Cybersports, or eSports, is the general name for the new and dynamic industry of video game competitions. The name of the industry includes two main components that explain its essence – cyber (computer) and sport (a word familiar to us for a long time). Competitions are held in various disciplines (which are identical to the names of famous video games): League of Legends, Dota 2, Overwatch, CounterStrike: Global Offensive, etc. According to gaming industry analytics company Newzoo, in 2020 global eSports revenue will reach $1.5 billion, and the total audience will grow to 454 million viewers.
If we speak from a legal point of view, it is difficult to call this direction only a sub-branch of sports law, because the so-called entertainment, media and IT law are also “involved” here. Today, the regulation of eSports both at the international and national level is not sufficiently developed. At the international level, the International e-Sports Federation (IeSF), which currently includes 54 member countries, can be called a “legislator” (like FIFA in football). She actively promotes the recognition of eSports as an Olympic sport. Many countries have already managed to include e-sports in their official lists of sports (China, India, Russia, Italy, Finland, Malaysia, South Korea, Egypt, etc.). Just as the online betting sites Bangladesh connected the passionate fans of sports to the competitive spirit.
How are relationships regulated in the eSports business?
First of all, it is necessary to determine who are the participants of the e-sports sphere and how they interact with each other. If you compare it with “offline” sports, it has a lot in common with such classic sports as football, basketball or chess. So in eSports there are players, teams/clubs/coaches/headhunters, organizers of eSports competitions (usually eSports associations or federations or special platforms/private companies), sponsors/advertisers and spectators/fans. At the same time, active participants in the media and entertainment part of the industry are video platforms such as YouTube and Twitch, which broadcast e-sports competitions and tournaments, as well as video game development/publishing companies, which are often organizers of competitions and founders of relevant e-sports disciplines.
Unlike traditional sports, relations between stakeholders in the eSports industry are not regulated by laws, regulations or rules of sports federations. Relevant contracts are concluded between interested parties (for example, on cooperation between a player and a club, on the transfer of a player from one club to another, on the organization of competitions, a marketing contract, a license contract for holding a tournament, etc.).
In the context of the contracts between the player and the club, there are many issues related to labor relations (issues of payment of wages, prizes for participation in competitions, bonuses). These relationships are governed by national law depending on where the club, company or platform is registered, as well as where the main work activity of the players takes place (training, education, participation in regular tournaments, etc.).
How to formalize investments in eSports?
According to PitchBook, private investors make a significant contribution to the development of eSports, having invested 1.8 billion USD in eSports startups in 2018. In general, investments in eSports can be different: investments in infrastructure (platforms, tournaments, special software solutions in this sphere), investments in teams/clubs or specific players, investments in the development of e-sports disciplines (video games), etc.
Depending on the type and purpose of investment, jurisdiction and type of investor, legal support for investing in eSports is quite diverse, and therefore requires a high professional level and a deep understanding of the industry. In this case, only the contractual form of the relationship between the participants of investment processes will be common. However, various legal fields may also be involved here: corporate and tax law, intellectual property law, etc.
Specialists say that only long-term investors who are ready to invest and wait for the result in the perspective of 5-10 years should enter e-sports. In the “today for today” format, it is impossible to achieve a result in this area. Every venture investor understands that the waiting time for investments is 5-7 years. In any case, these are strategic investments that are more durable. These aspects should also be taken into account during the structuring and execution of investment agreements.
Are there intellectual property objects in eSports?
Esports is a “good” field for intellectual property specialists, because some of the most important and profitable assets in this field are trademarks, computer programs, tournament broadcasts, game characters, computer graphics, artistic and musical works, etc.
Important sources of income in the eSports industry are sponsorship and advertising in streams (competition broadcasts). In order to showcase their trademark or trade name in cyber competitions, advertisers compete with each other. Sponsors and advertisers in this industry range from tech giants (AMD, Intel, Logitech and HTC) to automotive brands (Mercedes, BMW, Toyota, Volkswagen).
A rather unusual type of license agreements are so-called tournament licenses, which can be structured through several licensing, marketing and service agreements and include the sale of rights to broadcast the championship, streaming rights, rights to enter into sponsorship and advertising contracts, rights to place logos and brand names under time of the tournament, rights to manufacture and distribute merchandise with game symbols.
Important terms of such contracts are the term, territory of the license, methods of using intellectual property objects, type and amount of remuneration (fixed or proportional to profit).
How to resolve eSports disputes?
Esports disputes, given the unsettled nature of the industry, are usually resolved through negotiation or mediation. In exceptional cases, the parties refer to a court of appropriate jurisdiction or arbitration (for example, ACES at WESA (Arbitration Court for ESports)). Relevant eSports organizations/federations can also help resolve disputes in this area.
Most often, disputes occur between clubs and players, game manufacturers and competition organizers. In most cases, the subject of the dispute is a violation of contractual obligations or a violation of intellectual property rights. Issues of sponsorship, the procedure for streaming the game by the club’s players, the transfer of players from one club to another, the dismissal of players for doping/manipulation of results/non-attendance of mandatory tournaments, early termination of the contract, distribution of winnings/royalties, etc. may be controversial.
At the same time, the organizer of the tournament, which conducts it without obtaining the appropriate license, may become an infringer of copyrights of the game, rights to trademarks with the name of the game, as well as to images of characters that the right holder has registered for the sale of symbols and goods.
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