What is esport?
- Common approach
In every day speech, esport is considered synonymous with electronic sport, or video game competition. Originally developed and known only by the limited communities of video game players or “gamers”, it has grown exponentially in recent years.
Initially recognized as a “real sport” in many Asian countries (China, Japan, South Korea) or in the United States, the worldwide revenue of the esports business is expected to reach USD 1 billion in 2020. So it is now time for markets around the world to recognize this activity and the financial stakes it generates, but also to fill the legal gaps that exist, in particular regarding the organisation of competitions or the status of the players. It is also necessary to underline the ethical issues related to minors but also to women in the world of esport, which the legislatures must obviously take into account.
In France, video game competitions, but also French players who are members of renowned international teams and spectators of such events, are increasingly important. France has not escaped the esport phenomenon and the French legislator has therefore been forced to catch up and start to better supervise this new and ever-growing craze. The Law for a Digital Republic of 7 October 2016 offers a necessary legal recognition to esport. Two application decrees of May,9 2017 provide a framework for the organisation of video game competitions and the status of professional gamers.
The United States adopted esports early and it currently is its second largest market in the world after China. Meanwhile, the legal regime in the United States is developing more slowly than the business, which continues to thrive despite the pandemic.
- Legal approach
To the best of our knowledge, there is currently no harmonisation on esport legislation at either the international or the European level.
In France, the Law for a Digital Republic of 2016 provides the following legal definition of esport:
“the practice of a video game, alone or in a team, on the Internet or via local network, with a computer or a video game console”.
Companies or associations planning to supervise teams, players and organise competitions are subject to the aforementioned law and must obtain approval from the ministry in charge of digital technology. The approval is valid for three years and is renewable. It is necessary to be able to employ esport players and organise competitions. It obliges employers to guarantee fair treatment for employee players with regard to training and preparation for competitions. In order to obtain this approval, companies and associations undertake to provide equipment and material for training and must guarantee good training conditions, particularly regarding the players’ occupational health and safety. They must also deal with player transfer issues, particularly when players join international teams, but also with player transport and everything else related to the organisation during competitions.
So, a priori, French law has already pronounced itself on a certain number of esport’s issues relating to labor law, tax law and so on.
However, some legal issues are still questionable, in particular the issues related to intellectual property and the right of personality – direct consequences of the strong monetisation of image reproduction right.
What are some of the issues at stake for esport?
- Legal issues
While regulatory efforts are taking place, some issues such as intellectual property remain questionable. The purpose of this article is precisely to go back over the issues that arise in terms of intellectual property and personality rights, the answers to which are still on the margins.
- Financial issues
In any case, the underlying issue is that of financing. These rights carry significant financial stakes. The esport market in France represents 22 million dollars, compared to a little over a billion in the United States in 2019. The rewards for the winners of the competitions can be as much as thousands of euros in France and millions of dollars in the United States.
Who are the stakeholders in the esport? What are their rights?
The esport’s ecosystem is made up of a very rich variety of profiles, who, individually, may have intellectual property rights or personality rights.
These rights may form the basis of a significant amount of commercial revenues. It is crucial for esport’s stakeholders to be sure of what intellectual property, or right to personality in France or right of publicity in the United States they own or control before it is subject to negotiation in commercial agreements. Then the rights associated can be properly packaged and licensed for commercial use.
- Video game developers/publishers
Video game developers and publishers have intellectual property rights in and to their video games. Thus the authorisation of the video game developers/publishers is needed nearly all the time. This is a fundamental difference from traditional sports in which the teams or leagues own or control the sport and hire the talent. In esports, this oversight and control generally is vested instead in the game developers/publishers.
So typically the video game developers/publishers retain all rights to the game, including the commercial use of the title, and the teams and players are dependent upon a license in order to exercise any rights with respect to the game.
“You will not use the Service to participate in group competitions sponsored, promoted or organised by any commercial or non-profit organisation without Blizzard’s prior written consent. Here we see the necessity of licensing each time you wish to use a creation related to the game”.
This control gives video game developers/publishers the ability to choose the rules of the tournament since they can freely choose the organisers, which is important to the realisation of the event.
Moreover, video game developers/publishers are able to exercise their right to guide the players’ conduct. Indeed, some “End User License Agreements” clearly prohibit cheating and establish rules relating to fair play and good conduct. To that extent, one may say that video game developers/publishers control a great deal of the regulation of esports.
- Event organiser
The French Law for a Digital Republic enables the organisation of competitions involving video games. To do so, there must be at least two players or two teams who compete for a score or victory at the end. Based on this definition, it is thought that anyone could create a video game tournament, but this is not the case. As seen previously, the organisation of such an event is also subject to the prior authorisation of the publisher(s) of the game.
- Players & Teams
On the one hand, it is important to note that video game players have no intellectual property rights to the game itself, they are only users. The game developers or publishers own the Intellectual Property so they have the power. The players have no union nor have they organised collective bargaining rights, so this is unlike the situation in traditional sports. In addition, the players personal Intellectual Property rights are handled differently than in traditional sports. Under the law in the United states, traditional sports players initially would own their own Intellectual Property in their performances, and these rights generally are licensed to or otherwise owned by their teams. The teams then frequently license all or a portion of their rights to the leagues or other sports governing bodies.
On the other hand, esports players generally retain their personality/publicity rights and may monetise them to make a living from their passion. Hence, endorsement agreements, namely contracts between a company and a public figure such as a celebrity influencer or athlete (which increasingly now includes esport players) who will endorse its brand, are common. Those contracts usually include clauses addressing: the endorser’s payment amount, the endorser’s responsibility, the duration and the right of personality/publicity. Sponsorship agreements in esports have grown exponentially.
Players and teams may enter into trademark licenses with huge companies for the wearing of uniforms and equipment. For instance, in France, the Vitality Club has formed a partnership with Adidas, which produces its player jerseys.
- Sponsors, investors, advertisers
Sponsors and investors, namely often huge firms (Adidas, Red Bull and so on), find in esports a new market to promote their goods and services.
Product placement is common to generate revenue and is negotiated between organisers and large companies. Lots of players who choose to broadcast their own video games – known as streamers -present goods and services through their videos and receive compensation in return.
In the United States, the right of publicity arises under state-by-state, not federal law. So the varying rights that exist under different state law regimes might not be consistent from one state to another.
Under French law, this practice refers to advertisement, the definition of which is as follows:
“any form of communication made in the course of a commercial, industrial, craft or liberal activity with a view to promoting the supply of goods or services, including immovable property, rights and obligations”.
Consequently, it would be advisable to warn the public of the advertising nature of the information, and generally speaking to avoid misleading commercial practices (disguised advertising): to make the public aware that it is an advertisement. In the United States, the FTC requires that social media influencers who endorse products must state in their endorsement messages that they have a material connection with a brand.
Twich and YouTube include many messages which do not disclose that they are paid announcements which may be in violation of the regulations.
- Broadcasters & Platforms
Finally, as esports is becoming more renown, online platforms are increasingly seeking to obtain exclusive broadcasting and retransmission rights for esport competitions.
For example, after two seasons on the Amazon’s Twitch platform, the Overwatch League drew approximately 300,000 viewers on the internet. Following this and the approximately €90 million broadcast rights deal between Twitch and the Overwatch League’s organiser, Activision Blizzard, the rights now will be broadcast on YouTube which negotiated to take over the exclusive broadcast rights for the Overwatch League competitions, in addition to the rights for the Call of Duty League and the Hearthstone competitions.
This illustrates the very important financial stakes involved in the organisation and online broadcasting of a popular esport league, as well as the involvement of internet giants such as Amazon and Google in this growing market.
Esports is experiencing unprecedented economic growth, but the esports business currently is in its relative infancy regarding various legal matters. With the influx of cash, everyone will want their rightful share and there will be potential for ever-increasing legal issues. So it is important that your business engage in intelligent risk management analysis.
But one should note that efforts are being made to offer better monetisation, contract practices, Intellectual Property protection and regulation to the esports industry.
In any case, the IAEL, International Association of Entertainment Lawyers, partnering with Esports BAR, and our law firms UGGC and Liebenson Law, will be able to support clients in these shifts and in this field which has such a strong potential for development.
About International Association of Entertainment Lawyers
The IAEL provides a specialist, international forum for the sharing of knowledge and experience of legal and commercial issues of interest and concern to its members either in private practice or industry, whose areas of expertise cover nearly every aspect of entertainment law. Over the past thirty years, the IAEL has come to fulfill a unique role for lawyers throughout the world involved in the entertainment industry.
The IAEL actively participates at Esports BAR. Several members attended Esports BAR Cannes in February 2020, with Anne-Mare Pecoraro speaking on a panel and Jeff Liebenson leading a closed door round table discussion there.
If you are interested in joining or just want to know more about the IAEL please go to the IAEL website at www.iael.org.