Yesterday, 6 September 2017, the European Parliament alongside the Sports Intergroup organised a conference in Brussels under the title “The status of eSports in Europe: Need for a policicy response?“. The event was organized around three main pillars: ethical issues, the team/player perspective and legal issues/regulatory barriers. As can be seen in the images and in this chronicle of the event at the eSports Bureau website, the event had a great expectation and both European parliamentarians and some of the main players in the industry were present.
I had the honour of being invited to present, from a legal perspective, the current status of industry regulation and the main challenges the industry is facing in the short and medium term, and also my opinion on whether regulation of the whole industry or partially is necessary.
I will transcribe my speech below and hope that we can have a debate about the issue in the comments:
“First of all, I would like to thank Sports Intergroup for the invitation to participate in this session. It is an honour for me to be here today discussing the legal challenges in the esports industry.
My intention today is mainly to outline the current scenario and to promote a debate on it. Obviously, I have my own personal opinion, but I believe that today, given the immaturity of the industry, there is not a single solution to this issue and it will be the evolution of the sector itself that will show us the way.
My colleagues have already given context to the real numbers of an industry which, often and for different interests, tends to exaggerate. However, it is important for any activity with enough economic and social impact to have a clear legal framework. There is currently no such legal certainty in esports. In Europe, the only country that has regulated the sector in some way is France, establishing the bases of the professional scene of esports in the country moving esports away from the concept of traditional sports. This does not necessarily mean that the sector is acting illegally, but it does mean that, in practice, general provisions of law are being used. In this sense, a bad regulation or an over-regulation can be also a clear danger for an activity currently in development and very dynamic. But a good regulatory framework can provide a definitive impulse to an activity that will economically impact the future of entertainment in the 21st century.
From a legal perspective, which is what I’m here to focus on, it is important to understand who the main players in the industry are, who are we talking about when referring to “the players” in the esports industry. This will give us the starting point for determining the legal position of each of them, how their economic activity is being regulated and whether or not it is necessary to introduce any specific regulation for the protection of the general interest.
The main player in the industry is definitely the Publisher. The Publishers are the owners of the intellectual and industrial property of video games. Its main activity is the development and commercialization of video games for domestic use, but sometimes when the video game also acquires a certain relevance in the field of esports, some publishers also participate in the organization of events or establish some conditions for a competition using their video game. They are clearly “the owners of the ball”. They, so far, decide who, when and under what conditions can organise a competition around their product. This is the characteristic, in my opinion, which differentiates esports from any other type of competition in sports or entertainment, to which we are used to. There is a company that owns the main product on which the competition is based and, therefore, it is necessary to rely on them in any case in order to carry out the economic activity. This is also a big risk. Having control over the main product can sometimes lead to a competitive advantage over other parties when, for example, the Publishers decide to become the organizers of the competition or limit the access to the organisation of competitions with their video game to a limited number of promoters. The main legal relationship of Publishers is with the promoters or organizers of competitions in order to authorize the use of their game in these competitions. There must always be also a cession of intellectual property rights by the owner of the video game in order to exploit the audiovisual rights of the competitions.
COMPETITION ORGANIZER / PROMOTERS
We also have the competition organizers or promoters. They are responsible for designing and organizing the tournaments. The competitive aspect of these tournaments is another of the main characteristics of the esports. The recreational or individual practice of video games itself is not considered to be an esport, but it is the team organization and competition that gives them this characteristic. Naturally, the promoter will have a direct relationship with all participants in the industry, since, on the one hand, they must obtain permission from the Publisher in order to organize the competition with its videogame and establish the competition rules that directly affect the teams registered. In order to be able to recover the economic investment they make, they have to commercialize the audiovisual rights over the competition and seek sponsorships for it. They are also responsible for ensuring the integrity of the competition by implementing anti-doping and anti-match fixing measures derived from betting. Promoters therefore need to resolve a wide range of legal situations in order to be able to carry out their activity with guarantees.
On the other hand, we have the teams. They are entities that hire players to represent them in tournaments. Depending on the degree of professionalization of the teams, and the competitions in which they participate, they are established in a specific legal form. Teams are becoming more and more professionalized in Europe and are incorporating new profiles such as coaches, community managers, psychologists and physiotherapists into their structures. The professional competitions require the teams joining to have a certain legal status. In Spain, for example, most teams participating in official competitions have the legal form of a Limited Liability Company, as there is no specific legal entity to regulate their economic activity.
French regulation defines the professional video game player as someone who competes within the scope of an association or company authorized by the Digital Ministry in exchange for a remuneration. This is the only regulation in Europe that currently grants a specific status to esports players. In other countries, as a general rule, professional players who participate in esports tournaments should be governed by the common labour system in each country if they are working for a team, or by the self-employed worker’s system if they carry out a professional activity on a non-employee basis. Within these contracts, it is key for players to resolve the transfer of their image rights to the teams, or they can also manage this transfer directly with the promoters and sponsors. In addition to their employment contract, players may be subject to certain risks such as injuries, which requires a specific framework to provide them with the necessary coverage.
And we could go on with the rest of the actors but, for the short time we have, I will conclude by raising the question of whether all these legal relationships may need specific regulations or, instead, they can be resolved with the laws and provisions that we already have.
I honestly do not have a clear answer to this question. I think that the only obvious thing is that, given the size that the industry is expected to reach in the next few years, at least, the public authorities must be alert in case their intervention is required. At this point, I believe that it would be necessary to ask the following questions in order to determine whether or not there are situations or areas of esports that will require early action at a regulatory level.
I understand that if the general provisions of law can be applied to this economic activity or if the sector’s own self-regulation through private contracts between actors and industry codes of conduct are working, there is no reason for the states or the European Union itself to enter into regulation.
It should be considered whether or not in all the legal relationships mentioned above one of the parties in a dominant position stands out, allowing it to establish abusive conditions for the rest. As a sector in which legal relationships are complex and where participants can impose their own rules on others based on their dominant position, esports are exposed to anti-competitive practices for the rest of the market, conflicts of interest or collusive agreements that may affect the integrity of the competition and the industry itself. Similarly, the protection of the public interest and of some of the parties that may de facto be placed at a disadvantage within the sector may be a justification for public intervention in the form of regulations. I also believe that we must be careful because an early intervention or a very interventionist regulation in a still developing sector can limit the correct expansion of the sector itself.
To conclude, in the event that the sector reaches a higher degree of maturity and it is considered appropriate to draw up a specific regulation that regulates it, the legislator faces three main ways in which this regulation can be put into effect:
A. The current option is a mix of industry self-regulation and general provisions of local laws in each member country. The main disadvantage of this situation does not come from the self-regulatory side, which, if it works correctly, would not have any legal impediment, but rather from the problem of having a general regulation in cases of very specific legal complexity, such as the organization of sports events or the legal regime of players or clubs. To this should be added the problem of legislative fragmentation that exists within the European Union, but also within each state, since in some countries, such as Spain or Germany, we may have different regulations in each region, which makes it difficult to have legal certainty and stability.
B. Secondly, the legislator can opt for a sector-specific regulation in which it is decided to regulate all aspects of economic activity, or only those that require public intervention to ensure legal certainty and balance of rights between the parties. This last one is the formula chosen in France, in my opinion in a correct way, where two decrees have been published that specifically regulate the organization of competitions and the legal status of the professional esports player. The drawback of the French regulation is that, as I have already warned, the speed at which the sector is evolving means that the regulation may become obsolete in a few months’ time.
C. A third option that powerfully arose in the past, but is increasingly losing strength now, is the consideration of esports as a sport and therefore apply the specific regulations in the field of sports. In my opinion, there are two reasons why this option is getting increasingly pointless:
- In the first place, because it is complicated to frame the esports under the same competitive practice. In the same way that one cannot compete in “sports”, but rather in football, basketball, tennis, one cannot compete in esports, but rather in League of Legends, Call of Duty, Hearthstone, and the interest on these games evolved quickly and each year the esports competition will include new games that, apart from having the common element of using software, they vary greatly. There is no common grounds between these games, and therefore, there cannot be a “discipline” called esports.
- Secondly, videogames are commercial products with an owner, “the owner of the ball”. The publisher is responsible for the specific characteristics of the software, a situation that cannot be compared to any sport and cannot be regulated without clashing in many ways with regulatory scopes such as trademark law, intellectual property, market regulation and the legitimate rights of publishing companies.
Currently, no regulation in the world equals esports with sports.
I hope that at least I contributed to a better understanding of the legal challenges that this industry faces in the short and medium term and I will be happy to discuss and address your questions below.
Thank you very much.”