s home addresses). Players can be selected for a drug test in either a random or a targeted basis.

In football there have been a number of high profile doping offences which have led to substantive bans for players. In 2003, ex-Manchester United defender Rio Ferdinand was banned for 8 months for missing a drugs test. More recently Kolo Toure was given a 6 month ban for taking his wife’s slimming tablets to regulate his weight. Current Liverpool player Mamadou Sakho is potentially in line for a lengthy ban after testing positive during a UEFA match. He could be banned for up to 2 years.

 

The need for contractual stability for players and teams and issues surrounding player recruitment, inducements and poaching

The Premier League and other leagues have rules in place that prevent a player, his agent or other representatives from making an approach (tapping up) with a view to negotiating a contract with a buying club without having first obtained the prior written consent of the club to whom the player is contracted. The wording of the Premier League Regulations is as follows:

Any Club which by itself, by any of its Officials, by any of its Players, by its Agent, by any other Person on its behalf or by any other means whatsoever makes an approach either directly or indirectly to a Contract Player… shall be in breach of these Rules”.

The highest profile Premier League tapping up matter occurred in 2005, when a meeting took place between Ashley Cole and his agent Jonathan Barnett, Peter Kenyon (then Chelsea chief executive), Jose Mourinho (Chelsea Manager) and agent Pini Zahavi. The Premier League found that the charges against all the above individuals were proved apart from Pini Zahavi. Chelsea were fined £300,000 and given a suspended three-point deduction. Cole and Mourinho were each handed £75,000 fines.

There have been various instances of player poaching occurring in the esports world. LCS has found various teams guilty of poaching players at various times including team CLG in December 2014. CLG was fined and had sporting sanctions imposed. More recently, Chris Badawi, current part-owner of LCS team Team Dragon Knights and CS team Renegades, tapped up a player under contract with a competitor (Team Liquid). Badawi was sanctioned with a prohibition that he could not hold an official position for any team in any Riot-affiliated competition for the 2015 and 2016 seasons.

As players become more valuable and the prize money on offer for major esports tournaments continues to rocket, and with agents potentially becoming more active in the esports player space, the likelihood of tapping up occurring in the future will likely increase.

 

Recognition of esports as an actual sport 

Back in April 2016 the esports community were up in arms because a world class esports player, William Hjelte (aka “Leffen”) was denied a U.S. athletes visa,[29] leaving him unable to compete in an upcoming tournament in the country. This was because the video game “Super Smash Brothers Melee" was not considered to be a legitimate sport by US Citizenship and Immigration Services (USCIS). The esports community rallied behind Leffen and requested the USCIS to grant a temporary visa, thus allowing him to compete. The petition was signed with over 100,000 signatures and fortunately a temporary visa was granted.

However these situations occur frequently and many other professional esports players find themselves in similar situations.[30] This will also be an issue for team owners as their players may be stonewalled by immigration laws. With esports prize pools and player salaries rapidly increasing year on year the pressure on national governments and immigration authorities to recognise esports will continue to build.

 

Professionalism within the esports industry 

Players in the esports industry need to understand and be taught how and when to engage with their following. If a player joins an organization, that player now represents the entire organization and should be responsible for his actions in the public. We need the industry to get out of the habit of giving out too much information. We have seen many posts detailing the “bad" side of an organization… using the internet as your judge will not help anyone’s case.[31]

Compared to traditional athletes the age of esports players is considerably younger, with some of the very best players being as young as 16 or 17 years old. Although exceptional football players may break through at such a young age, they are usually the exception to therule. As such many of them haven’t reached the level of maturity of traditional athletes. This lack of maturity often shines through via social media. Disgruntled players often use social media outlets such as Twitter to vent their frustrations instead of dealing with the issue internally with their team managers. The problem is the negative media attention which can considerably harm their team’s reputation. Controversies like this can cause companies to think twice about investing into and associate their brand with the industry. Educating players on the business and commercial aspects of being part of the esports industry is crucial and will need to be addressed through training on an individual, team and league-wide basis.

 

Conclusion

The competitive element to professional esports has some close synergies to more “traditional” competitive sports. Broadcasting and commercial revenues as in sports like football, rugby, cricket, basketball and American football have acted as “drivers” towards a more nuanced commercial, legal and regulatory environment. What started out as requirements for basic esports player contracts are now dwarfed by a multitude of growing commercial and regulatory issues. Such issues will now become structural, esports industry-wide concerns to ensure a joined-up approach.

The similarities with “traditional” sports are obvious, but esports is nevertheless a nuanced industry. The key, from our perspective, is that all regulatory and governance structures must keep pace with the commercial developments, as the two are not mutually exclusive. Indeed, the commercial success of esports, in many ways, depends on getting regulation and governance right, particularly from an integrity perspective, as that will open the door for many more major sponsors who are perhaps “holding fire” for the time being.

 

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Author

Andrew Nixon

Andrew Nixon

Andrew Nixon is a Partner in the Sport Group at Sheridans. Referred to in this year's Legal 500 as a “very bright and talented sports lawyer” Andrew's practice focuses principally on regulatory, governance, disciplinary, arbitration and dispute resolution within the sport sector. Andrew's clients include governing bodies, sports clubs, sports agencies and individual athletes.

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Daniel Geey

Daniel Geey

Daniel is a Partner in the Sport Group.

Daniel’s practice focuses on helping clients in the sports sector, including rights holders, leagues, governing bodies, clubs, agencies, athletes, sports technology companies, broadcasters and financial institutions.

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Chris Paget

Chris Paget

Chris is an Associate in the Sport and Music Groups.

Chris acts for a broad range of clients within the entertainment sectors. He advises clients on a range of commercial issues related, in particular, to the sports and music industries. He has experience acting for musicians, athletes, talent agencies, independent recording and publishing companies and sports governing bodies.

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Jonny Madill

Jonny Madill

Jonny Madill is an Associate in the Sport Group.

Jonny advises on commercial, technology, regulatory, governance, disciplinary and dispute resolution matters within the sports sector.

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Tim Davies

Tim Davies

Tim Davies is an Associate in the Computer Games and Digital Media Groups.

Tim specialises in advising clients on the various commercial and intellectual property issues, including brand protection and enforcement of intellectual property rights, within the interactive entertainment, digital media and creative sectors.

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