As we spend more and more time at home playing games, the thought may come to mind “Should I test my metal in an online tournament? Or maybe our friendly group tournament could be something bigger…”
Due to gaming in general becoming more mainstream and becoming more than just a hobby, as shown by the explosive growth of the eSports industry during the past years, the interest in forming leagues, tournaments and clubs keeps growing as well. It has been estimated that eSports have reached a total audience of over 400 million viewers and a revenue over 1 billion USD in 2019, which makes it a highly potential industry to start your own business. There are many ways to build a career in eSports, whether you want to become a professional gamer, setup your own team or get involved in the industry in some other way. When it comes to eSports leagues, most but not all leagues are run by game publishers. Starting your own independent eSports league is one way of getting involved in the industry.
When starting your own league, there are several things that you must take into account, such as determining your league format, the game(s) to base your league on and contractual matters. As with any business, in order to build a successful business, you need to make sure that you have a solid legal ground.
“It’s Dangerous to go alone! Take this!”
-Legend of Zelda
Often eSports leagues are built around specific games, such as Activision Blizzard’s Call of Duty and Overwatch or Riot Games’ League of Legends. Unlike traditional sports, in the eSports industry the game developers and publishers often own the underlying intellectual property that generally includes content, characters, and gameplay. Thus, eSports leagues and event organizers need to ensure that they avoid intellectual property infringements and obtain the necessary usage rights to make the games publicly available at the events or through other means, e.g. streaming.
Every game publisher has their own set of rules with regards to the licensing of their product, which you should assess carefully to avoid legal issues. The licenses set out the terms on which the games can be used, i.e. played and streamed. There are many game publishers that allow grass roots, not-for-profit and minimum profit level tournaments with an easily obtained community license, but if you are aiming to make profit, each publisher also has their own rules regarding the for-profit platform. Generally, permission is required to host for-profit tournaments, and it depends on the publisher, how the permission can be obtained. For example, EA requires filling out and submitting a specific permission request form.
Franchising and Licensing
While you must be careful with others’ intellectual property rights, it is also important to remember to protect your own brand. Registering your leagues most important trademarks is a good start. Many leagues have licensing programs for their trademarks, and some have taken on the structure of other professional sports leagues with centralized licensing.
Licensing can also apply to teams as well as players. Teams can act as a part of a franchise or independently, the latter meaning that they are not affiliated with leagues directly, but rather compete in various tournaments around the globe. As many teams and players have begun to register trademarks e.g. team names, nicknames, and logos, do remember to ask for permission to use for example a specific team’s logo for advertising purposes. Also, due to the popularity of streaming platforms such as Twitch, a large portion of the player licensing industry has focused on non-affiliated gamers who have built a huge following on social media and thus the brand of the gamer themselves is worthwhile protecting.
That being said, with regard to franchised leagues, such as the Overwatch League, these are generally established by game publishers and have followed the same franchising approach used in professional sports often seen in e.g. North America and thus this has allowed for the formation of centralized rules as well as oversight So when setting up your own league, it is good to keep in mind which approach you wish to take.
The applicable regulation depends on where your operations are based and who is the target audience for your league. There can be multiple jurisdictions that apply to different contracts or situations. For example, Finnish regulation applies to eSports events addressed to Finnish players or consumers. There may be major differences in national laws related to e.g. consumer protection or gambling. For example, criminal sanctions may apply in cases of breach of gambling laws. As is the case with games themselves, the eSports industry is born global. Organizations as well as professional players can also face multiple complex tax issues.
The rules of the legal game
When getting involved in the eSport business, you also need to be aware of the necessary contracts. Contracts in the eSports ecosystem may include multiple international jurisdictions, which means that you need to understand what risks you are taking. It is important to have a contract that minimizes unnecessary risks and has reasonable obligations. If you are unsure, ask for help. To set up your league and keep it running, you need to negotiate, draft and sign lots of agreements, from licensing the right to the games that will be played or the right to use a certain teams trademarks, to venue rental and third party service agreements. A good contract minimizes different interpretations and helps you to prepare for any future issues or risks.
In addition, the terms and conditions for your league need to be drafted so that you and the participants know the rules of the game. The terms should therefore be drafted carefully taking into account all possible scenarios, as it may not be possible, depending on the jurisdiction, to e.g. impose sanctions against players behaving unethically, if it is not set out in the terms.
Where’s the treasure?
Most of the revenue in eSports comes from sponsorship and advertising. However, you should be aware that consumer protection legislation may affect how the matches, tournaments and related products can be marketed and what kind of activity is considered inappropriate when it comes to marketing. For example, according to the Finnish consumer laws the consumers should be able to tell the difference between advertisements and other content of eSports tournaments.
Another main revenue stream in eSports is broadcasting licenses, which allow platforms like Twitch or YouTube to broadcast eSports content and gain more viewers. Remember to check the terms of the streaming platforms (as well as the publisher’s terms to make the game publicly available) before you press play.
This article should not be viewed as legal advice. If you are planning to set up your own eSports league, please do not hesitate to contact us for legal advice.
Don’t forget to have fun! Gaming is a safe and fun hobby that you can turn into a profitable business! What could be better?