Esports as a sport to boost global growth
All of a sudden, during the coronavirus outbreak, sports fans have discovered the fun of watching video game competitions. This practice is not new, and the esports market has been rapidly growing in recent years. However, there is no doubt that the lack of competition from traditional sports has given esports unprecedented visibility.
The issue is how to maintain this visibility in the long term. Only the recognition of esports as a sport can lift the regulatory restrictions that are currently limiting its global growth, granting a global regulatory framework able to attract substantial investment.
The value of the esports market is currently limited but, according to Newzoo, it will reach just over USD1 billion in 2020.
The COVID-19 emergency in the short term had a negative impact on the esports market since it led to the cancelation of several live events. But, since esports tournaments can also operate remotely, it attracted the attention of major sports leagues worldwide. These leagues no longer had traditional sports to show due to the lockdown and were willing to find new ways of engaging with fans. Indeed, Formula 1 launched its new F1 Esports Virtual Grand Prix series, featuring several current F1 drivers. And NASCAR did the same, with one esports event attracting a peak of 1.3 million viewers.
However, the esports market is not only relevant for video gaming publishers and sports teams. The League of Legends 2019 world championship trophy case was designed by a world-leading fashion house, which also created the clothes of the video game characters participating in the final.
Esports is used by brands in all sectors to reach new customers that might not be attracted by traditional marketing strategies. And the COVID-19 outbreak might be filling the gap for worldwide growth of the market.
The popularity achieved during the last few months has led major sports companies and investors to the conclusion that esports could become an important part of their business; one less affected by external factors beyond their control. Indeed, several soccer teams already have an esports team. But it represents an ancillary part of their business from which they do not make substantial profits. And the experiments mentioned above run by Formula 1 and NASCAR appeared to be more marketing events than actual investments in a new line of business.
Current esports regulation
DLA Piper published the Esports Laws of the World report that reviews the laws applicable to esports in 38 jurisdictions. The findings of the report show that regulations have not been able to catch up with the growth of the market. There is a significant inconsistency in rules applicable to esports among different jurisdictions. Gambling, sports and prize promotion/advertising rules might apply to esports events, impose restrictions or grant exemptions, depending on how and where they are organized.
There are several variables to consider. Is the esports tournament online or land-based? Does a country recognize esports as an official sport? Can any type of prize be awarded to participants? What are the technical requirements to be complied with? And what is the risk of local penalties?
Esports are not recognized as a sport in most jurisdictions worldwide, including countries like the US, the UK and Italy, which do not have any dedicated legal or regulatory regime applicable to esports. This means that if an esports tournament is not correctly structured, it risks breaching gambling laws that expose event organizers to potential criminal sanctions applicable even if the tournament is online and run from abroad.
There are some solutions aimed at mitigating risks. But these solutions change from country to country, while the esports business is global. There are only a few countries (e.g. France and South Korea) that expressly provide rules allowing some types of esports tournaments to be held. This variation in regulation puts the performance of esports tournaments in a gray area where, depending on the position of local authorities, they can be allowed or prohibited. The current situation is a significant contradiction for a business that is, by definition, global. And the adoption of consistent rules across different jurisdictions in the short term would be quite challenging, while the momentum for esports is now.
Esports must be recognized as a sport to foster growth
The setting up of a global set of regulations on esports approved by all countries worldwide in a short timeframe appears to be a lost battle. There are too many regulatory inconsistencies between jurisdictions, and having a single body that accommodates the needs of all countries is beyond reach.
The sole viable option that would allow esports to be subject to consistent rules worldwide in the short term is their recognition as a sport.
The main concerns from the esports market derive from potential restrictions that could be triggered by such recognition. The esports market has been growing with local initiatives, and indeed one of the issues around the global recognition of esports as a sport appears to be the lack of a global regulatory body.
Esports tournaments gravitate around many different leagues that are organized by different companies, with considerable involvement of video game publishers. The issue is, however, whether the market is willing to go the extra mile to become global.
Only the recognition of esports as a sport would enable the immediate applicability of a consistent set of rules worldwide, granting certainties to sports teams, advertisers and investors on the stability of a market that has limitless potential.
The obligations triggered by the recognition of esports as a sport would not be excessively burdensome for a business that wants to attract global investment. And such recognition would also finally free the sector from any prejudice as a practice for just teenagers.
The momentum for esports is now, and if missed, the market might regret this choice for several years.
Originally published 22 June 2020
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