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Play by play – an introduction to esports, monetisation and IP rights

Published 08 June 2020 By: Rory Scott, Jonathan Coote, Leigh Smith, Chris Yates

The Covid-19 pandemic brought traditional sport, on a global scale, to a standstill. As governments sought to control the spread of the
virus, high profile leagues and tournaments (both international and national) around the world were cancelled, suspended or postponed.
A void has emerged, as major international events like the 2020 Olympics and 2020 Euros have been moved into a packed 2021
calendar, with the hope that a sense of normality will have returned to the sporting schedule to allow them to go ahead.

Esports has not been immune to the consequences of the pandemic, with live events cancelled, postponed or replicated online[1] and
projected revenues down (although only in the short term).[2] However, global interest in esports has intensified as sports leagues
worldwide have turned to esports to continue their engagement with fans. NASCAR led the charge with its iRacing series, with drivers
competing digitally through a simulation platform. Formula 1 launched the F1 Esports Virtual Grand Prix series (with virtual races
running in place of every postponed Grand Prix) and the English Premier League's inaugural ePremierLeague Invitational (in which
celebrities and Premier League players represented their team in a knockout tournament to raise money for charity) attracted 150
million viewers across platforms including YouTube, Twitch, Facebook, Twitter and Sky Sports live. It has even been suggested that
Covid-19 may lead to the normalisation of esports, thanks to the "unprecedented (and accidental) adoption of esports by broadcasters,
leagues and athletes seeking to engage fans".[3]

This article provides an introduction to the world of esports, the key stakeholders involved and some of the challenges facing an
industry that was expected to reach a global audience exceeding 440 million viewers last year[4] and is forecast to generate between c.
US$1.8 billion[5] and US$3 billion[6] in revenue by 2022. In particular, we look at the monetisation of esports, and how intellectual
property (IP) rights (and the enforcement of such rights) will be of seminal importance for the key stakeholders involved, as well as
shaping how the industry develops in the years to come. The sub-sections in this article are:

What is esports?
The rise of esports
Who are the key stakeholders?
Monetising esports – revenue streams
Monetising esports – the importance of IP rights and their enforcement
What next for esports?

The authors are aware that readers will have varying levels of knowledge about esports. Readers who are already familiar with the
basic ecosystem can skip straight to the sections on monetisation.
What is esports?
There is still no harmonised definition of esports. For the purposes of this article, we define esports as the playing of competitive video-
games by professional gamers, in an organised format (a tournament / league) and with a specific goal (a title / prize money). Esports is
an umbrella term for an industry covering hundreds of different video-games.

It is important from the outset to be cognisant of the difference between esports (as defined above) and "gaming". Indeed, conflating the
two is a common misconception. Gaming is a far broader term, encompassing the playing of video games, whether competitively or
non-competitively, whether offline or online and whether in single player or multiplayer mode. [7] To draw an analogy with football,
gaming lies on a spectrum that encompasses a child practicing "Keepy Ups" in his garden, a local football team playing in a competitive
5-a-side tournament and a football freestyler duo streaming their latest skills and moves online. Esports is a competitive professional
league or tournament, such as the Champions League, Bundesliga or the FA Cup.

This distinction is also important when considering the two types of professional gamers:

1. Competitive professionals – i.e. elite gamers who participate in esports, whether as an individual or as a member of a team, to win
tournaments / leagues; and
2. "Lifestyle" gamers – i.e. skilled (but not necessarily elite) gamers who broadcast their day-to-day gameplay on digital channels
and live streaming platforms to fans / subscribers, and whose ultimate goal is to entertain viewers, whether they win or lose.

Whilst there are gamers who transcend the boundary between the two types of professional gamer, the majority of gamers will fall into
either one of the two brackets. In this article, our focus is on esports, and therefore the former rather than latter bracket. However, this is
not to understate the importance of lifestyle gamers to the esports industry, who may nonetheless sign to professional esports teams, as
part of those teams' broader business models – for example, to attract sponsors and fans, sell merchandise and produce entertainment
content.

Esports, whilst a relatively nascent industry, challenges established conceptions of what constitutes a "sport" (although whether esports
can be appropriately classified as a "sport" remains a controversial topic), but also offers new and varied investment opportunities to
current and prospective market participants. Esports undoubtedly shares many of the fundamental characteristics of traditional sport,
however its idiosyncratic features require a more bespoke approach in a number of respects, particularly in relation to monetisation.

The rise of esports

In 1972, the first known esports event took place at Stanford University, with students competing at "Spacewar", a space combat video-
game. The winner took home a year's subscription to the magazine Rolling Stone. Fast-forward to 2019, and 16-year old Kyle "Bugha"
Giersdorf scooped US$3 million for winning the Fortnite World Cup solo final, the largest prize ever for a single player at an esports
tournament. To place this into context, Bugha's prize exceeds that awarded to Novak Djokovic for winning Wimbledon 2019 (US$2.91
million) and Tiger Woods for winning the 2019 Masters (US$2.07 million). Moreover, the US$3 million won by Bugha was a mere
fraction of the US$100 million prize pool set aside by Epic Games, creator of Fortnite, for all Fortnite esports tournaments held during
the course of 2019. Less than one month after Bugha's victory, five-man team "OG" triumphed at The International (a Dota 2
tournament) in Shanghai, with the team sharing the US$15 million first place prize and captain Johan "N0tail" Sundstein becoming the
top prize-winning esports player of all time, with estimated career winnings of almost US$7 million.[8]

Esports competitions are played in front of spectators, who can watch in-person or via online streaming. These audiences can be vast.
By way of example, 60 million unique viewers watched the Grand Final of the 2018 Mid-Season Invitational, a League of Legends
tournament hosted by Germany and France.[9] According to a recent report by Goldman Sachs, esports has been elevated "into
mainstream culture as a legitimate professional sport with a massive global following".[10] This global following includes major
celebrities and professional sportspersons, which in turn further raises the profile of esports. For example, in early 2020, Real Madrid's
Gareth Bale launched his own esports team, Ellevens Esports.

Who are the key stakeholders?

Video-game publishers: video-game publishers produce, release and own the IP in the games they publish, and thus control the
content of the games (including updates to the games subsequent to initial release).[11] For publishers, esports represents a way
of deriving revenue from their principal assets – their IP rights in the games – by licensing the use of those rights. The primary
purpose of such licensing may be direct (a distinct revenue stream under the licensing contract), indirect (using esports to
generate interest in the game to drive sales) or a combination of the two.

Competitions and leagues: publishers may also run esports competitions and leagues (for which they control the structure and
rules) or alternatively license the rights to run and broadcast such competitions to third parties. High profile examples of the former
include the creation of the Fortnite World Cup by Epic Games, the formation of the League of Legends Championship Series and
the League of Legends European Championship (the North American and European leagues, respectively) by Riot Games and
the subsequent launch of the Overwatch League by Blizzard. An example of the latter is ESL (formerly the Electronic Sports
League), which is the largest organiser of esports competitions worldwide (e.g. ESL One).
 Team owners / franchises: for those video-games for which leagues have been created, the publishers can also sell "teams" that
can participate within those leagues to third parties (similar to the US sports "franchise" model). By way of example, Activision
(Blizzard's parent company) sold the first twelve teams in the Overwatch League for US$20 million, and subsequently sold eight
further teams for a reported US$30 – 60 million each, with each team based in a global city, and the teams split into a Pacific
division and Atlantic Division, respectively. Activision targeted current owners of major sports teams as prospective team owners,
including Kroenke Sports & Entertainment (Los Angeles Gladiators)[12] and the Kraft Group (Boston Uprising), who have
experience in generating revenue from local and global fanbases.[13]

Teams: in addition to the "teams" which are sold to third parties, teams exist in the more conventional sense, i.e. a collection of
players competing on the same side against other groups of players. Teams often compete across various platforms and video
games. The top three highest earning teams of all time are "Team Liquid", "OG" and "Evil Geniuses", with cumulative prize
winnings totalling close to US$90 million. Team Liquid, which has multiple divisions dedicated to the most popular esports games,
is majority owned by aXiomatic, an ownership and management group created by an array of top traditional sports team owners
which offers investment services in the esports industry. Teams may seek to obtain IP rights in relation to their players under the
contracts with those players. As with traditional sports athletes (such as elite footballers, golfers and tennis players[14]), esports
players have become increasingly attune to the fact that they are not just professional gamers, but also valuable media assets.

Players: the number of professional esports players has grown rapidly in recent years. They can earn income through
sponsorship, prize money and team salaries (for members of a team which pays a guaranteed salary). Substantive player salaries
are likely to encourage more gamers to consider pursuing esports as a professional career,[15] which in turn results in higher
quality gameplay and increased fan interest. Furthermore, unlike in traditional sports, lifestyle gamers can also earn income
outside of the esports context through streaming services. The highest profile example is Richard Blevins, better known by his
online alias "Ninja", who earns an estimated US$500,000 per month from streaming and commenting on gameplay.

Online streaming services: major technology companies including Amazon (Twitch), Google (YouTube) and Tencent (Douyu and
Huya) own or have heavily invested in streaming services which can broadcast competitive and lifestyle gameplay. Facebook has
recently launched a dedicated Facebook Gaming app in an attempt to challenge these dominant players and firmly establish itself
in the gaming and esports world. Twitch is the largest streaming platform, averaging in excess of one million concurrent viewers
watching its subscription-based content every second over the course of 2018. Online streaming services contract with publishers
(whether on an exclusive or non-exclusive basis) for the rights to stream gameplay. Live streaming platforms have experienced a
surge in growth as a result of the Covid-19 pandemic; for example, Twitch exceeded 3 billion hours watched (in a single quarter) in
Q1 2020 for the first time.[16]

Traditional broadcasters: some traditional broadcasters, in addition to online streaming services, have also begun contracting
with publishers in order to broadcast gameplay. However, such broadcasters have thus far had a difficult task in converting the
digital native fans of esports away from streaming services; research conducted by Nielsen found that 61% of esports viewers on
Twitch did not watch TV on a weekly basis.[17] Whilst Disney, ESPN and ABC began broadcasting the Overwatch League in
2018/19, it was exclusively licensed to YouTube by Activision Blizzard in early 2020.

Traditional sports team and leagues: professional sports teams and leagues have also started investing in esports, capitalising
on their unique IP rights (by licensing them to publishers), brand awareness and experience to find new audiences through
esports. For example, NBA and Take Two Interactive (the publisher of the NBA 2K franchise) entered into a joint venture to create
an esports league for NBA 2K; with 23 of the NBA's 30 teams currently participating in the NBA 2K League. In 2019, all NBA 2K
League games and tournaments were livestreamed on the NBA 2K League's Twitch and YouTube channels, with the NBA 2K
League Finals re-aired in China through Tencent.

Monetising esports – revenue streams

The total annual revenue for the esports industry in 2019 was projected to reach c. US$1.1 billion; 42% from sponsorship, 23% from
media rights, 17% from advertising, 9% from merchandise and tickets and 9% from publisher fees, representing year-on-year growth of
34%, 42%, 15%, 22% and -3.0%, respectively. The fastest growing esports revenue stream is excepted to be media rights, with a
compound annual growth rate (2017 – 2022) of +39.6%, compared to sponsorship's +28.4%.[18][19] Esports' revenue generation
therefore differs from traditional sports' widely recognised 40:40:20 revenue split model (covering media rights, sponsorship and
gameday income, respectively), with the expectation that in the coming years esports will be far more reliant on media rights, and far
less reliant on gameday income, than traditional sports.

Media rights
As the popularity of esports increases, the number of streaming services and traditional broadcasters seeking to secure distribution
deals to broadcast esports competitions and leagues, and the value of those distribution deals, is expected to increase.

Distribution deals have already been signed for significant sums. In early 2018, Twitch secured exclusive rights to broadcast the first two
years of the Overwatch League worldwide (bar China) for US$90 million, representing a higher annual figure than the US$300 million
paid by BamTECH (Major League Baseball's video streaming company) to Riot Games in late 2016 for the streaming rights to League
of Legends until the end of 2023. Facebook has also entered the fray, securing an agreement with ESL for exclusive broadcast rights
for ESL's Counter Strike: Global Offensive Pro League.
One advantage that streaming services and traditional broadcasters currently have over publishers in negotiating distribution deals is
that the esports industry is fragmented, with the IP for each video-game belonging to the relevant publisher. Thus, a traditional sports
league like the Premier League or the NFL can collectively bargain on behalf of all teams within their league, in a way that isn't
applicable in the gaming industry.

However, streaming services and broadcasters have had to adapt to address the challenge of seeking to monetise an industry which
has always operated on a freemium model – i.e. esports have always been free to air. Implementing subscription models risks losing
audience members – which has knock-on implications for sponsorship – thus making striking the correct balance a complex commercial
path to navigate.[20]

Sponsorship
Sponsorship is the primary revenue source for many of the key stakeholders mentioned above and lends credence to the suggestion
that esports is currently over-reliant on sponsorship as a revenue stream, although this is expected to change as revenue from media
rights increases. Sponsorship deals may be struck with individual players, teams, competition organisers and/or video-game publishers.

Until relatively recently, the vast majority of sponsorship of esports was from endemic brands (i.e. brands that create products required
to produce or used to play esports), such as software manufacturers and consumer electronics brands. In 2017, approximately 65% of
event sponsorship deals and 88% of team sponsorship deals were signed with endemic brands.[21] In 2019, Intel extended its
partnership with ESL through to 2021, with the two parties intending to invest over $US100 million over a three-year period.

However, as the popularity of esports has increased, the infrastructure of the competitions / leagues has become more established and
non-endemic brands have improved their understanding of the esports industry, sponsorship has come from a broader variety of
sources, with the interest of a greater number of mainstream brands piqued. The fact that esports audience members are a coveted
demographic – with approximately 79% aged under-35[22] – has undoubtedly played a role in this increased interest, particularly given
that this demographic is one of the hardest to reach through traditional media.

Thus, we have seen Mastercard become the first global sponsor of League of Legends (a game already sponsored by Coca-Cola), T-
Mobile and Toyota sponsor the Overwatch League and Paypal partner with Rainbox Six Siege.[23] Esports teams Cloud9 and Ninjas in
Pyjamas are sponsored by Puma and Betway respectively (with the company's logos emblazoned on the teams' kit), whilst Jian "Uzi"
Ziaho (a League of Legends player) has signed an endorsement deal with Nike.[24]

Advertising
Esports currently offers a wide array of advertising opportunities, for a number of different stakeholders. Streaming services such as
Twitch and YouTube Gaming generate substantial revenues through advertising, with streamers also able to monetise their activity,
whether by charging flat fees or entering into partnerships with streaming services.

There is also a prospective line of monetisation for publishers: in-game advertising. This would require the video-game publishers to
code adverts, or even team sponsorship, into the games themselves. This could be done generically or specifically for esports
competitions.

At the end of May 2020, Riot Games announced that they would display in-game digital sponsorship banners (the "Summoner's Rift
Arena Banners") during League of Legends esports broadcasts, with MasterCard and Alienware among the first brands that will feature.
The sponsorship banner will appear in multiple locations across the in-game map and can change appearance throughout a match.[25]
Moreover, Riot Games have given each of its twelve regional leagues the ability to have different in-game sponsors. Riot worked with
Nielsen to evaluate their approach to in-game sponsorship, with the data allegedly indicating that "it will become one of its most
valuable deliverable assets."[26] [27]

In-game advertising is not currently covered by any specific broadcasting or advertising code, but issues remain that could affect this
potential revenue stream for publishers, including:

The extent to which publishers are reticent to change the aesthetic look and feel of their games by allowing in-game advertising;
The potential backlash from gamers in response to in-game advertising;[28]
Limitations on the types of advertising allowed due to the advertising laws in certain countries (e.g. restrictions on advertising
alcohol, gambling, tobacco, etc)[29] and the demographic of video-gamer users (i.e. minors); [30] and
The hesitance of brands to advertise within certain types of games, such as violence-based video-games.

Riot Games' approach indicates they are particularly attuned to the first two issues referenced above. Whilst the sponsorship banners
will be visible to those watching the esports broadcast, it will not impact the professional gamers themselves. In addition, David Higdon,
Riot Games' global head of communications and esports, noted in response to fan concerns about the level of in-game sponsorship
integration that: "We'll be very careful on how we innovate around it… Let us know what you think when you watch it this summer. We'll
adjust as needed."[31]

If in-game advertising grows as publishers seek to monetise further by leveraging in-game "real estate", this will create a host of issues
surrounding advertising standards and the enforcement of IP rights.
Merchandise and tickets
Whilst a smaller portion of the annual revenue of the esports industry is attributed to merchandise and ticket sales, this is nonetheless a
revenue stream that has seen strong growth. In 2018, the Overwatch League entered into a multi-year deal with sports merchandise
company Fanatics, whilst for esports team 100 Thieves their apparel business line is one of their three primary revenue sources
alongside competitive gaming and entertainment and media.[32]

Monetising esports – the importance of IP rights and their enforcement

Esports has a notable advantage over traditional sports in respect of monetisation; the video-games underpinning the esports benefit
from significant copyright protection. The Court of Justice of the European Union has held that the act of performing a sport cannot be a
copyright work in and of itself as it does not satisfy the requirement of "originality".[33] This has historically created major issues for
traditional sports broadcasters in dealing with online piracy for unauthorised live streaming of fixtures. Broadcasters of traditional sports
rely on the fact that the broadcasts of footage of sports events are protectable as copyright work. Broadcasters also bolster their
protection through the inclusion in the footage of opening clips, anthems and trade marks to demonstrate a breach of IP rights.[34]

In contrast, in the world of esports, the "sport" (i.e. the video-game) typically consist of a number of separate copyright works, each of
which can be controlled by the owner and/or its licensee(s). For instance, under English law, these may include:

in-game images;[37]
in-game text;[36]
source code in the game or parts thereof;[35]
in-game films;[38]
characters;[39]
musical score;[40] and
music recording.[41]

In addition, logos and brands used to distinguish the video-games may be protected as trade marks (whether registered or
unregistered).

Esports stakeholders are therefore afforded multiple layers of protection that can be used as part of an enforcement campaign to
protect commercial interests.[42] However, the competing interests of the different stakeholders (as highlighted below) is a major factor
to take into account in relation to enforcement, and which may have a concomitant impact on the monetisation of the esports industry.

Further complexity is introduced where the video-games feature real players, who themselves may have rights in their likeness. In
addition to rights under licences with publishers, esports leagues, competition organisers and broadcasters will also have their own
distinct IP rights – for example, esports broadcasters typically film game screens and the players themselves, meaning they own
copyright in that footage and broadcast (which in turn is dependent on the broadcaster having the rights to feature the game in that
footage). There are therefore a broad variety of rights that may be infringed upon.

When you consider that the fastest growing esports revenue stream is expected to be media rights, the importance of stakeholders
being able to adequately enforce their IP rights when infringed is underlined. However, given the myriad of rights and competing
interests involved, it is critical that esports stakeholders have a clear understanding of and properly negotiate:

1. The extent of (and limitations to) their IP rights;

2. Their ability to take enforcement action when IP rights are infringed;
3. Their responsibility to take enforcement action when IP rights are infringed; and
4. The implications of taking, or failing to take, enforcement action.

Streaming
Streaming serves as a useful illustration in this respect. Unlike traditional sports, which have generally taken an assertive approach in
enforcing their IP rights, enforcement activities in esports and videogaming have often been more restrained.

Publishers have been historically reluctant to stop what are known as "let's play" videos; videos distributed online where gamers
commentate on themselves playing a particular game. For publishers, this constitutes free promotion and advertising and can boost the
popularity of their games, which can in turn increase revenues by: (a) facilitating sales of the games; and/or (b) increasing the number
of in-game microtransactions.[43] Furthermore, assuming in-game advertising becomes a more widespread phenomenon, "let's play"
videos will increase exposure to such advertising, which may lead publishers to try and leverage such exposure in contract negotiations
with advertisers.

However, even for publishers, there have been limits to their tolerance for such videos. "Let's play" videos are typically governed by the
terms of the relevant End User Licence Agreement, which often set out an exception for "non-commercial" use. Thus, in 2013, Nintendo
began claiming all advertisement revenue[44] on user-generated "let's play" videos uploaded to YouTube that featured Nintendo's
content. Nintendo publicly positioned this as a reasonable balancing exercise; allowing fans to continue enjoying Nintendo content on
streaming platforms (i.e. not blocking gamers in totality from using Nintendo's IP), whilst simultaneously asserting its right to monetise
its IP. The gaming community disagreed. Following an outcry[45], Nintendo set up the "Creators Program", which offered video creators
between 60% and 70% of the advertisement revenue[46] (depending on whether the creator registered and posted the video to
Nintendo-specific channels) generated from the video. In 2018, Nintendo rolled-back even further from its position, announcing it was
halting the Creators Program in its entirety and that – provided video creators followed a new set of "basic rules"[47] – they could retain
100% of any advertisement revenue generated. In the associated press release, Nintendo seemed to acknowledge the role played by
such video creators, stating: "We appreciate and encourage the continued support of content creators, and thank them for their
dedication to helping us create smiles".[48] Nintendo came to understand that the reputational damage of taking enforcement action
outweighed the advertising revenue claimed.

By contrast, competitions and broadcasters may take a very different approach to enforcement than video-game publishers, which is
reflective of their differing commercial interests. Esports broadcasters typically film both game screens and the players themselves; they
therefore own copyright in the filming and broadcast itself and are able to use the content of the game under licence from the publisher.

In January 2018, esports competition organiser ESL had an exclusive deal with Facebook to stream ESL's Dota 2 competition. When
gamers began streaming gameplay from the tournament (overlaid with their own commentary) on rival streaming platform Twitch, ESL
elected to issue "takedown notices" pursuant to the US Digital Millennium Copyright Act (DMCA), informing Twitch that it was hosting
copyright-infringing material. In order to shield itself from liability, [49] Twitch removed the offending streams. However, Valve (the
publisher of Dota 2) responded by announcing that only they were able to issue such takedown notices in relation to the "infringing"
streams.

This confusion stemmed from the fact that whilst both ESL (the competition organiser) and Valve (the publisher) held IP rights in
elements of the broadcast of the competition, the ability to issue a takedown notice was dependent upon the specific nature of the
material being "infringed", as well as the terms of the licence provided by Valve to ESL. ESL held an array of copyrights in various
elements of the broadcast of the competition, but the gamers were not violating these rights through their streams. Whilst the gamers
were streaming the same gameplay that ESL was broadcasting (with its own commentary overlaid), they were not streaming the ESL
broadcast (or elements of the broadcast) itself. Thus, absent the terms of a licence granted by Valve specifying that ESL had rights vis-
à-vis the actual gameplay, ESL did not have the ability to issue takedown notices in relation to the streams.

This incident demonstrates the importance of esports stakeholders having a comprehensive understanding of IP rights and being
aligned on the approach to enforcement. It stressed the importance of clear contractual and practical mechanisms to ensure the smooth
exploitation and enforcement of the broadcast. It also highlights the attendant implications for the growth of media rights revenue in the
esports industry:

Competition organisers: if competition organisers (ESL) can't enforce their IP rights, there is little commercial sense in
broadcasters (Facebook) paying substantial sums for exclusive streaming rights. This will affect the monetisation of such
competitions. Competition organisers therefore need to carefully assess their IP rights to ensure their commercial interests are
adequately protected, as well as obtaining appropriate permissions from other rights holders to address any lacunae in such
protection.

Video-game publishers: if video-game publishers (Valve) are unwilling to enforce their IP rights to protect the interests of
competition organisers, or alternatively to grant competition organisers rights under the relevant licence that affords adequate
protection to their broadcasts, the value of such licences substantially diminishes. At the same time, video-game publishers must
also be careful not to alienate the gamers on whom they rely to promote their content and who may encourage criticism of the
publisher within the gaming community. If publishers are unwilling to engage with this issue by formulating a clear policy on the
permissible content of streams of competition gameplay, and continue to take a back-seat approach to enforcement, their interests
will come into direct conflict with those of other stakeholders. This potential conflict is particularly pertinent in circumstances where
the video-game publisher is also the competition organiser, and therefore has a direct relationship with the broadcaster.

Streaming platforms hosting "infringing material": Streaming platforms (Twitch) should continue to comply with takedown
notices when presented, as they are reliant upon the safe harbor afforded by the DMCA[50] (and equivalent legislation elsewhere)
to shield themselves from liability. There is simply too much content on streaming platforms to proactively identify all infringing
content. Streaming platforms should also comply with any counter takedown notices properly filed by streamers. As an industry,
stakeholders should cooperate to develop fast and effective mechanisms to identify illicit streams, building on work such as digital
watermarking which has been done in the context of traditional sports broadcasting. This is particularly relevant in the context of
Article 13 of the EU Directive on Copyright in the Digital Single Market,[51] which will require service providers (i.e. streaming
platforms) to implement measures to protect content and ensure effective content recognition technologies.

Streamers: Streamers should look to policies issued by publishers to understand the limitations on the content that their streams
can contain. If a streamer believes their content has been improperly removed through a takedown notice, they should file a
counter takedown notice.

What next for esports?

There is no sign of esports' rapid expansion slowing down. To the contrary, a recent report by Goldman Sachs highlights that the
industry remains heavily under-monetised relative to its audience potential. According to the report, the total online population is over
3.65 billion persons globally, 2.2 billion of which are gamers; esports viewers currently represent only a fraction of the online population
(c. 5%), suggesting there is plenty of scope for audience growth.[52]

As revenues increase, fuelled by larger audiences and audience engagement, we expect to see the industry mature, with further
investment driving the implementation of greater organisation and more sophisticated infrastructure, the entrance of further major
brands into the arena and larger prize pools. Activision (through Blizzard) and Tencent (through Riot Games) have led the way, targeting
the investment of current owners of traditional sports teams, in order to utilise their knowledge of how to generate increasing financial
returns, including revenues from those teams' regional support bases. As the professionalisation of the industry continues apace,
increased monetisation will follow. Global wagering on major esports titles, already estimated at US$5.5 billion in 2016, is now projected
to approach $13 billion this year.[53]

According to PwC's Sports Survey 2018, the traditional sports industry is keeping a keen eye on the esports industry; over 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 by participants as the sport with the highest
potential to grow revenues globally, comfortably beating both football and basketball into second and third place, respectively. When you
consider the esports audience demographic, in conjunction with the fact that in excess of 70% of participants believe the biggest threat
to the traditional sports industry is the shift in the consumer behaviour of younger generations, it is unsurprising that esports has now
become too commercially relevant to be ignored.[54]

The International Olympic Committee has now recognised esports as a "sporting activity" and is exploring the possibility of including
esports in future Olympic Games. Esports may be a demonstration sport at the Paris 2024 Olympic Games and it will be a medalled
event at the 2022 Asian Games. And in early May 2020, the Commonwealth Games Federation agreed an exploratory partnership with
the Global Esports Federation to develop a Commonwealth Esports strategy.

The esports industry is an attractive and exciting market that transcends both sport and technology. However, the industry remains an
emerging one. At this stage of its development, it is absolutely critical that adequate consideration is given to the legal and commercial
issues raised by the interrelationship between, and enforcement of, various industry stakeholders' different IP rights. The industry will
need to wrestle with these complex issues as it continues its rapid expansion.

References
[1] Daniel Kozelko, ‘COVID-19: how is esports coping compared to traditional sports?’ lawinsport.com, 8 April 2020, last
accessed 8 June 2020, https://www.lawinsport.com/topics/sports/esports/item/covid-19-how-is-esports-coping-compared-to-traditional-
sports?category_id=672

[2] https://newzoo.com/insights/articles/newzoo-coronavirus-impact-on-the-esports-market-business-revenues/

[3] https://www.weforum.org/agenda/2020/05/covid-19-taking-gaming-and-esports-next-level/

[4] https://newzoo.com/wp-content/uploads/2016/04/Newzoo_Esports_Audience_Global_June2019.png

[5] https://newzoo.com/insights/trend-reports/newzoo-global-esports-market-report-2019-light-version/

[6] https://www.goldmansachs.com/insights/pages/infographics/e-sports/report.pdf

[7] https://taylorstrategy.com/esports-vs-gaming-whats-difference/

[8] https://www.esportsearnings.com/players

[9] https://www.statista.com/statistics/507491/esports-tournaments-by-number-viewers-global/

[10] https://www.goldmansachs.com/insights/pages/infographics/e-sports/report.pdf

[11] For example, Epic Games own Fortnite, Riot Games own League of Legends, Activision Blizzard own Overwatch, Valve
Corporation own Dota 2 and EA own FIFA. Interestingly, Tencent are invested in both Riot Games (100% ownership) and Epic Games
(40% ownership), as well as streaming services Douyu and Huya.

[12] Kroenke Sports & Entertainment owns a multitude of sports teams, including the Los Angeles Rams (NFL), Denver Nuggets
(NBA), Colorado Avalanche (NHL), Arsenal FC (EPL) and Colorado Rapids (MLS)

[13] The Kraft Group owns the New England Patriots (NFL)

[14] Lionel Messi, Tiger Woods and Roger Federer being obvious examples
[15] In early 2019, China designated "esports professional" as a recognised profession, whilst esports competitors can petition for a P-
1 athlete visa to enter the United States.

[16] https://blog.streamlabs.com/streamlabs-stream-hatchet-q1-2020-live-streaming-industry-report-9630bc3e0e1e

[17] https://www.nielsen.com/wp-content/uploads/sites/3/2019/05/esports-playbook-for-brands-2019.pdf

[18] https://newzoo.com/insights/trend-reports/newzoo-global-esports-market-report-2019-light-version/

[19] It is notable that the forecast revenue figures exclude revenues generated from within games and revenues from betting, both of
which represent substantive income streams in their own right. Indeed, NewZoo predict that collective spending on esports betting will
soon surpass spending on merchandise and tickets.

[20] https://digiday.com/uk/facebook-live-revenue/

[21] https://sponsorship.org/wp-content/uploads/2017/08/Sportcals-Endemics-vs-Non-Endemics-eSports-expanding-its-sponsorship-
horizons.pdf

[22] https://www.goldmansachs.com/insights/pages/infographics/e-sports/report.pdf

[23] https://esportsobserver.com/top10-nonendemic-spons-2018/

[24] https://esportsinsider.com/2018/12/this-year-in-esports-2018-roundup/

[25] https://www.sporttechie.com/riot-games-league-of-legends-broadcasts-advertising

[26] https://esportsobserver.com/riot-games-summoners-rift-banners/

[27] Riot Games have also recently announced that viewers of certain live League of Legends esports broadcasts will be rewarded
with "Drops" – in-game items and promotions from brand partners. These "Drops" will take place around specific moments within the
match. Although initially these "Drops" will only take place during the League of Legends Championship Series and the League of
Legends European Championship, Riot Games have stated they intend to expand the program to other leagues
(https://esportsobserver.com/lec-and-lcs-to-introduce-reward-drops-during-live-matches/?mc_cid=1f69944bcd&mc_eid=93e6a7f67e).

[28] A recent study by the Lumen Research found that 94% of gamers noticed in-game ads (2.6x higher than only standard display
advertising).

[29] This would be a particular issue in relation to cross-border streams.

[30] This would likely restrict publishers from relying on two industries that makes up a significant proportion of advertising revenue for
traditional sports – gambling companies and alcohol companies.

[31] https://www.dailyesports.gg/league-of-legends-expands-in-game-advertising-with-arena-banners/

[32] https://www.nytimes.com/interactive/2020/02/18/magazine/esports-business.html?referringSource=articleShare

[33] Football Association Premier League Ltd and others v QC Leisure and others; Karen Murphy v Media Protection Services Ltd
(Joined cases C-403/08 and C-429/08)

[34] Ibid.

[35] These can be protected as "literary works" (s. 3(1)(b) and (c), Copyright, Designs and Patents Act 1988 ("CDPA")), provided they
are the author's own intellectual creation. However, only the expression may be protected and not the idea or functionality behind the
software (see SAS Institute Inc v World Programming Ltd [2014] R.P.C. 8)

[36] In-game text may also be protected as "literary works".

[37] The individual frames of a videogame may be protected as "artistic works" (s. 1(1)(a), CDPA), "graphic works" (s. 4(1)(a) and
4(2), CDPA) and in certain circumstances as unregistered and/or registered designs (see Nova Productions Ltd v Mazooma Games Ltd
[2007] EWCA Civ 219)

[38] Cut scenes and other films may also be protected as "films" (s. 1(1)(b) and 5B, CDPA

[39] Characters may be protected as "graphic works", "artistic works", designs or trademarks.

[40] A musical score can be protected as a "musical work" (s. 1(1)(a), CDPA)

[41] A music recording can be protected as a "sound recording" (s. 1(1)(b), CDPA)
[42] The protection afforded by intellectual property rights, and the ease with which such rights can be enforced, varies from
jurisdiction to jurisdiction. For example, proving infringements of intellectual property rights in the gaming context in China (a key
esports market) has historically been particularly challenging in comparison to Europe and the United States.

[43] This is particularly important for "free-to-play" games – such as League of Legends, Dota 2 and Fortnite – for which
microtransactions represent a major revenue stream. Between July 2017 and July 2018, Fornite generated over $US1 billion in revenue
from microtransactions.

[44] https://www.nintendolife.com/news/2013/05/nintendo_claiming_ad_revenue_on_youtube_user_generated_gameplay_videos

[45] https://www.gameinformer.com/b/news/archive/2013/05/16/nintendo-opts-to-earn-youtube-ad-revenue-on-videos-featuring-its-
games.aspx

[46] https://www.fastcompany.com/3041691/nintendo-agrees-to-split-ad-revenue-with-youtube-creators

[47] This included that videos include creative input / commentary and that the videos only be monetised through a number of official
partner programs on a handful of platforms (e.g. YouTube, Twitter, Twitch, Facebook).

[48] https://thenextweb.com/gaming/2018/11/29/nintendo-new-video-rules/

[49] By way of brief summary, the key aspect of the DMCA for the purposes of this article is the "safe harbor" provision, which
provides protection for service providers such as Twitch from the copyright infringing activity of their users. Under the safe harbor, a
service provider will not be held liable for copyright infringement on its site if: (a) it doesn't have actual knowledge of the infringement;
(b) is not aware of facts or circumstances from which infringing activity is apparent; and (c) upon gaining such knowledge / awareness,
removes the infringing material or access to such material.

[50] Ibid.

[51] Directive (EU) 2019/790 of the European Parliament and of the Council of 17 April 2019 on copyright and related rights in the
Digital Single Market and amending Directives 96/9/EC and 2001/29/EC

[52] https://www.goldmansachs.com/insights/pages/infographics/e-sports/report.pdf

[53] https://www.thelines.com/wp-content/uploads/2018/03/Esports-and-Gambling.pdf

[54] https://www.pwc.ch/en/publications/2018/PwC%20Sports%20Survey-2018_web.pdf

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