Competitive video gaming, or eSports, is a phenomenon that has become an integral part of today’s digital youth culture. To date there has been very little attempt to research and counter or fix legal issues surrounding the eSports community. While the field of eSports continues to develop its own set of unique challenges, many of the obstacles are similar to those that other traditional sports organizations face. As with virtually all traditional sports organizations, the major eSports revenue goes to the venues and promoters of the events. Gambling, Governing Legislation, Regulations, and Player Representation are just a few of the additional issues the industry is facing. Given the eSports industry’s popularity and ever-expanding monetary value, sorting out and addressing these legal issues will be critical. This requires insight from sophisticated legal counsel and business consultants, preferably before potential storm clouds are formed and their fury unleashed. As President John F. Kennedy once wisely said, “The time to repair the roof is when the sun is shining”
eSports have recently begun to experience widespread international adoption and yet skepticism as to whether eSports can actually be considered a sport continues to exist. This conceptual conundrum is an issue pertinent, not only for describing eSports but also for re-evaluating our traditional definition or drawing the limits of what we commonly define as sports. Many are of the opinion that this new age sport does in no way fulfil the true meaning and concept of sports, simply because the competency of players cannot be matched or measured by physical dexterity. However, the overall performance of these players is heavily dependent upon their physical capabilities by way of their reflexes. Although the sport is confined to a computer-mediated setting it does not necessarily mean that the sport is not physically enervating for the players. eSports are divided into subcultures within themselves just as “traditional” sports seem to be. Whilst some quantitative and qualitative eSports literature has surfaced, the term continues to have an unsupervised definition. Wagner in 2006 provided an explicit definition based on the definition provided by Tiedmann in 2004 “an area of sport activities in which people develop and train mental or physical abilities […].” adding to it “in the use of information and communication technologies”
This however fails to answer the looming question of what sporting activities qualify as traditional or eSports. Based on current notions, eSports can be characterized as “A type of sport in which the primary aspects of sport are facilitated by electronic systems; the input of players and teams and the performance of the eSports system is mediated by human-computer interfaces”
Rise Of E-sports
The eSports industry has seen enormous growth over the years with regards to both spectatorship as well as sales. This incidentally led to a revenue growth which in turn led to brands rushing to invest in the eSports industry accelerating the revenue growth even further. The industry continues to experience growth in several other arenas, all of them being interrelated one way or the other.
Fans spent over 17 million hours watching their gaming idols on YouTube and Twitch in 2018 alone.
The sector is expected to generate a revenue of $905 million by 2020. Customers planning to buy tickets and merchandise would be bringing an additional $96 million. A surge in the number of casual viewers has also been noted.
Streamers have begun using multiple platforms and in several cases their own channels for broadcasting live coverage of events in some cases even their own gameplay, making participation easier for fans and allowing them to engage with their favourite eSports athletes. According to a stream lab analysis, Twitch and YouTube lead the competition with 1.13 million active streamers and 432,000 active streamers per quarter respectively.
The overall revenue for eSports in 2016 was $493 million, of which $350 million came from brand investments. Improving by 33% year-on-year in 2017, where total revenue was $655 million, and brand investments contributed $468 million from that. A remarkable 38.2% was the overall increase in total revenue year-on-year by 2018. Advertising came next by contributing 19% of total revenue, followed by 18% media rights. In addition, eSports generated 13% of its revenues from game publisher fees and 11% from merchandising and tickets.
Legal Challenges Encircling E-sports
Spectating has certainly come a long way, transforming into a billion-dollar industry.
As with any burgeoning business recurrent legal and ethical issues tend to arise. The following legal issues need to be immediately addressed, to nip them in the bud.
Most organizers have specific guidelines dictating such competitions, be it imposing a prohibition on betting or taking steps to prevent cheating. The absence of a single governing body in the world of eSports establishing uniform and overarching rules would lead to an array of financial frauds ultimately hampering the legitimacy of eSports.
The Esports Federation of India (ESFI) in India is currently the governing body for digital gaming. It is a member of IESF and the Association of Asian Electronic Sports (AESF) established pursuant to section 7 of the Companies Act, 2013 and Rule 8 of the Companies Rules. ESFI aims at regulating Electronic Sports in India and providing sports training facilities, building an ecosystem for eSports in India that are not restricted to the organization of Tournaments Amateur, Semi-Professional and Professional.
Esports have fallen prey to gambling controversies time and time again. Developers desperately need to ensure that game related exchanges do not enable illicit gambling operations. Gaming exchanges must be accessible strictly within the limits of a given game for virtual items-currencies, and should be interdicted to be traded for actual money.
Smart investments require an in-depth understanding of the eSports industry. Igniting the need to hire adroit M&A counsellors.
Players in eSports gain considerable attention ensuing prospects for sponsorship and merchandising. Brands in turn conglomerate around teams and players with a prodigious fan base. This too however requires a scrupulous understanding of the endorsement guidelines provided by the FTC which ordinarily, players and teams can not completely fathom.
IP ranges from characters and gameplay owned by the game developers. IP holders need to protect their copyrights, licensing arrangements and patents. Users need to ensure that they do not infringe those rights. Attention needs to be paid to comprehend and operate around the peripheries of this unparagoned legal construct.
Online Streaming Rights
There is an extreme lack of understanding as to IP rights under eSports. When players attract subscribers, they clamber to ensure that the monetization of their brands continues. Players spend a brobdingnagian amount of time forging their brands around IP that they by no way own. It is important to educate players about user license agreements that they are governed by.
Only a handful of eSports athletes have been granted P1 visas in order to compete in U.S. based competitions, other players have not been so lucky. Keeping them from competing in such competitions. U.S. Citizenship and Immigration Services refuses to acknowledge this critical issue in spite of an online petition with more than 100,000 signatures.
eSports contracts stretch from endorsement contracts to personal appearance agreements. Players should be cautious of terms that trigger any sort of employment obligations. Contracts need to be drawn up with great meticulousness and parties should then be informed of the obligations that they have concomitantly contracted.
With the Pac-12 announcing intercollegiate competitions in support of eSports, they may as well become a collegiate sport. But, questions as to the leadership of multiple associations remain.
Potential Solutions: Blockchain
The issue of players not receiving a cut from the prize pool may quickly be solved by the use of blockchain technology by way of smart contracts. The system would ensure transparency and would automatically distribute prizes which were promised to the participants. Since agreements in smart contracts cannot be violated. Blockchain technology allows real-time auctions to be introduced by availing the benefits of their decentralized information storages, to reduce instances of fraud simultaneously reducing the requirement of third-party sources and their unnecessarily exorbitant commission charges.
Meanwhile, Blockchain works primarily through cryptocurrencies, enabling unfettered access and flexibility to move cash between a user’s profiles and accounts, without accruing charge on transactions while being swift and reliable. Cybcercube also attempts to use an internal currency which can be exchanged effectively for cryptocurrencies namely bitcoin or Ethereum.
The biggest legal challenge that the eSports industry appears to be facing is arguably a lack of regulation, explicitly catered to it. Although, individual event organizers or national bodies enforce specific rules and regulations. The absence of a regulatory body, overshadowing the sector whilst providing guidelines and continuity could heavily impede the expansion of the industry.
A plethora of federations, national organizations, event organizers as well as the game publishers themselves seem to be regulating the industry. To achieve abidance and ascendancy in its field, agreements need to be reached on all the legal issues hounding the eSports industry.
Attempts have been made to produce some sort of a legislation and to create a single governing body – notably through the eSports Integrity Alliance (established in 2015) and its Code of Conduct, Code of Ethics and Anti-Doping Code, as well as the World ESports Association – yet no industry-approved body has been created. Many share the opinion that there exist a myriad of legal issues in the eSports sector to diarize much less address.
In 2012, the Valve Corporation released their game ‘Counter-Strike: Global Offensive.’ The game came up with the idea of creating ‘skins’ which could be used to personalize a character’s exterior. Which eventually led to one of the most prevalent forms of eSports gambling.
Gambling as an eSports issue needs to be addressed immediately because of games like ‘Counter-Strike: Global Offensive.’ A study was recently conducted by Child Care UK which found that “more than half of the parents surveyed allowed their children to play video games over the age of 18…and 86% of parents did not follow video games age restrictions.”
The issue of unrestricted access for underage players to such websites needs to be addressed. IP-related conflicts are likely to continue without a regulatory body keeping the industry afloat. To secure the longevity of the industry, eSports are in desperate need of robust and customized regulations-governance, keeping in mind the increasing complexities and the amount of games multiplying so swiftly.
The industry is in dire need of a singular body which can steer and administer all its agencies, while ensuring that special attention is paid to avoid the fragmentation and endangerment to the foundation of this volatile sporting empire.
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Author Details: Aman Danish (Jamia Millia Islamia)
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