The Rise of E-Sports Raises a Host of New Legal Issues

May 31, 2019

The meteoric rise of electronic sports has created a wave of new business opportunities and a host of new legal issues along with them.  In e-sports, participants play online video games and broadcast their gameplay and verbal commentary real-time over the internet while interested fans watch, comment and even bet on outcomes.  The more popular e-sports today are combat games involving a multiplayer online battle arena (MOBA) with first-person shooters (FPS) and include such games as Fortnite, Overwatch, and Starcraft, among others.[1]

More recently, leading teams of gamers compete head-to-head in online tournaments with thousands, even millions of viewers tune in to watch.  The technology consulting firm Activate estimates that more than 250 million people watch e-sports and that by 2020, more than 70 million will watch a single e-sports final, which is higher than the viewership for the finals of U.S. professional baseball, soccer and hockey.[2]  With this new social phenomenon, video gaming has now become a spectator sport.[3]  The rise of e-sports has created a new field of law in which contract, privacy and intellectual property issues intersect in a unique entertainment context.

To start, game play and game content are typically intellectual property that belongs to the game developer, such as Blizzard Entertainment for Overwatch and Epic Games for Fortnite.[4]  In other words, while an individual ordinarily owns his or her own name or likeness as a fundamental right of privacy, gamers are generally required to license away their intellectual property rights when they agree to the terms of use in the game.[5]  Consequently, players who stream their game play publicly via social media such as Twitch or YouTube require permission or a license from the developer.[6]  Likewise, gamers seeking to play in professional tournaments and tournament organizers must also obtain a license from the developers in order to use game content in tournaments.  Many tournaments provide live broadcasts of the competition and prize money to competitors.  Recently, competitions similar to U.S. professional sports have emerged, with salaried players and regular season and playoff play.[7]  In any event, such licenses need to be carefully drafted to clarify who owns what, the players’ rights to use their own name, voice, and likeness, and under what conditions, territorial and usage restrictions, compensation, duration, and other terms.

Some exceptional gamers earn money from paid channel subscriptions and viewer donations.  Tyler “Ninja” Blevins reportedly earns over $500,000 per month playing Fortnite in donations from his five million YouTube and Amazon Prime subscribers, who are allowed to donate to his Twitch channel.[8]

Most professional gamers, however, typically turn to endorsement contracts to make money, which permit sponsors or partners to use the player’s image, voice, name, likeness and gamer handle or nickname in connection with the company’s product or service.  Such endorsement deals typically provide a guaranteed level of monthly income to the player but sometimes contain termination provisions or other restrictions if the gamer’s performance metrics or viewership drops below specified levels.[9]  Many endorsement contracts also require players and teams to create new branded content designed to highlight the brand or partner.  Such content can range from Twitch feeds, to written or mixed media posts to Instagram or Twitter, to short-form video content for Snapchat or YouTube.[10]  In any event, endorsement or partnership contracts also need to be negotiated and drafted carefully to clarify who owns what and for how long, third party rights if any, the terms and conditions of any license, and other terms and restrictions.

As in traditional sports, e-sports are also vulnerable to gambling and rigging problems.  In June, 2013, a Russian e-sports player nicknamed “Solo” was banned for life by StarLadder, an online tournament hosting company, for betting against his own team for $322.[11]  Solo never received the money and the ban was later reduced to one year.  Since then, however, e-sports commentators and viewers frequently use the term “322” to mock particularly bad plays, suggesting that the player in question is attempting to lose or “throw” the game on purpose.[12]

E-sports now also has virtual currency akin to Bitcoin.  In October 2016, Amazon launched its own in-game digital currency called Stream+ for Twitch that integrates directly with the Twitch platform.[13]  The currency functions as a “loyalty points system” in which players can earn points by watching streams that can later be spent on polls and wagering.[14]

E-sports may or may not be as interesting to watch as professional basketball.  But as an exponentially growing online platform, e-sports have created a new field of law that promises to keep a new generation of lawyers busy.

[1] https://en.wikipedia.org/wiki/Esports
[2] https://onlinebusiness.syr.edu/blog/esports-to-compete-with-traditional-sports/
[3] https://onlinellm.usc.edu/blog/esports-law-growth/
[4] https://onlinellm.usc.edu/blog/esports-law-growth/
[5] https://us.blizzard.en-us/company/legal/wow_eula.html/
[6] https://onlinellm.usc.edu/blog/esports-law-growth/
[7] https://en.wikipedia.org/wiki/Esports
[8] https://www.cnbc.com/2018/03/19/tyler-ninja-blevins-explains-how-he-makes-more-than-500000-a-month-playing-video-game-fortnite.html
[9] https://cdas.com/esports-teams-players-endorsement-deals/
[10] https://cdas.com/esports-teams-players-endorsement-deals/
[11] https://www.criticalhit.net/gaming/dota-2-team-banned-after-allegations-of-match-fixing-rox-kis-claims-theyre-innocent/
[12] https://www.reddit.com/r/OutOfTheLoop/comments/36zzmh/what_does_322_in_esports_mean/
[13] https://www.youtube.com/watch?v=LDokh8j8cJY
[14] https://www.lawyersrock.com/esports-competitions-law/