PLAY BY PLAY – AN INTRODUCTION TO ESPORTS, MONETISATION AND IP RIGHTS

JUNE 2020 PLAY BY PLAY – AN INTRODUCTION TO ESPORTS, MONETISATION AND IP RIGHTS The Coronavirus pandemic has brought traditional sports across the globe to a standstill. High profile international and domestic leagues and tournaments have been cancelled, suspended or postponed. A void has emerged in which worldwide interest in esports has intensified.

This article, which was written for, and first What is esports? published by, LawInSport (the original is There is still no single definition of available to view here), provides an esports. Esports is an umbrella term for introduction to esports, the key an industry covering hundreds of different stakeholders involved and some of the video-games. For the purposes of this challenges facing an industry which had article, we define esports as the playing an estimated global audience exceeding of competitive video-games by 440 million viewers in 2019 and is forecast professional gamers, in an organised to generate revenue between US $1.8 format (a tournament/league) and with a billion and US$3 billion by 2022. In specific goal (a title/prize money). particular, we look at the monetisation of esports, and how intellectual property (IP) Despite esports differing from “gaming”, rights (and the enforcement of such rights) conflating the two is a common will be crucial for the stakeholders involved misconception. Gaming is a far broader and will shape how the industry develops. term, encompassing the playing of video games, whether competitively or non- Esports has not been immune to the competitively, offline or online and consequences of the Coronavirus whether in single player or multiplayer pandemic. However, interest in esports mode. To draw an analogy with football, has increased as traditional sports have gaming lies on a spectrum that turned to the esports environment to encompasses a child practicing “Keepy continue their engagement with fans. Uppies” in their garden, a local football Formula 1 motor racing launched the F1 team playing in a competitive five-a-side Esports Virtual Grand Prix series, with tournament and a football freestyler duo virtual races running in place of every streaming their latest skills and moves postponed Grand Prix; in the U.S. online. Esports is a competitive NASCAR launched the iRacing series, professional league or tournament, with drivers competing digitally through a analogous to the Champions League, simulation platform and the English Bundesliga or the FA Cup. Premier League’s inaugural ePremierLeague Invitational, in which This distinction is also important when celebrities and Premier League players considering the two types of represented their team in a knockout professional gamers: tournament to raise money for charity, attracted 150 million viewers across 1. Competitive professionals – elite platforms including YouTube, Twitch, gamers who participate in esports, Facebook, Twitter and Sky Sports live. It whether as an individual or as a has been suggested by the World member of a team, to win Economic Forum that Coronavirus may tournaments/leagues; and lead to the normalisation of esports, 2. “Lifestyle” gamers – skilled (but not thanks to the “unprecedented (and necessarily elite) gamers who accidental) adoption of esports by broadcast their day-to-day gameplay broadcasters, leagues and athletes on digital channels and live streaming seeking to engage fans. platforms to fans/subscribers, and whose ultimate goal is to entertain viewers, whether they win or lose.

2 CLIFFORD CHANCE PLAY BY PLAY – AN INTRODUCTION TO ESPORTS, MONETISATION AND IP RIGHTS The majority of gamers will fall into either The International (a Dota 2 tournament) in one of the two brackets. In this article, Shanghai, with the team sharing the our focus is on esports, and the former. US$15 million first place prize and captain However, this is not to understate the Johan “N0tail” Sundstein becoming the importance to the esports industry of top prize-winning esports player to date, lifestyle gamers to the esports industry, with estimated career winnings of almost who may sign to professional esports US$7 million. teams, as part of those teams’ broader business models – for example, to attract Esports competitions are played in front sponsors and fans, sell merchandise and of spectators, who can watch in-person produce entertainment content. at a stadium or via online streaming. These audiences can be vast. For Esports, whilst a relatively nascent example, 60 million viewers watched the industry, challenges established Grand Final of the 2018 Mid-Season conceptions of what constitutes a “sport” Invitational, a League of Legends (although whether esports can be tournament hosted by Germany and appropriately classified as a “sport” France. According to a recent report by remains a controversial topic), but also Goldman Sachs, esports has been offers new and varied investment elevated “into mainstream culture as a opportunities to current and prospective legitimate professional sport with a market participants. Esports undoubtedly massive global following.” This global shares many of the fundamental following includes major celebrities and characteristics of traditional sport, professional sportspersons, which in turn however its idiosyncratic features require further raises the profile of esports. For a more bespoke approach in a number example, in early 2020, Real Madrid’s of respects, particularly in relation Gareth Bale launched his own esports to monetisation. team, Ellevens Esports.

The rise of esports Who are the key In 1972, the first known esports event stakeholders? took place at Stanford University, with • Video-game publishers: video-game students competing at “Spacewar!”, a publishers produce, release and own combat video-game. The winner took the IP in the games they publish, and home a year’s subscription to the thus control the content of the games magazine Rolling Stone. Fast-forward to (including updates to the games 2019, and 16-year old Kyle “Bugha” subsequent to initial release). For Giersdorf scooped US$3 million for publishers, esports represents a way of winning the Fortnite World Cup solo final deriving revenue from their principal – the largest prize ever for a single player assets – their IP rights in the games – at an esports tournament. To place this by licensing the use of those rights. The into context, Bugha’s prize exceeds that primary purpose of such licensing may awarded to Novak Djokovic for winning be direct (a distinct revenue stream Wimbledon 2019 (US$2.91 million) and under the licensing contract), indirect Tiger Woods for winning the 2019 (using esports to generate interest in Masters (US$2.07 million). Moreover, the the game to drive sales) or a US$3 million won by Bugha was a combination of the two. fraction of the US$100 million prize pool set aside by Epic Games, creator of • Competitions and leagues: Fortnite, for all Fortnite esports publishers may also run esports tournaments held during the course of competitions and leagues (for which 2019. Less than one month after Bugha’s they control the structure and rules) or victory, five-man team “OG” triumphed at alternatively license the rights to run

CLIFFORD CHANCE 3 PLAY BY PLAY – AN INTRODUCTION TO ESPORTS, MONETISATION AND IP RIGHTS and broadcast such competitions to obtain IP rights in relation to their third parties. High profile examples of players under the contracts with those the former include the creation of the players. As with traditional sports Fortnite World Cup by Epic Games, the athletes (such as elite footballers, formation of the League of Legends golfers and tennis players), esports Championship Series and the League players have become increasingly of Legends European Championship attuned to the fact that they are not just (the North American and European professional gamers, but also valuable leagues, respectively) by Riot Games media assets. and the subsequent launch of the • Players: the number of professional Overwatch League by Blizzard. An esports players has grown rapidly in example of the latter is ESL (formerly recent years. They can earn income the Electronic Sports League), which is through sponsorship, prize money and the largest organiser of esports team salaries (for members of a team competitions worldwide (e.g. ESL One). which pays a guaranteed salary). • Team owners/franchises: for those Substantive player salaries are likely to video games for which leagues have encourage more gamers to consider been created, the publishers can also pursuing esports as a professional sell “teams” that can participate within career, which in turn results in higher those leagues to third parties (similar to quality gameplay and increased fan the US sports “franchise” model). For interest. Furthermore, unlike in example, Activision (Blizzard’s parent traditional sports, lifestyle gamers can company) sold the first twelve teams in also earn income through streaming the Overwatch League for US$20 services. The highest profile example is million, and subsequently sold eight Richard Blevins, better known by his further teams for a reported US$30 to online alias “Ninja”, who earns an US$60 million each, with each team estimated US$500,000 per month based in a major city, and the teams from streaming and commenting split into a Pacific Division and Atlantic on gameplay. Division, respectively. Activision • Online streaming services: major targeted current owners of major sports technology companies including teams as prospective team owners, Amazon (Twitch), Google (YouTube) and including Kroenke Sports & Tencent (Douyu and Huya) own or have Entertainment (Los Angeles Gladiators) heavily invested in streaming services and the Kraft Group (Boston Uprising), which can broadcast competitive and who have experience in generating lifestyle gameplay. Facebook has revenue from local and global fanbases. recently launched a dedicated • Teams: in addition to the “teams” Facebook Gaming app in an attempt to which are sold to third parties, teams challenge these dominant players and exist in the more conventional sense, establish itself in the gaming and i.e. a collection of players competing on esports world. Twitch is the largest the same side against other groups of streaming platform, averaging in excess players. Teams often compete across of one million concurrent viewers various platforms and video games. watching its subscription-based The top three highest earning teams to content every second over the course date are “Team Liquid”, “OG” and “Evil of 2018. Online streaming services Geniuses”, with cumulative prize contract with publishers (whether on an winnings totaling almost US$90 million. exclusive or non-exclusive basis) for the Team Liquid, which has multiple rights to stream gameplay. Live divisions dedicated to the most popular streaming platforms have experienced esports games, is majority owned by a surge in growth as a result of the aXiomatic, an ownership and Coronavirus pandemic; for example, management group created by an array Twitch exceeded three billion hours of top traditional sports team owners watched (in a single quarter) in Q1 which offers investment services in the 2020 for the first time. esports industry. Teams may seek to

4 CLIFFORD CHANCE PLAY BY PLAY – AN INTRODUCTION TO ESPORTS, MONETISATION AND IP RIGHTS • Traditional broadcasters: some gameday income, respectively), with the traditional broadcasters, in addition to expectation that in the coming years online streaming services, have also esports will be far more reliant on media begun contracting with publishers in rights, and far less reliant on gameday order to broadcast gameplay. However, income, than traditional sports. such broadcasters have thus far had a difficult task in converting fans of Media rights esports away from streaming services; As the popularity of esports increases, research conducted by Nielsen found the number of streaming services and that 61% of esports viewers on Twitch traditional broadcasters seeking to secure did not watch TV on a weekly basis. distribution deals to broadcast esports Whilst Disney, ESPN and ABC began competitions and leagues, and the value broadcasting the Overwatch League in of those distribution deals, is expected 2018/19, it was exclusively licensed to to increase. YouTube by Activision Blizzard in early 2020. Distribution deals have already been • Traditional sports team and signed for significant sums. In early 2018, leagues: professional sports teams Twitch secured exclusive rights to and leagues have also started investing broadcast the first two years of the in esports, capitalising on their unique Overwatch League worldwide (bar China) IP rights (by licensing them to for US$90 million, representing a higher publishers), brand awareness and annual figure than the US$300 million experience to find new audiences paid by BamTECH (Major League through esports. For example, NBA Baseball’s video streaming company) to and Take Two Interactive (the publisher Riot Games in late 2016 for the streaming of the NBA 2K franchise) entered into a rights to League of Legends until the end joint venture to create an esports of 2023. Facebook has also entered the league for NBA 2K; 23 of the NBA’s 30 fray, securing an agreement with ESL teams currently participate in the NBA for exclusive broadcast rights for 2K League. In 2019, all NBA 2K ESL’s Counter Strike: Global Offensive League games and tournaments were Pro League. livestreamed on the NBA 2K League’s Twitch and YouTube channels, with the One advantage that streaming services NBA 2K League Finals rebroadcast in and traditional broadcasters currently China through Tencent. have over publishers in negotiating distribution deals is that the esports Monetising esports – industry is fragmented, with the IP for each video-game belonging to the revenue streams relevant publisher. Thus, a traditional In 2019, the total annual revenue for the sports league such as the Premier esports industry was projected to reach League or the NFL can collectively about US$1.1 billion; 42% from bargain on behalf of all teams within their sponsorship, 23% from media rights, league, in a way that is not applicable in 17% from advertising, 9% from the gaming industry. merchandise and tickets and 9% from publisher fees, representing year-on-year However, streaming services and growth of 34%, 42%, 15%, 22% and broadcasters have had to adapt to -3.0%, respectively. The fastest growing address the challenge of seeking to esports revenue stream is expected to be monetise an industry which has always media rights, with a compound annual operated on a freemium model – i.e. growth rate (2017–2022) of +39.6%, esports have always been free to air. compared with sponsorship’s +28.4%. Implementing subscription models risks Esports’ revenue generation therefore losing audience members – which has differs from traditional sports’ widely knock-on implications for sponsorship. recognised 40:40:20 revenue split model Striking the correct balance is a complex (covering media rights, sponsorship and commercial path to navigate.

CLIFFORD CHANCE 5 PLAY BY PLAY – AN INTRODUCTION TO ESPORTS, MONETISATION AND IP RIGHTS Sponsorship Gaming generate substantial revenues through advertising, with streamers also Sponsorship is the primary revenue able to monetise their activity, whether by source for many key stakeholders and charging flat fees or entering into lends credence to the suggestion that partnerships with streaming services. esports is currently over-reliant on sponsorship as a revenue stream, There is also a prospective line of although this is expected to change as monetisation for publishers: in-game revenue from media rights increases. advertising. This would require the video- Sponsorship deals may be struck with game publishers to code adverts, or even individual players, teams, competition team sponsorship, into the games organisers and/or video game publishers. themselves. This could be done generically or specifically for esports competitions. Until relatively recently, the vast majority of sponsorship came from endemic brands At the end of May 2020, Riot Games (i.e. brands that create products required announced that they would display to produce or used to play esports), such in-game digital sponsorship banners (the as software manufacturers and consumer “Summoner’s Rift Arena Banners”) during electronics brands. In 2017, League of Legends esports broadcasts, approximately 65% of event sponsorship with MasterCard and Alienware among deals and 88% of team sponsorship the first brands that will feature. The deals were signed with endemic brands. sponsorship banner will appear in multiple In 2019, Intel extended its partnership locations across the in-game map and with ESL through to 2021, with the two can change appearance throughout a parties intending to invest over US$100 match. Moreover, Riot Games has given million over a three-year period. each of its twelve regional leagues the ability to have different in-game sponsors. However, as the popularity of esports has Riot worked with Nielsen to evaluate its increased and the infrastructure of the approach to in-game sponsorship, with competitions/leagues has become more the data allegedly indicating that “It will established, sponsorship has come from a become one of its most valuable broader range of sources including deliverable assets.” mainstream brands. “The fact that esports audience members are a coveted In-game advertising is not currently demographic – with approximately 79% covered by any specific broadcasting or aged under 35 – has undoubtedly played a advertising code, but issues remain that role in this increased interest, particularly could affect this potential revenue stream given that this demographic is one of the for publishers, including: hardest to reach through traditional media”. • The extent to which publishers are Mastercard become the first global reticent to change the aesthetic look sponsor of League of Legends (a game and feel of their games by allowing already sponsored by Coca-Cola), in-game advertising. T-Mobile and Toyota sponsor the • The potential backlash from gamers in Overwatch League and Paypal partners response to in-game advertising. with Rainbow Six Siege. Esports teams Cloud9 and Ninjas in Pyjamas are • Limitations on the types of advertising sponsored by Puma and Betway allowed due to the advertising laws in respectively (with the company’s logos certain countries (e.g. restrictions on emblazoned on the teams’ kit), whilst advertising alcohol, gambling, tobacco, Jian “Uzi” Ziaho (a League of Legends etc) and the demographic of video- player) has signed an endorsement deal gamer users (i.e. minors). with Nike. • The hesitance of brands to advertise within certain types of games, such as Advertising violence-based video games. Esports currently offers a range of advertising opportunities. Streaming Riot Games’ approach indicates it is services such as Twitch and YouTube particularly attuned to the first two issues referenced above. Whilst the sponsorship

6 CLIFFORD CHANCE PLAY BY PLAY – AN INTRODUCTION TO ESPORTS, MONETISATION AND IP RIGHTS banners will be visible to those watching through the inclusion in the footage of the esports broadcast, it will not affect opening clips, anthems and trade marks the professional gamers themselves. In to demonstrate a breach of IP rights. addition, David Higdon, Riot Games’ global head of communications and In contrast, in the world of esports, the esports, noted in response to fan “sport” (i.e. the video game) typically concerns about the level of in-game consists of a number of separate copyright sponsorship integration that: “We’ll be works, each of which can be controlled by very careful on how we innovate around the owner and/or its licensee(s). For it… Let us know what you think when instance, under English law, these may you watch it this summer. We’ll adjust include: source code in the game or parts as needed.” thereof; in-game text; in-game images; in-game films; characters; musical score; If in-game advertising grows as publishers and music recording. seek to monetise further by leveraging in-game “real estate”, this will create a In addition, logos and brands used to host of issues surrounding advertising distinguish the video-games may be standards and the enforcement of protected as trade marks (whether IP rights. registered or unregistered).

Merchandise and tickets Esports stakeholders are therefore afforded multiple layers of protection that Whilst a smaller portion of the annual can be used as part of an enforcement revenue of the esports industry comes campaign to protect commercial from merchandise and ticket sales, this is interests. However, the competing nonetheless a revenue stream that has interests of the different stakeholders (as seen strong growth. In 2018, the highlighted below) is a major factor to Overwatch League entered into a multi- take into account in relation to year deal with sports merchandise enforcement, and which may have a company Fanatics, whilst for esports concomitant impact on the monetisation team 100 Thieves its apparel business of the esports industry. line is one of its three primary revenue sources alongside competitive gaming Further complexity is introduced where and entertainment and media. the video-games feature real players, who themselves may have rights in their Monetising esports – the likeness. In addition to rights under importance of IP rights licences with publishers, esports leagues, and their enforcement competition organisers and broadcasters will also have their own distinct IP rights – Esports has an advantage over traditional for example, esports broadcasters sports in respect of monetisation; the typically film game screens and the video games underpinning the esports players themselves, meaning they own benefit from significant copyright copyright in that footage and broadcast protection. The Court of Justice of the (which in turn is dependent on the European Union has held that the act of broadcaster having the rights to feature performing a sport cannot be a copyright the game in that footage). There are work in and of itself as it does not satisfy therefore a broad variety of rights that the requirement of “originality.” This has may be infringed upon. historically created major issues for traditional sports broadcasters in dealing When you consider that the fastest with online piracy for unauthorised live growing esports revenue stream is streaming of fixtures. Broadcasters of expected to be media rights, the traditional sports rely on the fact that the importance of stakeholders being able to broadcasts of footage of sports events adequately enforce their IP rights when are protectable as copyright work. infringed is underlined. However, given Broadcasters also bolster their protection the myriad of rights and competing

CLIFFORD CHANCE 7 PLAY BY PLAY – AN INTRODUCTION TO ESPORTS, MONETISATION AND IP RIGHTS interests involved, it is critical that esports simultaneously asserting its right to stakeholders have a clear understanding monetise its IP. The gaming community of and properly negotiate: disagreed. Following an outcry, Nintendo set up the “Creators Program,” which • The extent of (and limitations to) their offered video creators between 60% and IP rights. 70% of the advertisement revenue • Their ability to take enforcement action (depending on whether the creator when IP rights are infringed. registered and posted the video to Nintendo-specific channels) generated • Their responsibility to take enforcement from the video. In 2018, Nintendo pulled action when IP rights are infringed. back even further from its position, • The implications of taking, or failing to announcing that it was halting the take, enforcement action. Creators Program in its entirety and that – provided video creators followed a new Streaming set of “basic rules” – they could retain Streaming serves as a useful illustration 100% of any advertisement revenue in this respect. Unlike traditional sports, generated. In the associated press which have generally taken an assertive release, Nintendo seemed to approach in enforcing their IP rights, acknowledge the role played by such enforcement activities in esports and video creators, stating: “We appreciate videogaming have often been and encourage the continued support of more restrained. content creators, and thank them for their dedication to helping us create smiles”. Publishers have been historically reluctant Nintendo came to understand that the to stop what are known as “let’s play” reputational damage of taking videos; videos distributed online where enforcement action outweighed the gamers commentate on themselves advertising revenue claimed. playing a particular game. For publishers, this constitutes free promotion and By contrast, competitions and advertising and can boost the popularity broadcasters may take a very different of their games, which can in turn increase approach to enforcement than video revenues by: (a) facilitating sales of the game publishers, which is reflective of games; and/or (b) increasing the number their differing commercial interests. of in-game microtransactions. Esports broadcasters typically film both Furthermore, assuming in-game game screens and the players advertising becomes a more widespread themselves; they therefore own copyright phenomenon, “let’s play” videos will in the filming and broadcast itself and are increase exposure to such advertising, able to use the content of the game which may lead publishers to try and under licence from the publisher. leverage such exposure in contract In January 2018, esports competition negotiations with advertisers. organiser ESL had an exclusive deal with However, even for publishers, there have Facebook to stream ESL’s Dota 2 been limits to their tolerance for such competition. When gamers began videos. “Let’s play” videos are typically streaming gameplay from the tournament governed by the terms of the relevant (overlaid with their own commentary) on End User Licence Agreement, which rival streaming platform Twitch, ESL often set out an exception for “non- elected to issue “takedown notices” commercial” use. In 2013, Nintendo pursuant to the US Digital Millennium began claiming all advertisement revenue Copyright Act (DMCA), informing Twitch on user-generated “let’s play” videos that it was hosting copyright-infringing uploaded to YouTube that featured material. In order to shield itself from Nintendo’s content. Nintendo publicly liability, Twitch removed the offending positioned this as a reasonable balancing streams. However, Valve (the publisher of exercise; allowing fans to continue Dota 2) responded by announcing that enjoying Nintendo content on streaming only they were able to issue such platforms (i.e. not blocking gamers in takedown notices in relation to the totality from using Nintendo’s IP), whilst “infringing” streams.

8 CLIFFORD CHANCE PLAY BY PLAY – AN INTRODUCTION TO ESPORTS, MONETISATION AND IP RIGHTS This confusion stemmed from the fact licence that affords adequate protection that whilst both ESL (the competition to their broadcasts, the value of such organiser) and Valve (the publisher) held licences substantially diminishes. At the IP rights in elements of the broadcast of same time, video game publishers must the competition, the ability to issue a also be careful not to alienate the takedown notice was dependent upon gamers upon whom they rely to the specific nature of the material being promote their content and who may “infringed”, as well as the terms of the encourage criticism of the publisher licence provided by Valve to ESL. ESL within the gaming community. If held an array of copyrights in various publishers are unwilling to engage with elements of the broadcast of the this issue by formulating a clear policy competition, but the gamers were not on the permissible content of streams violating these rights through their of competition gameplay, and continue streams. Whilst the gamers were to take a back seat approach to streaming the same gameplay that ESL enforcement, their interests will come was broadcasting (with its own into direct conflict with those of other commentary overlaid), they were not stakeholders. This potential conflict is streaming the ESL broadcast (or elements particularly pertinent in circumstances of the broadcast) itself. Thus, absent the where the video-game publisher is terms of a licence granted by Valve also the competition organiser, and specifying that ESL had rights vis-à-vis therefore has a direct relationship with the actual gameplay, ESL did not have the broadcaster. the ability to issue takedown notices in • Streaming platforms hosting relation to the streams. “infringing material”: streaming platforms (Twitch) should continue to This incident demonstrates the comply with takedown notices when importance of esports stakeholders presented, as they are reliant upon the having a comprehensive understanding safe harbour afforded by the DMCA of IP rights and being aligned on the (and equivalent legislation elsewhere) to approach to enforcement. It stressed shield themselves from liability. There is the importance of clear contractual and simply too much content on streaming practical mechanisms to ensure the platforms to proactively identify all smooth exploitation and enforcement infringing content. Streaming platforms of the broadcast. It also highlights the should also comply with any counter attendant implications for the growth takedown notices properly filed by of media rights revenue in the streamers. As an industry, stakeholders esports industry: should cooperate to develop fast and • Competition organisers: if effective mechanisms to identify illicit competition organisers (ESL) cannot streams, building on work such as enforce their IP rights, there is little digital watermarking which has been commercial sense in broadcasters undertaken in the context of traditional (Facebook) paying substantial sums for sports broadcasting. This is particularly exclusive streaming rights. This will relevant in the context of Article 13 of affect the monetisation of such the EU Directive on Copyright in the competitions. Competition organisers Digital Single Market, which will require therefore need to carefully assess their service providers (i.e. streaming IP rights to ensure their commercial platforms) to implement measures to interests are adequately protected, as protect content and ensure effective well as obtaining appropriate content recognition technologies. permissions from other rights holders to • Streamers: streamers should look to address any lacunae in such protection. policies issued by publishers to • Video game publishers: if video understand the limitations on the game publishers (Valve) are unwilling to content that their streams can contain. enforce their IP rights to protect the If a streamer believes their content has interests of competition organisers, or been improperly removed through a alternatively to grant competition takedown notice, they should file a organisers rights under the relevant counter takedown notice.

CLIFFORD CHANCE 9 PLAY BY PLAY – AN INTRODUCTION TO ESPORTS, MONETISATION AND IP RIGHTS What next for esports? by participants as the sport with the highest potential to grow revenues There is no sign of esports’ rapid globally, beating both football and expansion slowing. A recent report by basketball into second and third place, Goldman Sachs highlights that the respectively. When you consider the industry remains heavily under-monetised audience demographic for esports, in relative to its audience potential. conjunction with the fact that more than According to the report, the total online 70% of participants believe the biggest population is over 3.65 billion globally, 2.2 threat to the traditional sports industry is billion of whom are gamers; esports the shift in the consumer behaviour of viewers currently represent only a fraction younger people, it is unsurprising that of the online population (c. 5%), esports has become too commercially suggesting there is plenty of scope for relevant to be ignored. audience growth.

The International Olympic Committee has As revenues increase, fuelled by larger recognised esports as a “sporting activity” audiences and audience engagement, we and is exploring the possibility of including expect to see the industry mature, with esports in future Olympic Games. Esports further investment driving the may be a demonstration sport at the implementation of greater organisation Paris 2024 Olympic Games and it will be and more sophisticated infrastructure, the a medal event at the 2022 Asian Games. entrance of further major brands into the And in May 2020, the Commonwealth arena and larger prize pools. Activision Games Federation agreed an exploratory (through Blizzard) and Tencent (through partnership with the Global Esports Riot Games) have led the way, targeting Federation to develop a Commonwealth the investment of current owners of Esports strategy. traditional sports teams, in order to use their knowledge of how to generate The esports industry is an attractive and increasing financial returns, including exciting market that transcends both revenues from those teams’ regional sport and technology. However, the support bases. As the professionalisation industry remains an emerging one. At this of the industry continues, increased stage of its development, it is absolutely monetisation will follow. Global betting on critical that adequate consideration is major esports titles, already estimated at given to the legal and commercial issues US$5.5 billion in 2016, is now projected raised by the interrelationship between, to approach US$13 billion this year. and enforcement of, various industry stakeholders’ different IP rights. The According to PwC’s Sports Survey 2018, industry will need to wrestle with these the traditional sports industry is keeping a complex issues as it continues its keen eye on the esports industry; over rapid expansion. 70% of participants from the global sports industry say that they would develop a strategy to enter esports, with the main reason for hesitation being a lack of understanding of the business model. Moreover, esports was identified

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