While video games have been around for decades, the explosive growth of electronic sports (or eSports) is still fairly new. Gamers compete in tournaments drawing a huge audience of fans who watch live or online. The players can earn a substantial income from wins as well as from endorsement deals. Beside the players, various parties also make money through running and promoting competitions, broadcasting events, selling tickets and merchandise, gambling, licensing intellectual property and other sources of revenue. This is a growing field that implicates many areas of the law. As such, those involved in eSports should work with a law firm that has substantial experience handling these types of issues.
What Types of Legal Issues Arise in eSports?
Sports law encompasses a wide variety of contract, employment, intellectual property, gambling and other areas of law. However, just as each type of sports has unique issues because of how the business works, eSports has its own organizations, rules and concerns which must be taken into account when handling legal issues. In addition, eSports is still an evolving area with inconsistent business practices and open questions about how some tax, intellectual property, internet, privacy and international laws may apply. As a result, the parties need an attorney knowledgeable about traditional sports law matters as well as the special considerations in eSports.
Commercial and Contract Law
eSports involves numerous corporate and commercial matters. These include:
- Player agreements
- Agency and management contracts
- Team, tournament and league agreements
- Venue and event contracts
- Media/broadcasting rights
- Endorsement, sponsorship, marketing and appearance agreements
- Advertising and sponsorships
- Entity formation
- Mergers and acquisitions
- Social media influencer agreements
These transactions have added complexity because of the lack of consistent industry practices among eSports organizations. Early on, many eSports deals were entered into without the benefit of understanding the revenue potential of eSports, resulting in lost opportunities. As an evolving area, good legal representation is essential to evaluate and negotiate the best terms in any type of eSports transaction.
Intellectual property is an essential component of eSports. Copyright law protects live broadcasts thus requiring players and other parties to get permission to broadcast games publicly. For licensing rights, it is important to clarify the scope of rights. For example, in a live tournament, there may be multiple parties involved in the event, including the players, teams, commentators, organizers and others. Licensing agreements must be carefully drafted to ensure rights holders are compensated, while licensees are able to maximize revenue potential from games.
Trademark law may also apply. As those involved in eSports become well-known, they are more likely to seek trademark protection to ensure no one else can exploit their name or brand.
Legal advice is necessary to help brands and players protect and leverage their reputation and publicity rights. Video gamers want to benefit from their large following for additional revenue from third parties, but brands want to ensure they will not become associated with objectionable conduct or statements. Endorsement deals, where a brand pays for the right to use a player’s name, image or likeness in advertising, can be lucrative. However, there are many issues that players, teams and advertisers should negotiate.
Labor and Employment
The rights of players in traditional sports are well-established. In eSports, it is more complicated. Players may be considered “employees” or “independent contractors.” The difference implicates various labor and employment laws so teams must be careful when categorizing players. However, even where players are deemed employees, they have less bargaining power, which may lead to unbalanced employment contracts. Furthermore, they are not unionized and often do not have agents like players in other sports, so they do not have an organization representing their interests. As such, players should consult an attorney prior to signing a contract for advice on getting the best terms.
Betting is a lucrative source of revenue in most sports. However, there are fewer commercial gambling operators in eSports at present. As it expands, it is likely to face the same legal rules and scrutiny that traditional sports betting receives. An added wrinkle is that many eSports teams are based in other countries and tournaments may be conducted around the world, raising issues with international gambling laws.
As with traditional sports, cheating is a problem in eSports and all parties must comply with rules or risk serious consequences, including fines, automatic forfeit, bans and prosecution. Game boosting is one form of cheating which involves a party paying someone else to play incognito on their behalf in order to boost their rank. Typically, the party being paid is a professional player. In some countries, there are stiff legal penalties.
The popularity of eSports makes it likely there will be more legal regulations and commercial transactions in the future. Good legal advice can make a substantial difference in protecting the parties’ rights and maximizing the revenue potential.
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