by Giulio Coraggio and Vincenzo Giuffrè
The eSports industry is in a period of rapid growth, but the growth of a market often leads to legal issues and obstacles that need to be overcome in order to achieve its potentials.
There is at the moment a range of legal and business issues where eSports need a more comprehensive approach involving learnt lessons from the sports and the gambling sectors.
Below are our top 3 predictions on the legal issues that will affect the eSports industry in 2019.
Exploitation of broadcasting rights in eSports heads towards regulations
Copyright is aimed at protecting the economic interests of an author of an expressive work. In traditional professional sports leagues, teams in the majority of the cases hold and license their own intellectual property rights, while in eSports copyright in any given game is in the majority of the cases owned by the developer or publisher of that game.
The problem at stake for the tournament organizers in the eSports industry is that the broadcasting of an eSports event takes place predominantly online. While, game publishers own the copyright on the game, they often are not involved in the organization of tournaments. At the same time, tournament organisers will usually have obligations to protect their broadcasters and sponsors. This raises questions relating to rights, such as:
Can tournament organisers sell broadcasting rights to their tournament when they do not own the intellectual property in a game?
What is happening is that the eSports industry is moving towards self-regulation and relationships between video game producers and authors as well as tournament organizers and players are often regulated by contractual arrangements. For instance, in 2018, Activision Blizzard and Twitch completed a two-year, $ 90 million-minimum deal to stream both Season 1 and 2 of the Overwatch League on Twitch.
In absence of a different agreement between the parties, the question is whether there is a presumption of transfer of rights in favor of video game producers which would allow video game developers or publishers to enter into exclusive broadcasting agreements with tournament organisers thereby granting an exclusive licence to them to broadcast the tournament.
With the growth of eSports, we expect that regulators and courts will take a clearer position on the matter in 2019.
eSports disputes will increase
Other than IP infringements, gaming companies, video game publishers and tournament organisers are dealing with an increasing number of legal issues including
- e-doping which is essentially the practice to manipulate a software or a hardware in order to give an advantage over the opponent;
- video game boosters that are people who enhance other players’ accounts for a fee;
- the practice of hacking or alter game source code without permission; and
- match-fixing for which the challenge is to use tools developed to monitor sports betting with eSports betting.
Such actions might cause considerable damages to the gaming industry. Indeed, cheating negatively affects gaming developers, publishers and tournament organizers since it is an unfair exploitation that lowers the value of products in the sense of games, tournaments, sales and any activity around them. In this respect, Asian countries appear to be ahead on the enforcement of penalties against such misconducts with a Overwatch hacker that was punished in South Korea with one year of imprisonment and two years of probation.
It is likely that 2019 will see accurate lawsuit strategies by the gaming industry against sellers of programs that help players to cheat as well as players involved in e-doping, boosting, hacking and match-fixing and the amount of damage claims might be considerable since the value of the whole industry might be affected by such illegal actions.
Indeed, litigation sends a message to the legitimate-players community that the company takes such conduct seriously and will spend the time and resources to protect the integrity of its online experience.
Deeper focus of regulatory bodies over eSports
Whilst the percentage of eSports players compared to traditional gambling players is relatively small, it may increase in the future as eSports are becoming the preferred form of entertainment for video game players.
In this respect, gambling regulators have already been regulating betting on eSports quite carefully, requiring either an ad hoc license, as it occurs in countries like France, or making bets on eSports falling under sports betting regulations, as it occurs in Italy where the offering of bets on eSports with cash winnings requires the general remote gambling license for online eSports betting and the betting shop license for land-based sports betting. And an interesting market to watch is the US where, after the Supreme Court’s decision of May 2018 to strike down the Professional and Amateur Sports Protection Act (PASPA), which outlawed sports betting in most US states, each state must decide whether to allow eSports betting and establish its own regulatory framework.
There was a lower level of attention by regulators in relation to eSports tournaments with winnings in cash or in kind and eSports challenges where players just compete (often online) in the eSport to win a percentage of the total buy-ins, as it happens in a poker tournament.
There are countries like Italy that are providing more flexibility in relation to online eSports tournaments with prizes in kind, introducing exemptions to the strict prize promotion regulations in case of international competitions and already introduced softer regulations for online eSports tournaments with cash winnings.
The hope is that such opening towards lighter regulations for the eSports industry will be followed by other countries in 2019. The eSports market has massive potentials, but it does not have yet the size that is able to afford heavy regulations, such as those imposed on the gambling industry.
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