An overview of eSports Explosion and legal issues arising from it
Published 09 February 2016 | Authored by: Andrew Nixon Daniel Geey Jonny Madill
At a basic level, eSports is the competitive playing of video games for cash and prizes. There are organised global and multi-jurisdictional leagues involving professional teams who compete for millions of pounds in prize money; as well as a variety of online amateur leagues, too. Esports audiences are projected to top 335 million in 2017 allied with commercial revenue growth estimated to hit $465m in the same year. Esports is entering the mainstream.
The basic structure of the professional eSports industry revolves around teams (many of which are major brands in their own right), publishers (like Riot and Valve), events (like the Intel Extreme Masters) and leagues (like League of Legends and GSL). Streaming is at the heart of the eSport revolution, and various channels/platforms like Twitch (recently bought by Amazon for $970m) and YouTube stream live eSport events to millions of viewers worldwide. Furthermore, major brands are also starting to see value in a market that engages the famed millennial demographic in a way that many traditional sports do not. Sponsors such Red Bull, Intel and Samsung are already firmly entrenched in the eSport space, with more to come.
Esports is not a new phenomenon by any means, but part of the reason why the industry has developed quickly over the last few years, is down to technological advancement, in particular in relation to the streaming platforms; advancements which are taking eSports to a whole new audience. The Sheridans Interactive and Sports Groups have been able to team up to help gaming stakeholders from across the eSports ecosystem; a combination that allows us to deploy both our knowledge of commercial rights and regulatory frameworks from 'traditional sport' with an expertise in the computer games industry. Just as in any sport, team and player contracts need to be drafted; sponsorship and broadcasting agreements negotiated; and regulatory frameworks constructed. In any growth industry, which this undoubtedly is, as teams mature into sophisticated, multi-faceted organisations, the legal complexities transform accordingly.
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 eSport player contracts are now dwarfed by a multitude of growing commercial and regulatory issues, as we touch upon below. Such issues will now become structural, eSport industry-wide concerns to ensure a joined-up approach. Look out for the following as the eSports evolution continues through 2016:
- the issue of players’ rights and the formation of an overarching player union (including the provision of minimum player contract terms);
- as betting markets develop, integrity issues such as match and spot fixing, use of insider information and in-game cheating will come to the fore;
- salary caps, cost controls and salary transparency;
- the collective distribution of commercial and broadcasting monies amongst teams and players;
- disciplinary matters and stakeholder disputes;
- the creation of robust governance and regulatory frameworks (a functioning governing body, or set of regional governing bodies);
- doping (specifically in relation to cognitive enhancement substances which help players stay responsive and alert for longer periods) will become headline news;
- being ‘fit and proper’ to run a team and/or a league;
- the need for contractual stability for players and teams, and issues surrounding player inducements/ poaching.
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.
If you want to know about eSports then LawInSport will be hosting a panel discussion on eSports on the 24th February as part of LawInSport’s – Understand the Rules of the Game Conference 2016:
- Andrew Nixon, Head of Sport Group, Sheridans (Chairperson)
- Ian Smith, Director, Sports Integrity Matters
- James Watson, eSports Product Manager, Sportradar
- David Grundlingh, Red Planet
- James Lampkin, VP Pro gaming, ESL
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- Tags: Anti-Corruption | Anti-Doping | Contract Law | Employment Law | eSports | Governance | Regulation | Sponsorship
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About the Author
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.
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.