Unless you were an avid fan of marble racing or Belarusian hockey for whatever reason, the average sports fan struggled to find something to watch on television at the initial stages of the pandemic. With spectator sports like the Olympics, Premier League, IPL, NBA, Formula One, Wimbledon and the PGA Tour just to name a few either initially cancelled or postponed indefinitely, fans and organisers were in for a world of disappointment (and mounting losses).

As the quarantine dragged on however, one form of sporting event continued to thrive and grow in the age of social distancing – esports or competitive video gaming. An activity that a few years ago would have been regarded as a glorified waste of time is now an event where the average prize money in a DOTA 2 game is about a hundred and ten thousand dollars and the winner stands to take home six million dollars. High pay outs like this, in addition to the fact that these are skills that you can very possibly develop sitting on your chair is just one of the many reasons why esports has and is now rapidly capturing the minds of millions of fans across the world.

This article seeks to explore and chart how esports as a genre exploded post global lockdowns and then attempts to highlight contemporary legal issues that esports stakeholders face. By using Formula One as a case study, the author aims to show how esports is here to stay for the years to come.

COVID and esports

“How is playing a video game a job?”

“Who would pay to watch someone play a game?”

These are just some of the many questions that sceptics threw when competitive gaming leagues were beginning to gain momentum in their early days but in these last five years or so, esports teams, tournaments and players have had the ability to break into mainstream consciousness at unimaginable levels. As a result, brands and sponsors are now looking at esports the same way they are currently looking at traditional sports – a brilliant opportunity to engage with a younger demographic of consumers at grassroot levels. To give you an idea of the scale of corporate engagement, Nike, Audi and Kia Motors are just some of the many corporate partnerships with esports teams competing in the then-scheduled 2020 League of Legends World Championship, with Louis Vuitton as one of its key partners.

Wild isn’t it?

Now popular culture would like us to believe that the phenomenon of esports is a recent creation, however that is far from the truth. Since 2016, there has been a significant rise in viewers and between 2016 and 2017, the total audience was marked at 335 million and by 2018, that number rose to 380 million viewers with 6.6 billion hours of esports video watched – a sharp increase from the 1.3 billion hours in 2012 and by 2019, 454 million viewers were tuning in to esports content online.

The popularity of the genre caught global attention in 2019 when the League of Legends World Championship finals garnered almost 100 million unique viewers as compared to the American Super Bowl earlier that year which recorded just over 98 million viewers. Just to put that into perspective, the Super Bowl is understood to be one of the most watched annual sporting events in the world where this championship game is broadcast in over 130 countries in more than 30 languages and League of Legends beat that.

Esports however wasn’t always an indoor affair, with rising popularity, big and well-funded leagues would host their competitions often in front of sell-out crowds at massive stadiums like the Madison Square Garden for instance which hosted the 2016 League of Legends World Championships with more than 15,000 fans in attendance on both nights of the championship. The pandemic however changed that. But that did not stop tournament organisers from keeping the show running. One of esports’ biggest USP is its ability to go remote when things went sideways because after all there are only so many replays and highlights that sports fans can watch on YouTube before they thirst for some old fashioned live competition, a gap that esports was able to fill quickly enabling traditional sports fans to cross over into the genre pretty easily and this ability to be able to function and engage with the public amid a massive absence of conventional sporting leagues is a marketing opportunity handed by God himself!

Then there is the fact that esports is a much more inclusive platform as compared to how traditional sports are played. Individuals from all age groups and social backgrounds have the ability of trying their hand at making it big in esports leagues by playing on the same teams and with enough practice can play in the championships for record prizes, a luxury that traditional sports does not offer unless of course one possesses such exceptional talent.

The numbers speak for themselves: According to studies conducted by Streamlabs and Stream Hatcher, in the first quarter of 2020, Twitch reached all-time highs for hours watched, hours streamed and average concurrent viewership. Twitter reported a 71% increase in conversation volume and a 38% increase in unique authors in gaming content in the second half of March. In addition, Steam recorded 20 million players online at the same time on March 15th for the first time ever. These are encouraging figures which point to a very robust future for esports across the world.

Legal Challenges in esports

While things might seem pretty straightforward on the face of it, esports just like any other industry has its share of legal challenges that its stakeholders must account for while entering into agreements, from game developers creating intellectual property to sponsors and investors pushing money into the sport, legal implications are ever existent and following are some of the many key issues that are to be addressed –

Intellectual Property Concerns

Stakeholders involved in esports related commerce have been confronted with unique issues when it comes to intellectual property. For instance, when we come to copyright law, the position of law on a copyright that is the result of a player playing a particular esport is still vague. By playing said game, does the performance of the player constitute a copyright? Or does the player’s play, which generates code, constitute the creation of original content that can avail copyright protection?

Another pressing question that comes to light would be the way game developers choose to assert their copyright. While it is common knowledge that players stream their gameplay live to millions of spectators on online platforms such as Twitch and Facebook Gaming for instance, will developers look to seek higher promotion over copyright enforcement? Who then can claim ownership of rights in an esports tournament broadcast, keeping in mind the various (and possibly conflicting) contributions made by developers, organisers, players, broadcasters and commentators?

In competitive markets such as this, developers stand to lose big if their products are not adequately protected and to address this, some publishers such as PUBG and Riot Games, publisher of League of Legends host their own tournaments and have gone so far as to bringing broadcasting of the tournaments in-house, all part of a process to maintain control over the underlying intellectual property rights over the game and ensuring that developers continue to hold absolute control over the game’s use.

Contractual Obligations

As it is in any other traditional sporting venture, contracts are entered into by all stakeholders for the purpose of protection of their rights and listing out their obligations towards one another. However, as teams hire more players to enter the arena, they might just be submitting themselves – more so often unknowingly into a sea of obligations that can effectively bind the player into an oppressive agreement.

The recent lawsuit filed in California by Turner Tenny  (AKA “Tfue”), who is one of the world’s foremost names in competitive Fortnite, against his esports team, FaZe Clan where he sought to exit his allegedly oppressive three year contract with the team which denied him of multiple business opportunities, in addition to the team failing to pay up on his share of team sponsorship revenue. The contract also barred him from engaging in personal branding opportunities where other professional gamers would engage and connect with fans through content creation on streaming websites such as Twitch and Youtube. The lawsuit brought to light certain key issues that are to be deliberated upon in team-player contracts such as whether a team should engage its players as independent contractors or as employees as such misclassification can lead to the levy of financial penalties owing to tax considerations. Furthermore, a vast number of esports players engaged with teams are under the age of 18, thereby bringing in concerns of unequal bargaining positions between players and team owners where players may be tricked into accepting obligations which may prove to be detrimental to the player’s interests.

Gambling

Similar to betting that takes place in traditional sports, various third party websites can offer its users with the opportunity to place bets on esports in a variety of manners, ranging from individual player performance to team performance in competition levels to the occurrence of certain events during gameplay. While betting on such outcomes is legal, multiple concerns have been raised over the larger ramification that betting has on the integrity of esports. This opens avenues for cheating such as reports of players using concentration-enhancing stimulants such as Ritalin and Adderall to gain that extra edge

Not to mention the rising cases of edoping, where players manipulate with the software and/or hardware to give themselves an advantage over their opponents. Owing to the lucrative returns that gambling offers, players may be tempted to go so far as to sabotage the results of a game in exchange for such gains, all of which are antithetical to the principles of integrity and fair play. While the above listed set of issues are not exhaustive, it just goes to show just how unique and complex legal conundrums in esports can get, owing to this interesting intersection of so many different fields of law, esports law is still a developing field and it is expected that with time and increased momentum, courts will be able to pronounce reasoned judgments and practitioners will be in well suited positions to offer sound legal advice to their clients. 

Formula One – A Case Study

The Formula One World Championship (referred in popular folklore as F1) is currently the highest class of single-seater automobile racing sanctioned by the Fédération Internationale de l’Automobile or the FIA has been regarded as one of the first traditional sports to have successfully transitioned onto a fully virtual platform to continue to provide its fans an unparalleled racing experience. The story behind F1’s success starts back in 2017 when it launched its first F1 Esports Series which as initially pegged as a marketing move to push the official F1 Game developed by Codemasters which was seen as an opportunity to increase engagement levels with younger audiences, which is a demographic that the sport recently revealed has been struggling with  and since then things have looked very promising for the sport. Since 2017, F1 has run three ‘Esports Pro Series’ with the 2019 series boasting of a $500,000 prize pool and the 2020 series announcing a staggering $750,000 prize pool . The 2019 series drew an audience of 5.8 million viewers which was a 76% improvement from the previous year, and this was encouraging news for the sport because close to 79% of these viewers were below the age of 34.

A huge part of the appeal lay with the fact that a fan could essentially buy the game for their PlayStation or Xbox or their PC and could try their hand at making it all the way to the finals. This ease of accessibility meant that 109,000 players took part in the qualifying rounds in 2019 post which the fastest drivers in qualifying make it to a Pro Draft where official Formula One teams select drivers to represent their teams in the Pro Series Championships, all of which make for a very enticing opportunity for fans to try their hands on the sport. Fast forward to 2020, with the pandemic taking the world by storm, F1 was forced to cancel its pre-decided race calendar leaving a void that was filled pretty soon with live virtual versions which included eight Virtual Grands Prix, Pro Exhibition races and associated events. F1 marketed the event brilliantly, which saw participation from grid drivers like George Russell, Charles Leclerc, Alex Albon and Lando Norris and also saw professional footballers like Sergio Aguero, Thibaut Courtois, Gianluigi Donnarumma and cricketers Ben Stokes and Stuart Broad racing alongside professional esports drivers all of which only pushed the popularity of events. The numbers speak for themselves – The Virtual GP races reached 21.8 million views on digital platforms alone and TV viewership estimates suggest that the GP’s accumulated a further 5 million views through broadcast partners in over 100 countries – regarded as one of the most popular events on online streaming platforms.

In addition to this, the series also enabled grid drivers to bolster their public image and connect with their fanbase at more intimate levels – with drivers like Lando Norris, Alex Albon, Charles Leclerc and George Russell regularly interacting with their fans on their personal Twitch accounts, bringing in an additional 2.7 million views, according to TwitchTracker. The popularity of these Virtual Grands Prix showed itself in the numbers when the F1 Esports Pro Series saw over 237,000 racers having attempted to qualify for the 2020 championship, the highest ever figures recorded. With the pro draft complete and the Pro Series scheduled from October to December, things are looking up for the Series and its immediate future. F1 has received considerable praise for having the forethought of moving into esports as early as it did. Gareth Capon, CEO at Grabyo, a video technology platform said that “It was a long-term, future-proof decision for Formula One to diversify into esports when it did; By being one of the first to build an esports presence, Formula One had the foresight to use that time to learn about the industry, embed itself in the ecosystem and optimise its offering”

“With Formula one esports growing success, it’s expected that sim-racing can go even further into the mainstream with a mix of real and virtual driers both on virtual and real-life circuits. This bridge is and will be the continued success of F1 in esports.”

Guillaume Vergnas, partnerships development and esports manager at Renault Sport Racing

The Way Forward  

The pandemic has more or less led to the normalisation of esports in mainstream sports culture, with analysts having described esports to have been “popularised and legitimized in an unpredictable and profound way” thanks to the adoption of esports by broadcasters, leagues and athletes seeking to engage with their fanbases. Mike Sepso, co-founder and CEO of Vindex, an esports infrastructure platform opined that, “Among younger demographic groups, a prolonged shutdown for traditional sports leagues may drive more fans to esports on a regular basis – which globally would represent tens of millions of new consumers for the industry”

Market research firm Newzoo in its sixth annual Global Esports Market Report estimates that worldwide revenues generated by esports will grow by $150 million, reaching a record of approximately $1.1 billion by the end of 2020 and projections showing that these figures exceed $1.6 billion by 2021. Newzoo adds that sponsorships and media rights revenues are together responsible for three-fourths of the total figure amounting to $822.4 and this number is expected to increase to $1.2 billion by 2023.

Newzoo’s report highlights that the total esports audience will grow to 495 million people by the end of 2020, with 222.9 million of them esports enthusiasts. The report then predicts that by 2021, the annual growth rate in viewership will be approximately 14.4% – to put that into figures, the projections suggest that the number of casual viewers will grow to 307 million and 250 million esports enthusiasts, making it a grand total audience of 557 million viewers and when you compare that to figures from preceding years, there’s a steady yet rapid growth in these numbers. A silver lining to be highlighted in these figures would be the rise in casual viewers, which have the potential to turn over into dedicated fans of esports.

These positive numbers are a reflection of improving access to the internet across the globe, games that are now more accessible and affordable than ever and the growing popularity of video-streaming platforms such as Twitch and YouTube, not to forget mentioning the growing number of content creators that populate these platforms will only streamline and accentuate growth for the industry in the long term. Another positive sign to acknowledge towards the normalisation of esports in the mainstream is that over 170 colleges across the United States now have varsity esports programs and offer around $16 million in scholarships, as reported by the National Association of Collegiate Esports. This is an excellent avenue for budding pro gamers to hone on their skills and join the big leagues, just as you would in any other traditional sport. 

It is also important to acknowledge the role mobile gaming has in the esports industry, with analysts observing that the future of esports is likely to be powered by mobile, thereby further reducing barriers to entry in terms of access to compatible hardware and allow for even more gamers and fans to make their mark in the sport.

It isn’t just Formula One who’re making inroads in esports, NASCAR too has now embraced an esports adaptation of itself, drawing more than 1.3 million TV viewers to its inaugural race broadcast, according to Nielsen, making it the most watched esports TV show to date.

“There could be a world whereby the Esports league runs parallel to the core product with 21 F1 races running side by side with 21 esports races with teams competing in each.” (This is something I can get behind alright!)

Julian Tan, F1’s head of Digital Growth and Esports in conversation with Livewire Sport.

With discussions underway and a very real possibility of esports joining the Olympics for 2024 or 2028, the future for the sport certainly looks absolutely promising and with traditional sporting events slowly coming back to life with empty stadiums and reduced event frequency, esports is currently running head to head (or even moving ahead of) traditional sports in terms of hours viewed and long term commitments to the sport, both skill-wise and financially too. As Darren Cox, the CEO of Torque Esports says, “The genie’s out of the bottle and he’s not going back in”

Abhay Shetty

Abhay Shetty is a penultimate year law student at Jindal Global Law School. When he isn’t busy brushing up on his F1 trivia, you can find him holed up in his room trying to set the next fastest lap on his F1 simulator. He also studies law sometimes.

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References

Picture credit: Jakob Wells https://www.flickr.com/photos/96879998@N00/14516251507

Licence: Creative Commons Attribution 4.0 International

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