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Contracts in the E-Sports Sector

The further you get into technology, the further you go into gaming. That’s the general rule

Nick Johnson

Millions of people around the world play video games as an avocation, but to some skilled players gaming means much more than just a leisure activity. This birthed the arena for professional video gaming called ‘E-sports.’ E-sports or electronic sports is an organized form of video game competition which is played by professional players, either in a team or individually, wherein the players usually belong to sporting organizations. Initially, E-Sports gained popularity in China, South Korea and other Asian countries. But by 2010, it became a significant part of the E-Sports industry all over the world with many game developers actively funding tournaments and other events. In recent years, India has emerged as one of the most lucrative markets for the growth of esports. With the growth of professional gaming in India, improved infrastructure in the form of increased number of avenues for gamers and increasing internet penetration, gaming has become a viable professional career choice.  Numerous start-ups like JetSynthesys, FanMojo and Cobx Gaming along with investments by Google and Yahoo has led to better opportunities and has helped in the establishment of the esports industry as an investor-friendly avenue in India.[1]

Undoubtedly, Esports is characteristically different from traditional sports but since it is a thriving industry, it becomes necessary to understand the intricacies of contracts esports players enter into. In India, Esports Federation of India (ESFI) holds a significant position as a governing body for Esports because it shares its membership with the International e-Sports Federation (IeSF).[2]

Esports Contract

An esports contract is akin to any other employment contract, which is designed to set out the player’s working conditions, duties, liabilities etc. Esports contracts resemble the traditional sports contracts but since this industry is not governed by a well-developed regulatory framework, the contractual stability of eSports players is not well-protected. Without any definite regulations, eSports industry is solely reliant on contracts which take place between the players and the eSports teams (or clans).[3]

The specific provisions[4] which should be considered while developing a esports contract are:

  • Player obligations- This provision is present in every such contract as it specifies the obligations of the player participating in tournaments of a team’s choice. The player has to wear the team apparel and other accessories while representing the team, participate in certain hours of training per day either with teammates or individually, depending upon the type of game, and participate in sponsor events and promotions. The number of hours of practice session is a point of negotiation for both the parties as the teams often mandate 12-15 hours of practice sessions.  Moreover, players have their own fan base and popularity and to maintain it, they are obligated to attend certain events, give interviews etc. It is important for the contract to include all the information related to such responsibilities to avoid any future conflicts.
  • Player services and restrictions- This is the most important clause as it deals with all the services which the player is expected to provide. Apart from participating in competitions and leagues, a player might also be required to create video content, participate in sponsor events, promotion events etc. The clause should mention all the services exhaustively, for example, the amount of content, in terms of streaming hours that a player needs to create. A team can also put restrictions on a player regarding his participation in competitions. Earlier, teams used to prevent their players from having individual endorsement deals but that is not the case anymore. The players are also expected to follow the rules and regulations of the competition and the violations of the same are subject to fines which are deductible from the remuneration of the player.
  • Non-disparagement clauses- A non-disparagement clause restricts the players from taking any action that will negatively impact the team or its organization.  These clauses protect teams and its sponsors from defamatory remarks by players who are party to the contract. One such case occurred in 2019 when a popular eSports organization, Faze Clan, sued a professional Fortnite player, Tenney, by claiming that he had violated the non-disparagement clause by publicly disparaging the company.[5]
  • Morality clauses- This clause outlines the code of conduct to be followed at social events or during tournaments by the players. Since eSports players are recognized internationally, it is important to include a morality clause in order for the players to respect the cultural sensitivities of different countries.
  • Remuneration and other benefits- This clause in the contract deals with the monthly salary of the player and all the other expenses which are covered by the team. The teams’ organization has to pay for all the competition related expenses of the players and the coaches. The clause includes performance related bonuses as an additional remuneration.
  • Termination and Renewal clause- Such clauses typically include obligations of the players post-termination such as return of equipment, settlement of all dues, deletion of confidential data, non-disparagement obligations etc.  It includes the requirements for termination and renewal of a contract with the player. In case of early termination of the contract, a buyout clause is included in the eSports contract to quantify the value of the remaining contract period of the player depending on the amount of investment made by the team. The teams can also prohibit its players from negotiating with other teams during the period of the contract and include a ‘non-compete’ clause.
  • Equipment- This clause particularly deals with the specifications of the equipment provided by the team’s organization to the player for the duration of the contract.
  • Confidentiality clause- This clause gives protection to the teams’ sensitive information and obligates the employee to keep such information confidential. It gives an assurance to the organization that the players would not disclose any sensitive information to the public or competitors. This clause is present in any type of employment contract.
  • Revenue sharing- The method of sharing revenue earned amongst the team members and the team also forms an important part of the contract. Players are guaranteed a percentage of the earnings of the team through sponsorship, prize money, streaming, sale of merchandise etc. The player can either be provided with a higher percentage of earnings in comparison to the team or a lower percentage. The revenue from sponsorship is also shared with the players at times, which has to be explicitly mentioned in the contract.
  • Intellectual property clause- Digital athletes have a virtual identity which is different from the team they are becoming a part of. This virtual identity comes under the ambit of intellectual property laws. The player should ensure that he/she has maximum control over their brand and must ensure his rights over the ownership of trademarks rights in the gamertag, phrases used by them, ownership of their gaming accounts, past content etc. If a player has an exemplary performance record, he may negotiate for additional compensation.
  • Loans- The teams can loan out their players to other teams for a limited period of time. A provision for the assignment of obligations under the contract to the new team should be included along with the procedure for potential player loans in order to avoid disputes in the future.
  • Roster Management- The contract with the player has to specify the roster of the team, the substitutes and the reserves. Most issues in eSports contracts arise due to benching of the player which affects their remuneration. In 2019, CS:GO player Owen Butterfield, an eSports player had his salary reduced from $2000 to $700 due to being benched by the team, which affected his entire career as an eSports player.[6] Prolonged benching without any prospect of participating in competitions is a valid ground for termination of the contract.

Legal issues in eSports contracts

The primary issue which occurs in the case of eSports contracts is the age of the player. eSports players are usually below 18 years of age. The Indian Contract Act, 1872 states that a minor, that is a person below 18 years of age, is incompetent to contract and such contracts are void. However, this would just make the contract unenforceable against the minor and not illegal. Secondly, the enforceability of provisions like non-compete clauses beyond the term of the contract may be declared void as it goes against Section 27 of the Act which states that agreements which restrain others from carrying out their trade is void.  Prolonged benching without explanation is also considered to be a restraint of trade as held in the case of V.F.S. Global Services Ltd. v. Mr. Suprit Roy.[7] In light of such issues, the teams include a negotiation period prior to the end of the contract where the parties are given a chance to negotiate a renewal.

Players in eSports contracts are treated as independent contractors and not employees, however, in the event of a dispute, a court has the power to evaluate the true nature of the contract even if the contract was structured as the one relating to an independent contractor. The greater the control exerted by the team, the more likely it is to be treated as a contract of employment which was held in the case of Ram Singh v. Union Territory of Chandigarh. [8]

Conclusion

India is still at a nascent stage in the development of eSports. One of the reasons behind the slow growth is the weak organisational management of eSports in the country. There is a need for Governmental support in order to prevent the exploitation of young players. The government needs to play the role of a parent and help the industry grow to its full potential. eSports is certainly evolving to become a viable career option for virtual gamers and the Indian eSports industry is on its way to become a lucrative avenue for gaming in the future owing to the rich resources and exposure available today, to gamers. A unanimous consent is needed to formulate regulations for the eSports industry in order to ensure sustainability of this industry.


[1] Armaan Vinod, “The Indian eSports pie, and why everyone wants a piece of it”, The Bridge (Feb. 18, 2018), https://thebridge.in/esports/indian-esports-pie-why-everyone-wants-piece/.

[2] Anubhav Pandey, “Legal Framework Regulating eSports in India”, iPleaders (Oct.12, 2018), https://blog.ipleaders.in/esports-in-india/#:~:text=Esports%20Governance%20in%20India,Electronic%20Sports%20Federation%20(AESF).

[3] Kartikey Bhalotia, “Treatment and Regulation of eSports in India” International Journal of Legal Developments and Allied Issues (Mar.26, 2019), https://thelawbrigade.com/sports-law/treatment-and-regulation-of-esports-in-india/.

[4] “eSports Player Contracts: Common Clauses and Potential Legal Issues in India”, IKIGAI Law (Jun.18, 2020), https://www.ikigailaw.com/e-sports-player-contracts-common-clauses-and-potential-legal-issues-in-india/#acceptLicense.

[5] Julia Alexander, “Faze Clan sues Fortnite star Tfue claims he earned more than $20 million from streaming”, TheVerge (Aug.1, 2019, 4:06 PM EDT), https://www.theverge.com/2019/8/1/20750678/faze-clan-tfue-lawsuit-20-million-streaming-earnings-rival-esports-team.

[6] Ellen M. Zavian and Jim Schmitz, “Genesis of an Industry: The Emerging Workforce and Regulation of eSports”, ACC Docket (Apr.4, 2019), https://www.accdocket.com/articles/emerging-workforce-and-regulations-of-esports.cfm.

[7] V.F.S. Global Services Ltd. v. Mr. Suprit Roy 2008 (2) BomCR 446 (India).

[8] Ram Singh v. Union Territory of Chandigarh, (2004) 1 SCC 126 (India).


Cite this article (The Bluebook 20th ed.)-

Mona Das, Contracts in the E-Sports Sector, Ex Gratia Law Journal, (September 1, 2020), https://exgratialawjournal.in/blawg/sports-law/contracts-in-the-e-sports-sector/.

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Author

Mona Das
Student - NMIMS School of Law, Mumbai