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The rise of esports

The rise of esports

By Mark Lebbon

Technology 

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Esports continues to grow. Hardly a week goes by without a new development – from events, establishment of teams, lucrative sponsorships, and even suggestions that esports become an Olympic event.

Snapshot

  • Esports, or competitive video gaming, has enjoyed a rapid rise in popularity in recent years thanks largely to advances in internet technology.
  • The operation, governance and commercialisation of esports raises important legal issues such as intellectual property ownership, governance, corruption, integrity, sponsorship and player welfare.
  • As an emerging industry, esports is in a somewhat fragmented state of play which means industry participants need to ensure they appropriately regulate their activities and protect their legal and commercial interests.

 

What is esports?

“Esports” is an umbrella term given to competitive video gaming in an organised format. In essence, esports is video gaming where players compete, either individually or in teams, against other players in a specific video game. Competitive computer gaming dates back to the early 1970s,1 however, it is only more recently that esports has emerged into mainstream consciousness.

Just as the term “sports” encompasses numerous games or competitions, esports should be seen as a collective of different individual video games rather than a single identifiable competition. These games cover different genres such as Online Battle Area, Real-Time Strategy, First Person Shooters, Fighting, and Sports Simulation. While sports simulation games such as FIFA and NBA2k are popular, it is other video games such as League of Legends, StarCraft II, and Counter-Strike: Global Offensive (CS:GO) which are among the most popular.2

The growing popularity of esports is due largely to advances in internet technology. Faster bandwidth has not only enabled more complex and strategic games to evolve but it has, through digital streaming platforms such as Twitch, allowed fans to observe and engage with their favourite esports.

The participation and viewing levels of esports would be the envy of many traditional sports.3 In 2017 the total viewing audience for esports was expected to be close to 400 million.4 The large participation rates and fan base create many commercial opportunities. In 2017 revenues from esports were estimated to reach US$696 million, with that figure expected to double by 2020.5

 

Legal issues

The operation, governance and commercialisation of esports raises some important legal concepts and issues. Some will be familiar to traditional sports, while others are unique, reflecting the rapid rate of development of the esports industry and the ever-changing technological environment and unique characteristics of esports games. Here is a summary of some of the more important legal issues which arise in the esports industry.

Intellectual property

Intellectual property (IP) rights can subsist in the underlying video game of an esport. More specifically, under Australian copyright laws computer programs are considered to be a “literary work” and are afforded copyright protection.6 The owners, or authors, of the IP rights to the individual games are usually the game developers and publishers. These people can control how the rights are exploited, giving them a significant level of control. This level of IP protection does not exist with traditional sports, where the IP to the sporting activity itself is not usually protected.7

Some IP owners, such as Valve Corporation (Valve) (the publisher of CS:GO and DOTA 2), allow third parties to develop an esport around their game. However others, such as Riot Games, Inc (Riot), (the publisher of League of Legends), seek to control every aspect of the esport, not only running leagues and events but, in some cases, employing the players and teams. The different level of control exerted by developers may reflect their differing objectives – some see esports as a marketing tool to pursue further game sales and in-game purchases whereas others see it as an opportunity for an alternative and lucrative revenue stream.

Given the ownership and value of IP rights in the individual esports, the licensing of these rights is important. Disputes have arisen around ownership and exploitation of IP rights in esports and the level of registrable protection afforded to these rights. For example, Valve sued its publisher for breach of contract and copyright infringement, alleging that the publisher had distributed Valve’s games outside the scope of the licence granted.8 Further, Blizzard Entertainment had a dispute with Korean cable television stations regarding the unauthorised broadcast of its StarCraft game.9

In respect of sports simulation games, there may be a need for the game developer to enter into licensing agreements with the relevant sport’s governing body or a players association in order to obtain the right to use logos and athlete image rights as part of the video game.

Governance

Governance of any sport or competition is important. Implementation and enforcement of rules, competitive integrity and disciplinary procedures are hallmarks of successful sports.

Governance of esports is still in its infancy. Just as there is no single governing body for all sports, there is no governing body for esports as a whole. The rules of competitions, leagues and events vary depending on the nature of the relevant video game.

To a large extent, how an individual esport is governed depends on how the IP owners decide to exploit and allow others to exploit the rights in their game. As noted above, some developers take a relatively hands off approach to the organisation and governance of esports whereas others seek to closely control the game and, in effect, become the governing body.

Control over an esport may be more difficult to achieve when the IP owner for a game licenses the rights to hold leagues and events to different people who seek to implement their own sets of rules. For example, a player who is banned from the competitions of one event organiser may still be able to compete in events of another. This type of fractured governance model can make it difficult to deal with disciplinary matters.

The governance of some esports activities has been criticised for taking an autocratic approach to decision making which lacks transparency and procedural fairness. For example, Riot was criticised for the manner in which it banned the Renegades team from the League of Legends Championship Series (LCS) in 2016. Riot was said to have effectively sat as investigator, prosecutor and judge without any recourse for appeal by the owners of the Renegades team.10 This raises questions about whether independent third parties should have a role in leagues and competitions at a competition regulatory and disciplinary level.

There have been attempts to create international regulatory bodies. In 2008, the International esports Federation (IeSF) was formed by nine national esport member associations to promote esports as a sport and to establish standards for certification, referees, competition standards and the management of players.11 More recently, the ESL (formerly the Electronic Sports League), which organises esports competitions around the world, helped establish the World Esports Association (WESA) and also the Esports Integrity Coalition (ESIC). WESA was formed to “support and amplify sustainable growth of esports, based on the shared values of fairness, transparency, and integrity and sharing that growth between the players, teams and leagues”.12 ESIC was established to deal with integrity issues of common interest among its key stakeholders, in particular the threat from match manipulation, betting fraud and other integrity issues.13

However, given each video game is in and of itself a separate esport, these governing bodies have only limited reach. The extent to which these organisations will play a role remains to be seen and will depend on the level of cooperation and engagement from key stakeholders, notably the IP owners and event organisers.

Match-fixing and betting

Betting is big business in esports and, for some bookmakers, is more lucrative than more established sports such as golf and rugby.14 While betting can be a source of fan engagement, it also raises integrity issues.

Given the number of young people who compete and watch esports, there are concerns around the normalisation of gambling and the role video games may play in conditioning young people to become more frequent gamblers. In particular, “skins betting”, where certain video games allow players to make in-game purchases for virtual items such as skins, or digital designs, introduces young persons to softer forms of betting and gambling. Secondary markets have arisen in the trading of skins with a real market value attributed to the skins which in turn allows them to be used as currency to bet on esports.

Betting also raises serious integrity issues by tempting players to fix matches and competitions. This can be a particular problem for players who are not earning significant money from their esports activities. There have been numerous match fixing scandals involving esports, such as Alex Berezin who was found to be betting against his own team and losing on purpose when playing DOTA 2.15 In 2015 Valve banned seven players who were linked to fixing CS:GO games.16 This match fixing involved not only bets placed on matches but also the exchange of several high value skins and other in-game items, highlighting the additional risk that in-game economies pose to the integrity of esports.

Software cheats, applications and server attacks

The use of software cheats, applications and server attacks are unique integrity issues for esports. These cheats generally work by allowing:

  • the computer to automate actions (such as automatic aiming or triggering of actions)
  • a player to see through objects (such as walls, structures and storage containers
  • a player to acquire additional powers (such as the ability to fly, gain strength, or immunity to weaknesses).

Most software cheats are external tools or applications. These cheats have become more advanced, faster and accurate as technology has developed. One of the difficulties with trying to police this form of cheating is that it can often go undetected because it is inherently hard to identify without close analysis of gameplay or special software. ESIC banned a CS:GO competitor for two years for using a cheat which had gone undetected by Valve’s anti-cheat software (VAC).17

Anti-cheat software such as VAC, which seeks to identify the source code of cheat software, is one way to address this form of cheating. Technology is also being developed which directly tracks the movements of a player’s keyboard and mouse to ensure these movements reflect what actually plays out on the screen. Some competition organisers are taking more extreme measures, such as requiring professional players to maintain unopened equipment to ensure cheat software cannot be installed prior to the commencement of the competition.

Doping

Just as drugs can assist athletes to build and improve their physical performance, they can also assist the minds of professional gamers to perform at a higher and more efficient level. Drugs such as Adderall, Ritalin and Selegiline have been used to assist players by increasing concentration, calming nerves, reducing fatigue and boosting reaction times.

The use of drugs in esports had, until recently, been largely ignored. Very little consideration had been given to incidence of drug use and the potential damage it could do to esports. However, esports leagues and competition organisers are now starting to take a more proactive approach. The IeSF is an official signatory of the World Anti-Doping Agency18 and work continues in identifying drugs which may be considered performance enhancing, developing rules and policies to make the use of those drugs illegal, and putting procedures in place for testing.

Sponsorship and merchandising

Sponsorship of esports players, teams, leagues, competitions and events presents a good opportunity for organisations wishing to associate their brands with the industry. The demographic which esports attracts, largely males aged between 18 and 35 with relatively high disposable income, is a key market for many of these sponsors.19

In crafting sponsorship arrangements, both sponsors and sponsored parties need to consider similar matters to those that arise with traditional sponsorships, such as clearly identifying the benefits and deliverables and ensuring that the interests of the parties are adequately protected in the instance of damage to reputation.

The large fan base for esports also lends itself to merchandising opportunities. These opportunities arise at different levels. The IP owners in the game will generally own not only the IP associated with the game itself, but also the IP in any fictional characters and other merchandisable aspects of the games. Teams also have the opportunity to merchandise their brands and players, while players may have the opportunity to merchandise their image and likeness (if they have not already contractually licensed away these rights).

Player welfare

The esports labour market is relatively disorganised and unregulated. Generally there are no fixed working conditions and no standard playing contracts. If they exist at all, player agreements can be basic, and players have sought to move to other teams notwithstanding they may have an existing contract in place. Participation of teams in leagues and events is not assured, with teams coming and going depending on their performance, which can quickly leave even the best players without exposure to top level competition. For esports which are controlled by the game developer, players may also have little bargaining power. As a result, players can often make the majority of their esports income through sponsorships, endorsements and deals to stream their games online, rather than through their playing contracts. This is changing, with Riot now mandating a permanent roster of teams, minimum player salaries of $75,000 and a guaranteed share of league revenue for the LCS.20

Players also often have to deal with online abuse via chat functions on streaming platforms, which allow fans to publish comments in real time to the rest of the participants and viewers. Awareness of, and attention to, the welfare of participants will become increasingly important. In traditional sports welfare issues have been addressed by player unions which seek to advocate collectively on behalf of players. Player associations are now starting to be established in esports, with Riot providing players with the resources to set up a Players’ Association for the LCS.21

Conclusion

The online technology used for esports enables games, players, teams, leagues and events to gain incredible levels of popularity, supported by online viewing, social media and other forms of interaction. However, there is a somewhat fragmented state of play in the esports industry where game owners, streaming services, sponsors, players, team owners and managers and event organisers all contribute to, and in some instances compete for, influence over rights, regulation and commercial opportunities.

The nature of esports creates operational, commercial and legal challenges, and participants in this growing industry need to ensure they appropriately regulate their activities and protect their legal and commercial interests so that they can best exploit any opportunities that may arise.

Mark Lebbon is a senior associate in Hall & Wilcox’s corporate and commercial practice group, with a particular focus on the sports and media industries.

 

1. Ronald Li, Good Luck Have Fun: The Rise of eSports, 1st edn, 2016, p1.

2. Isaac Rabicoff, Kenneth Matuszewski, “The rise of esports creates a complicated relationship with IP”, IP Watchdog, 25 March 2017, www.ipwatchdog.com/2017/03/25/rise-esports-complicated-ip/id=79418/.

3. In 2016, 36 million unique viewers watched the League of Legends world finals which was more than the viewing audience for the NBA finals between the Cleveland Cavaliers and Golden State Warriors: Alex Walker, “More People Watched League of Legends Than the NBA Finals”, Kotaku, 21 June 2016, www.kotaku.com.au/2016/06/more-people-watched-league-of-legends-than-the-nba-finals/.

4. Newzoo, Global esports Market Report, 14 February 2017, https://newzoo.com/insights/articles/esports-revenues-will-reach-696-million-in-2017/.

5. Note 4 above.

6. Copyright Act 1968, ss10 and 35.

7. Victoria Park Racing & Recreation Grounds Co Ltd v Taylor [1937] HCA 45.

8. Valve Corporation v Sierra Entertainment Inc., 431 F.Supp.2d 1091 (2004).

9. Kim Tong-hyung, “Blizzard vows to take MBC to court”, The Korea Times, 2 December 2010, www.koreatimes.co.kr/www/news/tech/2010/12/133_77381.html.

10. Jacob Wolf, “Renegades, Riot and the danger of absolute power”, ESPN, 27 July 2016 www.espn.com.au/esports/story/_/id/17132668/renegades-riot-danger-absolute-power.

11. The Australian member of the IeSF is the Australian esports Association Incorporated.

12. WESA, Home page, www.wesa.gg/.

13. Esports Integrity Coalition, About us, www.esportsintegrity.com/about-us/.

14. Note 1 above, p184.

15. Ben Kim, “DOTA 2 team banned for alleged match fixing”, PC Gamer, 17 June 2013, www.pcgamer.com/dota-2-team-banned-for-match-fixing/.

16. Ben Skipper, “Pro Counter-strike players banned by Valve following $10,000 match fixing investigation”, International Business Times, 27 January 2015, www.ibtimes.co.uk/pro-counter-strike-players-banned-by-valve-following-10000-match-fixing-investigation-1485323.

17. Rasmus Tillgaard, “ESIC bans cheating player for two years”, Esports Integrity Coalition, 16 May 2017, www.esportsintegrity.com/2017/05/16/esic-bans-cheating-player-for-two-years/.

18. WADA, Code Signatories, www.wada-ama.org/en/code-signatories.

19. John Paolo Bago, “Let’s talk about investing in esports (as explained by the world’s largest internet company)”, Esports by Inquirer.net, 31 March 2016, http://esports.inquirer.net/14522/lets-talk-about-investing-in-esports-as-explained-by-the-worlds-largest-internet-company.

20. David Lumb, “North American ‘League of Legends’ championship finalizes 10-team roster”, Engadget, 20 November 2017, www.engadget.com/2017/11/20/north-american-league-of-legends-championship-finalizes-10-tea/.

21. Kieran Darcy, “Riot’s players’ association lays groundwork for unionization”, ESPN, 16 June 2017, www.espn.com/esports/story/_/id/19617991/riot-players-association-lays-groundwork-unionization

 

 


Disclaimer: Views expressed by commentators are not necessarily endorsed by the Law Institute of Victoria Ltd (LIV). No responsibility is accepted by the LIV for the accuracy of information contained in the comments and the LIV expressly disclaims any liability for, with respect to or arising from any such views.

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