On August 22nd and 23rd, Madison Square Garden hosted a sold out crowd of 11,000 sports fans (pictured above) each day. However, the fans were not present to see the Knicks or Rangers play, but to watch the top two League of Legends teams in North America do battle. For those that are unaware, League of Legends is a computer game with approximately sixty-seven million players worldwide. League of Legends is one of several games played competitively for profit, but perhaps has the greatest market share of the competitive gaming industry known as eSports. By comparison, a game that is gaining on League of Legends’ market share is Counter Strike: Global Offensive, who held a major tournament across the same two days and drew a peak of 1.3 million concurrent viewers online. Yes, video games are now a spectator sport.
The eSports industry has seen exponential growth in the past few years. Globally, eSports is projected to become a billion dollar industry by 2017, having currently amassed 47.7 million viewers and participants across the United States and Western Europe. However, as the industry develops, the need for eSports-related legal assistance has grown tremendously at every level. Much like the professional sports industry, eSports touches upon almost every area of law, although some legal fields are particularly prevalent.
ESports is rife with intellectual property concerns. As all gameplay and game content is the intellectual property of the developer, licensing issues arise regularly. Although some developers also act as the governing body of their game’s professional league, there are also independent companies which govern eSports professional leagues and otherwise act as a tournament provider. Therefore, developers must license their intellectual property to these independent providers in order for them to continue to operate. However, the choice of whether to license the game to certain providers remains at the discretion of the game developer since they own its intellectual property.
Additionally, licensing issues arise with individual players. With the advent of streaming services such as Twitch.tv, YouTube Gaming, and content creation through YouTube, gamers are relying on licenses from game developers to broadcast gameplay online. Developers vary wildly on how they choose to license their content to players, which can create conflict. For instance, Riot Games, the developer of League of Legends, is extremely protective of licensing its game to independent league/tournament bodies, but has a very liberal policy (which it has codified) of allowing players to use the game to stream its content and make YouTube videos. On the other hand, Nintendo is extremely restrictive with licensing its intellectual property to players. In fact, Nintendo published a list of games, excluding many of its more popular titles, which players must use to stream or otherwise create content.
Leagues, tournament providers, teams, and players all require assistance with the drafting and negotiating of contracts. Unfortunately, this has been an area of law that the eSports industry, particularly at the team level, has not adopted en masse. Team owners frequently rely on oral contracts with their players, or resort to creating their player contract by copying sections of various contracts that they find online. The resulting written contract is frequently a hodge-podge of several different types of contracts resulting in a contradictory, and largely unenforceable, contract. However, as teams are becoming increasingly business savvy, some teams are beginning to seek legal counsel for contract help.
Players have the greatest need for legal assistance with contracts due to their vulnerable status, despite the fact that the industry’s product rests on their shoulders. The history of eSports has unfortunately been marred by teams taking advantage of players, particularly by failing to pay them. In one recent example, a team failed to pay its player for three months and threatened to have the player’s mother evicted should the player leave the team. Despite these well-known horror stories, the players are young and impressionable, and have knowingly accepted bad contracts as a means of starting their professional career. Additionally, there are teams that discourage players from seeking counsel during their contract negotiation. Although such behavior may be actionable, players fear for their livelihood and largely attempt to negotiate the contracts on their own, or accept them as is.
At all levels of the industry, some of the most readily encountered contracts are player-team contracts, player-league contracts, team-league contracts, and sponsorship agreements.
Mergers and Acquisitions
As the eSports industry is still developing, the teams comprising professional leagues are in a constant state of flux from one season to the next. Professional leagues have generally allowed teams to sell their spots in the league to other organizations for profit. These pro league spots are transferred in the same manner as tangible property and fetch high prices due to their scarcity. Team rosters, and entire organizations, are also acquired and sold by organizations in the same manner. As with any asset purchase, the transaction should be negotiated and formalized into a written purchase agreement by counsel to protect both parties.
The above examples are just a small piece of how the eSports industry touches upon different areas of law. Despite the eSports industry’s substantial legal needs, there are few attorneys who service the industry. Surely as the industry becomes more profitable, for both the eSports teams and attorneys involved, more attorneys will flock towards the industry and offer protections for businesses and individuals. However, the industry must first be aware that it needs such help before it can be accepted.