eSports Practice Becoming a Lucrative Micro-Niche for Law Firms

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eSports has become a specialized micro-niche of opportunity over the last few years. The stunning rise in the popularity of particular teams of video gamers competing against one another in front of a live and broadcast audience is becoming big business — and another potentially lucrative micro-niche for innovative law firms.

For the uninformed, eSports law is an amalgamation of multiple disciplines — labor and employment, contracts, endorsements, sponsorships, gaming, intellectual property, and all the legal challenges that come with those arrangements. Potential clients are likely to include individual gamers, but also game publishers, organizations building potential leagues, sports competition venues, media and entertainment outlets, advertising companies, and let’s not forget potential investors and private equity funds.

The eSport micro-niche in legal started innocuously enough. In February 2015, Roger Quiles, head of Quiles Law, an eSports and sports law firm in New York City, launched the first eSports blog. Then in July 2016, he published The Little Legal Handbook for eSports Teams — an online publication designed to help out players and organization owners on legal matters, such as how to draft a player contract, how to draft a sponsorship agreement, and how to protect intellectual property.

In January 2017, Seattle-based lawyer Bryce Blum launched his eSports-only law firm, Electronic Sports and Gaming Law. Blum, an ESPN contributor, first began to make his name in eSports in early 2015 by posting legal opinions and articles on the subject.

Last summer a young associate, practicing employment and labor law, inspired the leadership at the McNees Wallace law firm to announce the launch of their eSports practice group. More recently, Sheppard Mullin announced they were launching a similar group with about 20 attorneys.

The eSports industry brought in $865.1 million in revenue in 2018, according to market researchers Newzoo, and it is expected to reach $1.1 billion this year, based on their projections. With a growth rate of 22.3% year-over-year, Newzoo predicts that the industry will rake in $1.79 billion in revenue by 2022.

According to those familiar with this area, what makes the legal side of this robust, rapidly emerging eSports micro-niche especially complicated and intriguing is that it is still very much a Wild West system without any established norms and patterns. The structure of teams and leagues, the formation of partnerships, and any kind of best practices for those interested in the business are all still being created.

People Are Paying Big Bucks to See eSports

The eSports industry can already boast of having a passionate, global, highly engaged audience. What is especially amazing is the way eSports are moving into stadiums built for popular professional sports like hockey or basketball. More than 20,000 people shelled out at least $60 apiece to see the two-day Overwatch League Final event at the Barclays Center last July. On Stubhub, a ticket resale portal, demand for tickets reached  $195 a piece, on par with prices more often associated with major musical acts or sporting events, not for watching video games.

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Citigroup analysts cite studies indicating that 143 million people watch eSports at least once a month. The study estimated a 15% compounded annual growth rate in viewers for the foreseeable future. Deloitte is forecasting an estimated audience of 600 million globally by next year.

Meanwhile, CNBC reported that the finals of the League of Legends tournament, held in South Korea in November, attracted an audience of 100 million — only 3 million fewer than US viewers of the 2018 Super Bowl.

Investors, Advertisers and the Media Want In

In October, Cloud9 became the world’s most valuable eSports team after raising $50 million in outside funding. Meanwhile, a report in Forbes estimated that a total of nine eSports teams worldwide are worth at least $100 million. As one might naturally expect, those numbers have attracted the attention of some big-time investors, like Mark Cuban and traditional sports mogul Robert Kraft, who owns the New England Patriots. Kraft also paid $20 million to own the Boston-based team in Activision Blizzard’s Overwatch League prior to its launch last year. Even pro basketball legend Michael Jordan made an equity investment in a group that own Team Liquid, a well-known eSports organization.

Further, the industry is generating approximately $1.5 billion annually from sponsorships and advertising. In early February, for example, the Overwatch League announced that it has added Coca-Cola as its official beverage partner ahead of the 2019 season. Coca-Cola joins Toyota, T-Mobile, HP, and Intel as the league’s major advertisers.

Like traditional sports, eSports is premium content, and media companies and advertisers are both willing to pay for the ability to tap into these markets. Twitch, a video game streaming service owned by Amazon, was the first to see the value of the Overwatch League, offering $90 million for digital rights to the first two seasons. And in July, Disney and ESPN announced that the Overwatch League playoffs and finals would be carried on channels Disney XD and ABC. This was a big validation for eSports, which have always operated on fringe media platforms.

For lawyers looking at this micro-niche, these advertising, media and sponsorship agreements mean contracts, negotiations, intellectual property disputes, and other legal work in this nascent realm.

eSports May Just Be Getting Started

The future of eSports may just be getting traction to move forward fast. Overwatch League has demonstrated how big the business can be, and now owner Activision Blizzard will be the first company to see how big it can make eSports grow with plans to go international in the near future.

Venues will also be built to house eSports events. In Los Angeles, Activision Blizzard built an eSports stadium for its Overwatch League this year, and we’ll see more purpose-built spaces in the coming years, particularly if expansion goes overseas.

Clearly, eSports is here to stay, and given the size of the business this early there’s no telling how big it will get — which is great news for the industry’s leader, Activision Blizzard, as well as for any lawyers who might want to get on this train early.