This article is the first of a series of Norton Rose Fulbright articles about legal, regulatory and governance issues facing the e-sports industry.
Part 1 – Level Up – What are eSports?
With predictions that by 2019 427 million people will be watching eSports and eSports revenues will exceed US$1 billion, it is no surprise that professional eSports outfits are emerging around the world. China and North America appear to be leading the charge but eSports markets are exploding globally.
Welcome to part 1 of a series of posts with experts from around our network exploring some of the legal, regulatory and governance considerations applicable to eSports competitions and wider infrastructure.
What is eSports?
eSports is an umbrella term for the competitive playing of a range of video games in front of an audience. It involves teams of sponsored professional athletes battling it out in their preferred game, in purpose-built arenas in front of their merchandise-clad fans.
Tournaments with lucrative prize pools are hosted and broadcast worldwide, and winnings for tournament champions can exceed the prizes on offer for the very biggest traditional sporting competitions.
The new mainstream?
Although the first Nintendo tournaments were held in the 1990s, eSports is beginning to hit its metaphorical stride due to advances in the speed of and access to the internet, added capabilities and user experiences in gaming software and hardware, and the growth of events and venues dedicated to eSports.
In October last year, the International Olympic Committee (IOC) recognised that the strong growth in popularity of eSports, particularly amongst young people, provides a platform for engagement between eSports and the Olympic Movement. The IOC further acknowledged the professional nature of the industry acknowledging that eSports athletes prepare and train with an intensity comparable to athletes in traditional sports. The infrastructure emerging around eSports professionals, including psychologists, dieticians and training regimes, is testament to this.
Organizers of the 2022 Asian Games have recognized this, and announced that eSports will be a medal event at the Asian Games in China.
As well as being recognized by mainstream sporting bodies, by some measures eSports may be considered more popular than some regular sports. In 2016, over 43 million viewers watched the 2016 League of Legends World Championship finals; 12 million fewer people tuned in to game 7 of the NBA finals that same year.
Like any trend that sees exponential growth and development in a relatively short period of time, however, the eSports industry has some legal, regulatory and ethical hurdles to overcome.
Establishing a professional sporting industry of the size and scale that eSports leagues are achieving is no small feat. With such rapid growth and the number of participants in the industry, however, come inevitable legal obstacles that need to be carefully thought through to avoid brand damage and financial damage in the long run.
From my perspective as an intellectual property lawyer, eSports has many interesting areas for consideration. For example, do licensing arrangements for games inadvertently extend to eSports forums? This loophole could be a huge revenue loss for sporting outfits and athletes that own and licence their brands. What about sponsorship and commercialization issues arising from the games themselves? What streaming rights have tournament organizers granted, and do these deals reflect the rapid scaling up of eSports competitions? What rights do individual athletes have? How long before their individual image rights start to have comparable value to traditional sporting champions?
Those involved in organizing eSports industries also have other legal issues to consider, including corporate structure, employment law, advertising and marketing, tax structuring and financing, to name but a few. We will explore these topics in more detail as our series continues.
Governance & Regulation
While the IOC has flagged the possibility of including eSports in future Olympic Games, they have also made it clear that a governing body tasked with ensuring compliance with “the rules and regulations of the Olympic movement” will be needed. To be part of the Olympics, eSports need to operate within the spirit of the Olympics (in and of itself a highly regulated sporting event).
Establishing a global governance body for eSports may not only open the door for eSports to be included in future Olympic Games, but would also likely provide wider benefits to the industry in the form of promotion, legitimisation, standardization and professionalism.
There is currently no such global governance body, and eSports tournaments are regulated in a piecemeal fashion by tournament organizers or game developers, who act as regulators for competitions involving their own games. There are inherent pitfalls in this model of regulation, as the business interests of developers and tournament organizers may conflict with the best interests of young athletes and the development of the industry as a whole.
National regulators such as the Australian eSports Association are attempting to promote and regulate eSports within their jurisdictions, however, given the global and online nature of eSports this piecemeal approach is challenging and an overarching global body is likely to be required for effectiveness in the long run.
If a global governance body is established to regulate the eSports industry, it will be fundamentally different to more traditional sporting governance bodies, who set and enforce the rules for particular sports. Both the number of eSports games on the market and the fact that parameters for game play are built into the games likely mean that it would not be feasible or necessary for the governing body to take on such a role. Instead, the role of a global governance body for eSports may center around the setting and enforcement of rules regarding competition integrity, e-doping, athlete welfare and cyber security.
There is no doubt that the eSports industry is here to stay, with awareness, participant, spectator and revenue numbers growing exponentially year on year. As eSports organizers and competitions become more mainstream and take on the accolade of professional sporting bodies, there are a number of legal and regulatory considerations that need to be developed and actioned to ensure the long term sustainability of this industry.
In this series of eSports articles lawyers from across our global network will consider many of these areas in more detail.