For those who aren’t aware (and if you’re reading this you are likely already well aware!), esports (the shortened version of the term “electronic sports”) is the competitive playing of multiplayer video games at organised events or tournaments.

Esports has emerged as one of the fastest growing industries in recent years, attracting millions of viewers from around the world. To put the sheer enormity of the industry into perspective, esports as a sector was estimated to have a fanbase of around 532 million in 2022, with revenues reaching nearly $1.38 billion from sponsorships at that time.

The industry is made up of various categories of participants, four of the most prominent being:

• the IP holders in respect of the games being played;
• the esports organisations/teams themselves;
• the organisations that host the tournaments in which those organisations/teams compete; and
• the social media ambassadors/influencers/content creators that promote the organisations.

Esports Organisations in the UK

In the UK, we have organisations like EXCEL, FNATIC, Tundra and Guild leading the way by fielding teams/players in tournaments held on titles such as League of Legends, Counter-Strike, Dota 2, Rocket League, FIFA, Valorant and Fortnite (to name just a few).

The majority of revenue generated by esports organisations can be attributed to sponsorship. If you take a look at the jersey of any major esports team you will likely see the logos of companies that are household names to even non esports fans. The FNATIC jersey has the BMW and ASOS logos front and centre. EXCEL has both the EE and JD Sports logos emblazoned across the front and Guild (co-owned by David Beckham I would add) has Sky Broadband as its headline sponsor. The biggest sponsorship deals can run into six, seven or even eight figures, which really highlights how important sponsorship deals are to esports organisations and how lucrative the deals can be.

Social Media Ambassadors/Influencers/Content Creators

Growing an esports brand isn’t just about how successful their teams are in tournaments, or how much money is generated from winnings or sponsorships. As with more traditional sports like football, esports are very much “for the fans” and developing fan engagement levels is vital to running a successful esports organisation.

Social media ambassadors and content creators are a vital part of the esports infrastructure, and they play a key role in developing an esports organisation’s brand and image. For esports organisations, partnering with popular Youtubers, Twitch streamers and Twitter/TikTok personalities can exponentially grow their audience and as a result, increase their commercial success.

Tournaments & Hosts

UK esports fans have had their fair share of major esports tournaments in recent times. The League of Legends Mid-Season Invitational, one of the most highly anticipated events in the esports calendar, had its 2023 edition held at the Copper Box Arena in London. The 7500-capacity venue has also hosted other esports events in the past, including the recent Apex Legends (Split 1 and 2) Global Series Playoffs in February and July 2023 respectively. The venue was also the home of Call of Duty League competitors the London Royal Ravens until they recently became the Carolina Royal Ravens (a move which will see them relocate to the United States).

A lot of the time, those who host esports tournaments are the owners of the intellectual property rights in the game that is being played (that being the developers/publishers of the game). Occasionally however, the rights holders will team up with third parties by way of a licence (an example being ESL, who for many years have run the Intel Extreme Masters tournaments in CSGO via a licence from rights holder Valve).

That licence turned out to be quite lucrative back in 2022, when ESL was purchased by Savvy Gaming for a total of $1 billion.

The future of esports is looking bright, particularly as it continues to catch the eye of investors globally. Venture capital firm Hiro Capital has previously reported that it already has around 26-28 investments in the esports sector globally, with a second fund of €350 million earmarked for future investments.

How We Can Help

Ensuring that you understand your obligations under any contract you are signing is vital. Additionally, you will want peace of mind that you are signing a contract which properly reflects your intentions and protects your interests. This is important whether you’re dealing with sponsorships or investments or when you’re looking to engage with content creators/brand ambassadors for the purposes of marketing and growing your brand.

An example of some provisions that are often overlooked include in commercial agreements of this nature include:

• Morality Clauses and Reverse Morality Clauses. These types of clauses deal with what happens if either party to a contract engages in conduct that is either disparaging of the other party or that offends public “decency” generally. You may be an esports organisation who engages an influencer, who later makes derogatory remarks about the company (or others) on Twitch during a stream. Alternatively, you may be an influencer who is associated with an organisation that does something that outrages the wider community. Of course, the “innocent” party in such situations will want to have appropriate provisions in place that protect their interests, and this may include (in some scenarios) bringing the commercial relationship to an abrupt end. Morality clauses enable this outcome.

• Rights of Negotiation and Reductions/Refunds. These types of clauses look to address what happens if there is a change to the value of sponsor’s rights under a Sponsorship Agreement. As examples, it could be where an esports team falls out of the top “bracket” of teams, is removed from a tournament or league, or loses 3 of its key (and most popular) players. The value of the sponsorship is likely to reduce in the eyes of the sponsor and they may want assurances that in the event of a change to the perceived value, that they are entitled to negotiate a reduction of the fees payable under the Agreement. Occasionally, we will see these types of clauses refer to “expert determination” where an independent person is brought in to determine the perceived value.

We at Eaton Smith are specialists in the video game sector, and we can assist you by drafting/advising on both investment and more general commercial contracts (such as sponsorships, influencer marketing agreements, tournament rules/licences and merchandising agreements).

If you’re an esports organisation, influencer/content creator, potential tournament host, or even a company outside of the esports sphere wanting to get more involved in the esports sector (perhaps by way of sponsorship), do get in touch with me (JohnCotterill@eatonsmith.co.uk) so we can discuss how I can be of assistance.

This is not legal advice and the information provided is not tailored for you; it is intended to provide information of general interest about general legal issues. You should seek specific legal advice before acting in reliance on any of the information provided.