Safeguarding an Esports Team’s Assets
More than 40 years ago, Stanford University organised the very first electronic sports (esports) tournament for the game Spacewar!, and the top prize for that tournament was a year’s subscription of ‘Rolling Stone’ magazine. Fast forward to 2018 where Newzoo, a leading provider of esports market intelligence, estimates that esports will generate US$922 million in revenue this year. This makes the formation and running of an esports team an increasingly lucrative proposition.
Given the huge monetary and other investments by esports teams and their owners and sponsors, there is a legitimate interest in protecting the team against losing their key assets (i.e. their players), and commercially exploiting these players’ personality rights and intellectual property (IP) rights. This is where the value of a well-designed and written contract between esports team and their players cannot be overstated.
Setting out the player’s responsibilities clearly in writing will also let the players know what is expected of them, and to reduce the risk of them thinking that they are being unfairly exploited or subject to onerous and ambiguous responsibilities, or that they should be paid more for these responsibilities.
For the purposes of this article, we have assumed that the nature of the relationship between esports teams and their players would usually be characterised as one of employer-employee. However, this would of course depend on the specific circumstances of:
- The level of control that the team asserts over the player
- Whether the team or the player owns the “factors of production” (i.e. the esports equipment)
- Economic considerations such as how and when payment is made and if the player shares losses with the team
Contracting with Minors
At the age of 17, Singaporean Gavin ‘Meracle’ Kang Jian Wen was the youngest-ever captain in the professional scene for the popular “DOTA 2” game. Also, Sumail Hassan Syed was just 16 years old when he became the youngest gamer to earn US$1 million in esports earnings. The ability for esports team owners and sponsors to legally bind young esports players is therefore not something that should be glossed over.
Any esports team in Singapore looking to add a talented young player must bear in mind that it can only legally employ a child who is 13 years old and older. Esports teams looking to employ players under 16 years of age will also need to limit the hours of training and introduce timely breaks, as Singapore law requires that no child or young person shall be employed under working conditions “injurious or likely to be injurious to the health of that child or young person”. In the context of esports, such injuries could include repetitive stress injuries, particularly in relation to players’ wrists, back and spine.
Apart from the above, while the Singapore Employment Act states that an individual below 18 years old can enter into a contract of service (i.e. an employment contract), that contract is not enforceable against that individual. This means that a player below 18 years old can enter into an employment contract with his esports team to enjoy the benefits promised under the contract, but the owner cannot enforce the contract against him.
That said, the Minors’ Contracts Act provides that a guarantee given in favour of a minor is enforceable against the guarantor. Therefore, if a minor breaches the terms of the employment contract, the esport team’s owners can enforce the player agreement against the minor’s guarantor, who will often be the minor’s parent, guardian or close relative.
Termination or Loss of Player
There are numerous instances in esports where a star player is poached by other teams, leave abruptly, or is fired by the team for misconduct. In such unilateral, and often hostile, termination of contract, the team loses a valuable asset and potential revenue. In more extreme situations, the team could possibly suffer a loss in reputation, lose sponsors, or end up forfeiting hard-earned tournament invites.
Therefore, to prevent the unplanned departure of a player or to mitigate the consequences and financial losses from such departure, esports team owners should make sure that their esports player contracts provide for issues such as:
(a) Transfer of Players (to prevent poaching or to provide for compensation for poaching)
An esports team will want to have the right to trade or transfer players with and to other teams based on its commercial and sporting needs. An esports player contract should therefore have appropriate provisions to address all the steps and issues in relation to the trade or transfer.
For example, the contract should ensure that the departing player reports to the new team once a trade or transfer has been concluded. This is because the team will only obtain transfer fee or rights to the other team’s player once the departing player’s transfer to the new team is complete.
(b) Post-Contract Termination Compensation (to mitigate losses)
If during the term of an esports player contract, a player chooses to leave the team for reasons not provided for in the player agreement (including to join another team), an esports team will want to be compensated for the time and money invested in the departing player and the opportunity costs it has incurred.
A good esports player contract should therefore spell out the amount that the esports team is to be compensated in the event that the player terminates the contract. However, esports teams should ensure that this amount is not construed as a penalty, in which case it may not be enforceable.
Also, it is advisable to include specific provisions describing the unique skills of the esports player, and the difficulty in replacing him or her. This will help to support the esports team’s right to demand higher compensation, along with other specific legal remedies, as compared to where other parties not possessing such unique skills were to terminate their contracts with the esports team.
(c) Exclusivity of Activities
Because teams might invest a substantial amount in a player, the team might wish to prohibit players from undertaking certain physical activities that could possibly injure the player or cause disruption to the team’s performance.
(d) Dispute Resolution Mechanism
There should be a dispute resolution mechanism in the esports player contract to help resolve any disputes amicably, thereby reducing the likelihood of the team losing players due to disputes or incurring unnecessary risk and expense in resolving disputes.
(e) Renewal or Extension of Contract
It is common for teams or clubs to have an option to renew or extend the esports player contract, and such renewal or extension is usually stated to be entirely at their discretion. This allows the team to be able to limit its liability if a player does not perform, or retain the player if he exceeds performance.
(f) Other Key Provisions
Given the nature of esports, it is highly recommended that esports players are contractually prohibited from gambling or match-fixing, and that the team has the right to summarily dismiss a player found to have participated in such activities.
This is especially when the rules and regulations governing esports and the industry are not fully developed or universalised yet compared to other more developed professional sports scenes.
Personality Rights, Intellectual Property Rights and Players’ Responsibilities
An esports team needs to be able to freely exploit the player’s personality rights and IP rights. This will require the players to cooperate with the esports team’s sponsors, including attending interviews, media appearances, photo and video shoots and other events, as well as to assist the esports team to generate content to maintain and improve the team’s rapport with (and revenue from) fans.
Therefore, the esports player contract needs to clearly state what the player’s content generation responsibilities are. For example, the provision could state that:
- The player should participate in live streams on the Twitch platform for a minimum of 2 hours a day, 5 times a week
- During the live streams, the player should at all times display the sponsor’s advertisements or logos prominently
- The player cannot be publicly seen to be using products made or marketed by competitors of the team’s sponsor
The esports player contract should also clearly state that the team has the exclusive rights to the players’ name, likeness, signature, voice or photographs for marketing and merchandising purposes.
In this nascent industry, there is a range of legal issues that esports teams need practical and commercially-focused approaches on. By safeguarding and securing the team’s players, teams will be more attractive to sponsors and investors. Teams will also be able to build and improve the trust and rapport with its players, which will incentivise a team’s best players to remain with the team.
The author would like to acknowledge the invaluable contributions of Mr. Loke Yan Chao in respect of the authorship of this article. Mr. Loke is an economics and law graduate, and an esports enthusiast.