This article has been written by Aakriti Bansal, pursuing a Diploma in Advanced Contract Drafting, Negotiation, and Dispute Resolution from LawSikho.
Table of Contents
Introduction
As technology has crept and set foot into every aspect of our lives and every field that the human mind could think of, sports is also not left untouched by the advancements of the digital era. Conventionally, when video games made their entry into the market, multi-player gaming was highly limited and video games came to be seen as only a recreational medium. However, the entire meaning of video games and online gaming has turned upside down and now is a full-blown market, providing gamers with endless opportunities to earn money. It is with the introduction of the internet that people could compete in massive competitions and thus with the rise of the same, the eSports industry was invented. 
What are eSports?
Esports, as added in the Oxford Dictionary in the year 2015, is given the definition, a multiplayer video game played competitively for spectators, typically by professional gamers. It can be understood from this definition that eSports (or electronic sports) is a term ascribed to competitive video gaming as competitions happen in physical sports. The main difference between video gaming and eSports is that there is an element of competition and usually also engages spectators. Esports in the current times has taken the form of organized, multi-player gaming competitions, wherein professional gamers can play individually or as teams, and is also broadcasted live for interested audiences, similar to traditional sports. Since, there is competition involved, the players, who are actually the e-sportsmen, fight for a cash prize or some sort of prize. One example is, the League of Legends involves putting a team of five players against a team of another five players, in a virtual battle. Some popular games that have gained popularity in the E-sports arena are League of Legends, Counter-Strike: Global Offensive, Overwatch, Dota 2, and Call of Duty amongst many others.
Some facts and figures relating to eSports
It is noteworthy that recently, eSport, for the first time, has been included as a medal sport at the Asian Games 2022, by the Olympic Council of Asia (OCA). Another estimate that has been made with respect to the audience for eSports, by consultancy KPMG, is that the eSports audience is likely to exceed over 130 million by the year 2025. The global revenues generated from eSports in the year 2019 were over $1.1 billion, which is an indicator of the fact that the gaming market has matured extensively in recent times.
Who all are involved in eSports?
The eSport is a highly dynamic and versatile community providing great scope for various professionals and amateur people to be engaged in it. It accommodates professional gamers as well as other people like casters, commentators, and other support people appointed by the eSport tournaments like producers, editors, analysts, product managers, game tester, referees, production crew members, events managers, social media managers.
Scope and regulation of eSports in India
The Esports industry in India is booming and growing at a rapid pace and the growth has been further augmented by the lockdown due to the Covid-19 Pandemic, with people relying more and more on new ways of generating income and entertainment. E-sports has gained immense popularity amongst the millennial and the Gen-Z population as the core engagers in these games, fall within the age group of 15-25 years. The testimony to the growth of this industry in India lies in the fact that various angel investors and venture capitalists are investing their capital in E-sports and online gaming startups in India, to further push the eSports industry towards growth. According to the Venture Intelligence Report, since April 2020, venture capital funds have made an investment of $438 million in the Indian gaming industry and start-ups. A report of Inc42 Plus, indicated a similar trend of increasing investment of up to $448 million between 2014 and 2020, in the Indian eSports sector.
The Inc42 Analysis Report further recognizes the role of high-speed 4G internet and its wide reach as one of the main factors contributing towards the growth of this sector. In 2020, eSports contributed 4% of all online gaming users and constituted 9.13% of aggregate revenue.
Talking about the widening scope of this industry and the employment and revenue it has generated, it nonetheless important to point out that although eSports is gaining popularity in India, the system of regulation in this sector is highly ancient and to an extent obsolete. In the year 2019, Mr. Shashi Tharoor had presented a private member bill in the Lok Sabha, titled the Sports (Online Gaming and Prevention of Fraud) Bill. The main intent behind the bill was to provide for a statutory framework for eSports in India to ensure that all the economic activity in this sector functions smoothly and there are no illegal practices that take place. The bill was of prime importance because India doesn’t have any specific law in this area.
Esports player contracts
Having said that there is a lack of a regulatory system in India for eSports, it is all the more essential to look at some unique concerns that eSports has brought, from a legal viewpoint. From contracts to endorsements, players, leagues, and teams must understand the legalities of this new field of entertainment.
Players’ contracts in eSports are mostly identical to those of the conventional sportspersons. The only point of difference lies in the fact that traditional sports are governed by a systematically developed framework of regulation, protecting the rights of teams and players and such a framework even ensures contractual stability and compliance. In eSports, due to the absence of such statutory regulations; the industry has come to rely more and more on contracts for engagement in eSports. It is, therefore, the need of the hour to understand the contractual relationship between parties involved in eSports and how these contracts can be enforced in India.
How do they work?
Like any other employment contract, even an eSports contract, is set out in a way to navigate the player’s working conditions, duties, liabilities, obligations, and everything else that is required out of the parties entering into the contract. Generally, the eSports players’ contracts have a finite period or for a specific tournament. The contract has to be within the four corners of the Indian Contract Law itself and the general provisions will be governed by the same. The contract mostly will determine important factors like Working hours, Salary amount, What percentage the organization will take from any potential tournament winnings, sponsorship requirements, company guidelines, Holiday and sickness information. Let us look at some of the essential clauses of these contracts in detail.
Essential clauses
- Player services:
The services to be rendered by a player forms the crux and the core of the contract being entered into by the parties and thus it is essential to categorically enumerate and list out all the services that a player is supposed to carry out during the term of the contract. The services generally go beyond just participating in a tournament or any specific gaming competition and can include making video content, endorsing such a competition; such clauses have to be quantified and included in the contract.
- Player obligations:
Not only is a player required to perform the services, but he is also obligated to comply with other requirements as the hiring company or the team may require. It could include wearing the team’s jersey while playing, participation in team meetings, participation in sponsor events and promotions. Teams often require the player to dedicate twelve to fifteen hours for practice sessions. Such requirements have to be kept in mind while drafting and also their possible impacts and consequences on the player.
- Players restrictions:
In a general contract, there are non-compete clauses, which ensure the exclusivity of engagement between the parties and make sure that the other party will not engage in a competing business after having access to all the confidential information of the first party. Similarly, in an eSports player contract, a player is to exclusively represent the particular team who is engaging it, and restricted from other competitions without the prior consent of the team. A player is also restricted from endorsing sponsorships and promotions of other competitors.
- Non-disparagement clauses :
This relates to the aspects of defamation and limits the liability of the teams and its sponsors from liability in cases where the players make defamatory remarks, as it is seen in traditional sports that while playing, the situations might get heated up and the player might make some remarks which could be defamatory in nature. This clause protects teams and sponsors in such situations. Teams have, in the recent past, sued players for the breach of such clauses.
- Remuneration and other benefits:
Gaming could use advanced technology and the employment of high-tech gadgets for the same. The compensation for such devices and the remuneration for the players have to be clearly laid down in the contract. Performance-based bonuses and perks could also be included. A proper mechanism to compensate the player should be drafted under this clause.
- Image rights:
As seen in the game of cricket, the use of the image of popular sportsmen helps the teams and the sponsors to raise funds, thus image branding is really important in such fields and eSports are not left behind. Thus, a provision has to be made in the contract which allows for teams to use the image, including the gaming name, id, tag, voice, and any other related aspects, of its players. Additional compensation could be provided to the player for such use.
- Equipment:
The remuneration clause could cover some aspects of this, however as mentioned earlier, gaming could require high-tech equipment, it is preferable to specifically mention if the sponsor would provide for the same or the player would get compensated.
- Revenue sharing:
Gaming is not the only activity through which funds are generated, there are other side activities like merchandising and brand collaborations, in such situations, players are guaranteed a percentage of the earnings of the team. For player-specific revenue, the player can be provided a higher percentage of the earnings and for those of the team, the player may be provided a small percentage (as shared between all the players in the team). The prize money from tournaments is split between the team members with the team taking a minor percentage. The sponsorship revenue from team sponsors is at times also shared with the player.
- Roster management:
Roster management refers to schedule management. Managing a roster typically includes a list of players and information related to them like their gaming specifics, the number at which they will play, and other details. The contract has to clarify the roster of the team and the number of starting players and substitutes or reserves.
- Relationship between the parties:
An eSports player contract should comprehensively address the contractual relationship between The contractual status between the parties can have varying consequences, from potential tax implications to implied statutory employment rights.
- Termination and renewal:
It is necessary to list down the conditions of termination and renewal in the contract. It is also necessary to list down the post-termination obligations of the players. Further, compensation can be determined for early termination of the contract in the form of a buyout clause. Buyout clauses quantify the value of the remaining contract period of the player depending on the investment made by the team in her. Teams can also choose to incorporate terms like a right to refuse if some other teams would want to engage the player.
Legal nuances relating to eSports and eSports player contracts
Some legal nuances to consider while getting engaged in the eSports industry are:
- Contracts
With the advent of eSports as a recognized industry, teams, players, tournament leaders and leagues will need to negotiate, draft and sign contracts. Some important things to keep in mind while entering into such contracts are:
- Age of the player: as discussed earlier, eSports is one field that targets the younger generation usually between the age group of 15-25, since minors, below the age of 18 are also involved, it becomes necessary to look into this aspect. Under the Indian Contract Act, 1827, minors are not competent to conclude contracts and such contracts are void. Though this does not make such a contract illegal, it will be unenforceable against the minor. Esports teams and organizations will need to ensure that the contract is enforceable as a whole.
- Enforceability of contract terms: The enforceability of some of the other provisions mentioned above is also questionable under Indian contract law. The Contract Act (Section 27) also considers agreements that restrain others from carrying out their trade or profession to be void. For example, non-compete clauses may be voided, unless they are considered by the court to be reasonable given the context. Non-compete clauses applicable during the term of the contract are often considered reasonable but those applicable beyond the term of the contract will have to satisfy a higher threshold of reasonableness. Thus such aspects have to be taken care of.
- Streaming rights
Gaming content is regarded as the intellectual property of the developer. This gives birth to issues like licensing when tournaments and leagues are streamed online on platforms like YouTube, for viewers to become audiences. In order to use the game to stream live and engage audiences, an additional license has to be obtained from the game developer. Thus, teams and players must be careful to function within the confines of their end-user license agreements.
- Intellectual property
Intellectual Property is one of the main concerns which affects this industry as the game content is legally regarded as the intellectual property of the developer and this can usually lead to licensing issues for tournaments and since gaming is not confined to the border, international laws also become relevant in this context. The licensing must extend past the overseeing body and to the players, as well. Players who choose to stream their play or create YouTube videos for additional profit need permission from the developer.
- Betting and gambling concerns
Esports has given rise to concerns like betting and gambling, since already there is no framework regulating the industry, to monitor such illegal activities is fairly a daunting task. From betting scandals, including rigging games to ensure a certain outcome, to the legality of whether or not players can bet against or on themselves all need to be addressed. This issue is not unique to any one nation as many eSports teams are based all across the globe, which means international gambling issues can be persistent.
- Mergers, acquisitions, and employment
As the eSports industry grows and develops, the issues of mergers, acquisitions, and the definition of employment all must be addressed. Professional eSports leagues carry spots that can be sold at a profit by the teams that fill them. Pro league spots are quite valuable, and legally their sale is treated in a similar manner to other tangible property. As a result, sales negotiations and contracts may be necessary for these types of mergers and acquisitions.
Conclusion
Thus, as it can be seen that the eSports ecosystem in India is in the nascent stage and is still developing, it is imperative for the industry bodies, the government, and the relevant regulators to lay down laws and guidelines for teams and players regarding contracts. It is also advisable to always read through a contract thoroughly before signing it, especially a one like an eSports player contract which is made in the background of a lack of statutory regulation. It is always preferable to seek advice from a legal professional to make sure that the contract has terms that are equally favorable to both parties.
References
- Roshan Gopalakrishna, Minors’ Agreements in Sports, available at http://sportslaw.in/home/2011/07/20/minors-agreements-in-sports/
- John H. Shannon & Richard J. Hunter Jr., Principles of Contract Law Applied to Entertainment and Sports Contracts: A Model for Balancing the Rights of the Industry with Protecting the Interests of Minors, 48 Loy. L.A. L. Rev. 1171 (2015), available at: https://digitalcommons.lmu.edu/llr/vol48/iss4/3
- Jonathan L. Israel, TFue v. FaZe Clan: Three-Ring Litigation Circus to Continue in 2020, available at https://www.natlawreview.com/article/tfue-v-faze-clan-three-ring-litigation-circus-to-continue-2020
- https://www.ikigailaw.com/e-sports-player-contracts-common-clauses-and-potential-legal-issues-in-india/?
- Holden, John et al., A Short Treatise on Esports and the Law: How America Regulates Its Next National Pastime, University of Illinois Law Review 509 (2020) available at https://ssrn.com/abstract=3441843.
- Ben Fisher, Esports Players Have Less Endorsement Freedom, available at www.sportsbusinessdaily.com/Journal/Issues/2018/05/28/In-Depth/Endorsement.aspx
- Hilary Russ, “Global Esports revenues to top $1 billion in 2019: Report”, Reuters, 12 February 2019, accessed via https://in.reuters.com/article/videogames-outlook/global-esports-revenues-to-top-1-billion-in-2019-report-idINKCN1Q123M.
- “The History and Evolution of Esports”, Medium, 3 January 2018, accessed via https://medium.com/@BountieGaming/the-history-and-evolution-of-esports-8ab6c1cf3257.
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