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eSports: brand opportunities, legal considerations & the future

A brand opportunity

For those unfamiliar with the concept, “eSports” is the umbrella term used to describe the competitive playing of various video games for (primarily financial) prizes. In the past few years the eSports industry has exploded, growing from little known tournaments entered into by disparate and minor online communities to a multi-billion dollar industry with vast global audiences, big name brand sponsors and super star “celebrity gamers”. It is fair to say that eSports is now threatening to enter the mainstream.

As viewing figures rise, more and more brands are seizing the opportunity to gain exposure to a vast global audience and to tap into what has been described as an “advertising goldmine” of often affluent young gamers. With global audiences predicted to exceed 500 million this year, eSports represents an excellent opportunity for brands to seek greater exposure to new geographic markets, new demographics and across new and innovative online media channels. This exposure may be gained by sponsoring a major tournament or creating a tie-up with one of the gaming stars to endorse a brand’s products. To pick just one recent example, male grooming brand Gillette made an announcement at the end of January 2017 that it will be sponsoring the hugely popular League of Legends eSports tournament – Gillette branded products available at the live event will include specialised razor handles which will be created by a 3D printer on-site. Other brands, including existing traditional sports clubs, are going further by establishing their own eSports teams to sign-up the best eSports players and to ensure their brand enjoys prominence at all the key eSports events and tournaments beamed across the world online.

Law and eSports

There are a variety of legal considerations for brands, video game developers, tournament organisers and gamers alike to take into account when operating in the eSports world. The industry has thus far grown at an alarming rate with very little in the way of overarching regulation, governing bodies or the like – however there are a number of areas of the eSports industry in which existing legal contracts and relationships come into play.

By way of a handful of examples, when eSports teams sign up the best gaming talent, they will need to enter into employment or consultancy agreements with professional gamers and those agreements should have a strong focus on use of the team’s brand and other IP. The best (or rather most popular) gamers are also likely to be sponsored by other brands (e.g. manufacturers of computer peripherals) and will for example enter into sponsorship or endorsement agreements to endorse and promote products via their personal YouTube channels. Particular attention should be given to these agreements to ensure consistency and avoid any disputes between rival manufacturers.

Software licences need to be obtained from games developers for both eSports tournament organisers in order to run and broadcast their tournaments, as well as for individual players in order to be able to stream themselves playing the game online for fans to watch. Tournament sponsors must enter into sponsorship and IP licence agreements to allow tournament organisers to use their brand in connection with a particular competition, such as the Gillette/League of Legends tie-up referred to above. These brands will need to ensure adequate provisions are in place in such agreements to protect their use online as well as at live events. Further, existing sports clubs or other brand owners wanting to establish an eSports team may for example need to review existing contracts to ensure they have the rights to use particular sponsors or partners’ names in the context of the eSports arena.

On a slightly different contractual note, governance and organisation of eSports - for example entry rules and terms & conditions for tournament participation - will need to become more stringent and clearly defined as the industry grows ever more professional, in an attempt to avoid disputes.

This handful of examples provides an indication as to how, much like conventional sports, the eSports industry is touched by multiple areas of law including Intellectual Property, Employment, Contract, Advertising, Regulation and IT.

The future

With 2017 set to be the year eSports enters the “mainstream”, we set out below some thoughts as to what lies ahead over the coming 12 months:

  • Growing audiences: Not a ground-breaking prediction by any means but it seems clear that the current astronomic growth of the industry is set to continue. We expect eSports to become available through more mainstream channels and broadcasters, in addition to existing streaming sites such as Twitch and YouTube. In addition, eSports may begin to make an impact on traditional “television” broadcasts, potentially with future offerings and coverage for the mainstream from the likes of Sky Sports.
  • More existing sports clubs involved: Many existing football clubs across Europe have already established professional eSports teams including Manchester City, Wolfsburg, Ajax and Valencia CF to name but a few. We expect many more to join their ranks in the next twelve months, taking the opportunity to tap-in to the vast brand exposure and new audiences that the eSports industry offers. Further, we predict that in the future we will see more and more official, organised and regulated tournaments, perhaps being linked to or endorsed by existing “real world” competitions such as a FIFA video game eSports version of the UEFA Champions League for example, in which existing sports clubs can enter their eSports teams.
  • Increased growth of eSport betting markets: As the industry itself grows so too will the associated betting markets. Already in existence, as more and more money is ploughed into the industry, greater prizes are at stake and wider audiences are viewing the spectacle, the consequential growth of the eSports online betting markets is somewhat inevitable. This is, of course, likely to also raise an array of spot-fixing/match-fixing, bribery and integrity issues, which have dogged conventional sports of late.
  • Wider range of games: The eSports world stretches far beyond games related to traditional sports such as the popular FIFA series and indeed the most popular eSports games such as League of Legends, Call of Duty and Dota 2 are far removed from the sporting sphere. With so much potential revenue at stake in establishing a competition based on a developer’s eSports title, the race amongst video game developers to create the next big eSports game (whether related to traditional sports or otherwise) is set to be frantic.
  • …and finally, more disputes – With ever increasing sums at stake for both developers and gamers, as well as a veritable web of contracts including software and IP licenses in play, alongside a “free streaming” online culture, we certainly expect to see more and more contractual disputes arising in the eSports industry in the coming years.