Three key legal issues currently facing the Esports industry: A perspective from Asia
Published 16 May 2018 By: Richard Wee
Continuing in this theme, this piece discusses what the authors, with their Malaysian perspective, believe are three of the most important legal issues that the Esports industry currently has to grapple with, namely:
Greater clarity on contractual obligations
Intellectual property and broadcasting rights
Greater clarity on contractual obligations
Contracts in esports are used in a very similar manner to mainstream sports. There are contracts between tournament organisers and participants during events. Teams enter contracts to protect their investments, and players sign contracts to protect their rights.
The first demographic requiring greater clarity on contractual obligations are the esports players. Esports athletes are often young, especially those first entering the scene, often at the age of 15 or 16. The danger is that their relative inexperience combined with the excitement of finally having a shot at being a professional athlete clouds their understanding of the true implications of any contract that they sign.
An example of this is the recent case of Counter-Strike: Global Offensive (“CS:GO”) professional player, Owen “smooya” Butterfield, who detailed his contractual problems on his Twitter account in November 2017.2 Butterfield explained that he was benched only months after joining esports team Epsilon. This resulted in his salary being reduced from $2,000 per month to only $700. To add salt to the wound, he lost access to social benefits despite his mother being disabled because he was technically still earning a salary. This decision to bench Butterfield effectively ended his career as he will unlikely play any tournaments throughout the duration of his contract which will affect his reputation as well as his value.3 Butterfield also revealed that although his contract was only worth $36,000, the buyout clause was basically 3 times more.4 5 He commented that although he understood that he was bound by the contract, it was signed when he was 17 years of age aiming to be a professional player.6 7 This example is not alone, and demonstrates that there is a need for greater awareness among players of the consequences of signing a contract. In the authors’ view, there needs to be more protection and advice given to players, and this should be a cornerstone for the industry as it moves towards greater professionalism.
The second area relates to the obligations between tournament organisers and players and/or teams. There have been occasions in which organisers have not had written contracts with the participating teams (or the staff that works at the event), and have allegedly made promises that they have failed to deliver on. An example of this was the Red Bull Coliseum Season 28 held in Malaysia, in which it was reported that there were issues over costs for players’ flights and accommodation as well as low-grade laptops used. There have also been instances in which tournament organisers fail to pay out the prize money, especially in Asia. For example, the ASEAN Games for Esports (AGES) held in Malaysia in 2016, in which it was reported that despite more than a year after the tournament, the winners still had not received their winnings.9 The absence of contracts makes it difficult for players to prove and claim what may be rightfully owing to them; and there is also an imbalance of power, with young players often unable to afford legal representation to enforce their rights. While some game publishers exert some form of governance over third party tournament organisations, the current problems remain largely unresolved.
The problems above are often exacerbated by the international nature of esports. It is not uncommon for a German organisation to sign a team comprising of Malaysians, Koreans and Lebanese, for the team is based in North America and competing in a tournaments organised by an organisation based in Peru. If there is a dispute in such a scenario, questions arise over jurisdiction, applicable law, where to bring a claim, and whether it is even economically viable to do so (given the time and money costs). This makes it all the more important for contracts to clearly define the applicable law(s) and jurisdiction.
Realising that contractual issues are a problem between players and organisations as well as with tournament organisers, some game publishers have made efforts to better regulate the issue. One such company is Blizzard – publisher of the game, Overwatch. Blizzard has initiated an Overwatch League (OWL) with the view of implementing sports league systems, such as in football, into esports. The OWL is a season long affair where teams play both home and away games. There is a transfer window in which players can be signed or dropped. In terms of contracts, the OWL has set the minimum standard of terms for player contracts.10 In fact, it was reported that for a player to be part of the OWL, the League office must both receive and approve a contract for a given player.11 The hope is that this will ensure better player protection as well as assist to smooth out contractual issues and disputes should they arise. It also provides greater transparency should OWL be required to take disciplinary actions or issue sanctions.12
Esports events boast millions of dollars in prize money. Competition between players is fierce, and marginal gains can make the difference between winning and losing. It is an environment ripe for cheating. One such method employment by esports players is “edoping”, which is essentially the manipulation of software or hardware to give a player an advantage over the opponent.
The industry has seen a wide variety of edoping methods. Game software has been modified, and settings of the keyboard or mouse have been altered to perform a series of actions with a single click. There are also those that do not require any form of modification, for example "stream sniping" where the player watches the live broadcast of the match in which he/she is currently playing to get an insight into their opponent. There have even been Distributed Denial of Service (DDoS) attacks in which a network is so overwhelmed that it is forced to slow down or shut down (which can also be a criminal offence in countries like Australia and the United States13).
Just like in traditional sports, integrity and fair play stand are foundational elements without which everything crumbles. Game publishers and tournament organisations have implemented various ways to detect and prevent edoping as well as to punish those who employ such means. However, with technology constantly advancing, it’s a never-ending battle.
The other major issue in edoping is enforcement of sanctions across different events and tournaments. One scenario is where players banned from competing for edoping in one tournament are still participating in other tournaments. For example, in 2014, Arrow Gaming players were handed lifetime bans by Valve, publisher and developer of the popular game, Dota 2, for match-fixing.14 However, some tournament organisers still allowed the banned players to compete, with some players going on to become tournament champions.15
Another scenario is where a player could be banned by one game publisher but goes on to compete in a different game. For example, former CS:GO professional player, Kevin “AZK” Lariviere, was handed a lifetime ban by Valve, also the publisher and developer of CS:GO for match-fixing.16 He then played competitively in a different game, Overwatch.17 AZK later returned to CS:GO after his ban was partially lifted by tournament organisers ESL18 for their tournaments only. This raises the question of whether a tournament organiser can lift a ban from a game publisher, which is the de facto governing and regulating authority for the game as it is their intellectual property.
While the examples given involve players banned for match-fixing instead of edoping, the same principles apply. It is difficult to ensure consistency in the enforcement of sanctions. One has to remember that in esports, the proprietary rights to the game belong to the publishers and so, more often than not, they become the regulators of esports for their game. They have the power to fine or ban players.19 One possible solution to this is for other publishers to recognise sanctions imposed on a player and prevent the player from participating in their tournaments. This would appear to be the more ethical approach as it otherwise they risk bringing the game into disrepute and undermining the integrity of the broader esports ecosystem.
For more information on edoping, please see this LawInSport article by Ian Smith: The continued rise of eSport – Efforts to combat match fixing and improve integrity.
Intellectual property and broadcasting rights
The broadcasting rights model in esports is still somewhat haphazard. Game publishers own the copyright to the game, but often don’t have a direct relationship with a tournament looking to broadcast its competition. Game publishers seem generally to not have a problem with this, seeing it as form of marketing that can translate into new users.
One perhaps concerning upshot, however, is that some tournament organisers have managed to get “streamers” on online platforms banned from the platform for broadcasting their tournament (despite not owning the intellectual property to the game and even when their own broadcast was free to viewi). One recent occurrence of this was the ESL One Genting 2018 Dota 2 tournament in Malaysia, in which the tournament organisers issued DMCA Takedown Notices (pursuant to America’s Digital Millennium Copyright Act 1998) to a number of streamers on the Twitch platform, resulting in their channels being banned by Twitch.20 The game publishers eventually clarified that no other party except the publishers themselves should be issuing DMCA Takedown Notices.21 While this cements the fact that the intellectual property rights belong to the game publishers, it does not resolve the issue of protecting the rights of the tournament organisers and their sponsors.
To understand the issues from the perspective of the tournament organisers, we first need some background. First, no tournament can run without sponsors. For esports, in which broadcasting is predominantly online, tournament organisers will usually have obligations to protect their broadcasters and sponsors. Whether it is exclusive broadcasting rights or the brand having screen time, the tournament organisers need to ensure they fulfil their end of the bargain. When other streamers broadcast the tournaments, especially if they are social influencers and well-known in the community, their streams will take away viewers from the official broadcast. This raises questions relating to rights, such as: can a tournament organiser sell broadcast rights to their tournament when they do not own the intellectual property in game?22 How do tournament organisers protect their interests and that of their sponsors? What about the rights of those who get donations and subscription fees from broadcasting the tournament through the free in-game feature?23
Intellectual property is a major subject that the esports industry is currently trying to grapple with. The underlying issue is that third parties are ostensibly making money from rights that they do not own (i.e. the game). There are a multitude of rights and interests of various parties to balance when it comes to intellectual property. The difficulty is in protecting these rights but at the same time catalysing the growth of the industry. ESL One Genting will definitely not be the last in which intellectual property issues come to the spotlight.
Perhaps a solution to this is for publishers to enter into exclusive broadcasting agreements with tournament organisers thereby granting exclusive licence to them to broadcast the tournament. However, this might only work for some games. For example, Activision Blizzard entered into a exclusive two-year broadcasting agreement with Twitch for the latter to serve as the exclusive third-party streaming partner for the Overwatch League’s regular season, playoffs and championships for English, Korean and French.24 This is made possible because Overwatch does not have any in-game spectating function that viewers can watch and therefore stream the tournament matches through the game client. The only way to watch the tournament is through Twitch. Compare this with games like Dota 2 that have an in-game spectating function. The only way these publishers can enter into exclusive broadcasting agreements with tournament organisers will be to turn off the in-game spectating functions to these tournaments. However, the feasibility and likelyhood of that happening is low given it’s intrinsic importance to the gaming concept.
Although esports is still in its infancy, "esports law" has definitely started to pick up. Awareness of industry’s bespoke legal and regulatory requirements is growing, and will continue to mature in tandem with the market. Given the many difference to traditional sports, lawyers in the space will need to familiarise themselves with the industry practices, the digital ecosystem, and the unique and ever evolving technological aspects of the space.
While it is exciting that esports law is beginning to take shape and establish itself, there is still a myriad of unexplored areas that the industry will have to tackle in the coming years. From governance issues to advertising and merchandising, we foresee an increase in awareness, intriguing developments and exciting times ahead.
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- Esports uncovered – Part 1: an overview of the ecosystem
- The continued rise of eSport – Efforts to combat match fixing and improve integrity