The changing virtual-face of sport and the legal issues it must combat
Becoming a professional athlete is a dream that most of us have once shared - earning big dollars and receiving international fame and recognition in a chosen sport. Sadly for many of us, the closest we will ever get to the dream is sitting in a comfy chair at home living the fantasy through a video game. However, the evolution of the internet and technology has sparked a multi-billion dollar entertainment industry that challenges the traditions of sport. This phenomenon is called ‘esports’, otherwise known as competitive gaming. Governments around the world are now gradually recognising esports players as professional athletes, with the top players attracting sponsorship contracts, endorsements, prize money and global stardom. For some readers this may be old news, as esports has been around for some time, but it is only within the last few years that the sporting and commercial world has started to take note and jump on the global bandwagon.
A factor behind the explosion of the esports industry, which has primarily come from the Asia-Pacific region, has been digital streaming platforms such as Twitch (acquired by Amazon for USD$970m in 2014) which allows fans to observe participants virtually competing against one another. The popularity of esports was highlighted when the 2016 League of Legends world finals held in China attracted a viewership of 36 million - 5 million more than the viewing audience for the NBA finals2. Since then, the global trend of esports has showed no signs of slowing down. Major companies such as Red Bull, ESPN, Samsung, Adidas and owners of NFL, NBA and AFL clubs have flocked to get into the industry by sponsoring esports players, teams, and events. The Observer’s Q2 2018 esports business digest reflected the amazing growth of the industry, reporting US$1.57billion in disclosed funding for esports related companies, and excitingly, the revenue stream for esports is estimated to reach US$1.4billion by 2020.
Over recent years, strong opinions from sport industry figures and academics have highlighted the polarizing opinions on whether esports can really be recognised as a sport5. However, the argument for esports' identity as a sport, was bolstered when the Olympic Council of Asia (OCA) announced that esports would be featured as a demonstration event at the 2018 Asian Games this September, stating that the decision “reflects the rapid development and popularity of this new form of sports participation among the youth”. This acknowledgment has been recently reinforced with reports indicating that advanced talks have been made with the International Olympic Committee regarding esports being featured at the 2024 Paris Olympic Games. Other notable developments include Canadian company Myesports Ventures Ltd announcing plans to open the first ever esports stadium in Vancouver in 2019.
All aspects of the esports industry are expected to grow exponentially as esports gains legitimacy as a true sport. However, such a revolutionary and emerging industry will inevitably have teething issues.
The rapid growth of esports has outpaced the development of regulation, with concerns it has left the industry in a fragmented position due to the lack of fundamental regulatory elements common in mainstream sport10. As esports teams compete across multiple games (each potentially a different esport), in different leagues and in different tournaments, governing bodies such as the World Esports Association (WESA) and the Esports Integrity Coalition (ESIC) have only limited reach. Instead, it is the game publishers who have control over their own games, set the rules and are positioned as the governing body, giving them a significant level of power over the conduct of competitors. Much like the governing bodies of traditional sports, national and international regulatory bodies should be established to ensure consistency, fairness and that rules and structures are adhered to.
At the heart of esports are the competitors, who are generally young and inexperienced in the professional sporting environment. This creates a potential for teams or IP owners who may be seeking to sign competitors to exclusive contracts and to use their image rights, to take advantage of the less experienced and more vulnerable competitors. The issue around image rights is particularly unique to the esports industry. Rather than idolise the actual person (i.e. the competitor), fans associate with the character or avatar which the competitor adopts while playing, such that the character or avatar becomes a valuable merchandising and endorsement asset. If this is not contractually protected, publishers, instead of the players themselves, may be able to exploit the image rights for commercial profit. Furthermore, in an industry where there is no standardisation of contracts, collective bargaining or fixed work conditions, leagues and IP owners are able to impose strict player contract requirements. This leaves competitors vulnerable to unfavourable agreements. We recommend that competitors obtain appropriate legal advice before entering into any agreements to ensure they are not blinded by the lights and fully understand the implications of the agreements into which they are entering.
In mainstream sports, the intellectual property (such as copyright, designs and trade marks) is generally owned and registered by the various leagues and then licensed to the relevant stakeholders, such as individual teams and broadcasters. With esports, the intellectual property usually rests with either the game developers or publishers who control how these rights are to be exploited.
It is typical for video game licence terms to include wording that effectively restricts use of the game to use for “personal” and/or “non-commercial” purposes. Logically, this would not extend to accessing, reproducing, or making copies of, the game for a commercial tournament where players are paid to participate, win prize money and/or obtain lucrative sponsorships. More often than not, purchasing a standard licence to a game for each player or device (be it on PC or a console) will not suffice, and tournament organisers need to work very closely with publishers to ensure that a specialised licence is agreed which enables them to commercialise the game in all the ways anticipated. It should be noted however that the majority of tournaments are organised either by the publishers of the games or in close partnership with those publishers.
Further issues arise in respect of the broadcasting of esports, particularly in circumstances where major tournaments are broadcast online through platforms such as Twitch and YouTube, which involves the distribution of copyright protected material. Any such capture or broadcasting of gameplay requires the copyright holder’s approval.
As such, the licensing of the rights comprised in the video game is an important consideration, and agreements must be carefully crafted to ensure that the licence to the video game (as well as any associated trademarks and audio soundtracks, if required) is scoped to sufficiently capture all activities planned for the tournament.
Despite the infancy of esports, alarming issues have already arisen involving high profile athletes and coaches which are, although prevalent in mainstream sport, exacerbated by the absence of a true governing body and sufficient regulation in the esports industry. These integrity issues extend to athlete doping, match fixing and even incidents involving sexual misconduct. It is concerning to see that, notwithstanding that these issues are becoming more widespread in the industry as it grows, the regulation of the industry remains stagnant.
Australia is not immune from the issues that have permeated esports globally since its rapid rise in popularity. Various industry bodies have already been established such as the Australian Esports Association (AESA) and the Esports Games Association Australia (EGAA). It is also exciting to see traditional sporting organisations buying into the esports industry, with the Adelaide Crows AFL team acquiring the Australian esports team ‘Legacy’, and the A-League heavily investing in an esports league with the FIFA video game. Consultants specialising in match day experiences are suggesting that sporting clubs and organisations use esports as an extension of the ‘fan experience’ and include it in their product offering.
We hope that, given Australia is a relative latecomer to the industry, the local industry has learnt from the teething issues encountered by other countries and will begin to implement appropriate regulation and governance measures.
For further information or discussion, please contact Partner, Josh Hunt or a member from the HopgoodGanim Lawyers’ Leisure, Sport and Entertainment team.