Article explains Key Clauses in E-Sports Contract, Potential Challenges to E-Sports Contracts and Way Forward for E-Sports Contract.
Indian E-Sports Industry is expected to reach Rs. 1100 crores by Financial Year 2025[i]. With the advancement in internet speed and penetration rate, the e-sports industry has seen a boom in the past 5 years. Presently the valuation of the E-Sports industry is Rs. 3 billion as per the data for the financial year 2021. Since India doesn’t have any specific legislation to govern E-Sports so the work in this industry is mostly contract-oriented. E-Sports Industry is presently the only industry where the average age of players is around 14-20 years[ii]. If we look into the contractual aspect of governing e-sports we will come to know that E-Sports organizations usually sign an E-Sports Players contract with the player, however, there are a couple of clauses that need to be dealt with exhaustively to prevent the exploitation of the E-Sport player and also the company is not incurring any such loss with any act of gesture of the e-sport player which they have signed.
Key Clauses in E-Sports Contract
1. Definition Clause
This is one of the most crucial clauses of any contract and the E-Sport Contract is not an exception to it. Definition clause helps in explaining the precise meaning of any complex context or nomenclature used in the contract which ultimately helps in preventing the risk of future litigation in matters related to interpretation. Definition clause is used to remove the ambiguities in the e-sports contract.
2. Player Service Clause
This clause ensures that all the services which the player is going to provide during the tenure of the contract are entered into. This clause will include all the services provided by the player like social media promotion, Video content creation, and promotion (vlogging) followed by participation and playing in the e-sports leagues and tournaments. Moreover, this clause will also cover the total number of hours to be engaged by the player concerning the contractor.
3. Player Obligation Clause
This clause will contain the list of obligations that which player is required to undertake such as participating in the leagues and tournaments of choice of the team, wearing the merchandise and apparel of the team whenever going to represent it; participating in the training program by the team be it solo or in multiplayer mode or sponsoring events or promotion for the same. This clause is extremely crucial while being drafted because if not then the player may be exploited by the team.
4. Player Restrictions Clause
This clause imposes the restrictions on the players such as the player is expected to represent their team exclusively, the player is not allowed to play in competitions without the team’s authorization, moreover, he is also expected not to promote his competitors or rivals or of its sponsors. Apart from this, this clause ensures that the player is following the code of conduct of the team and ethically playing his game. Any violation of the same the player will be liable for the fines to be imposed upon him.
5. Non- Disparagement Clause
We have often seen that sometimes players do make defamatory remarks against their team, this clause is indispensable in any e-sport contract as it prevents the player from making any defamatory remark against its sponsors or its team.
6. Remuneration and Allowances Clause
This clause specifies the details of remunerations which is going to be paid to the player and other expenses covered by the team for the player and sometimes performance-related bonus may also be incorporated in this clause of the contract.
7. Image Rights Clause
An image right is the right of the player which is associated with the player due to his or her skills which a contractor or a team can use during the contract. Moreover, this clause is considered to be supreme as it can lead the player to be additionally compensated for allowing the exploitation of his image for the profit of the contractor or the team.
8. Equipment Clause
Equipment plays a major role in the success or failure of the player in a game hence this clause tends to be another important clause for an e-sport contract. This clause specifies the restrictions and permission regarding the equipment supplied to the player and how it needs to be used by the player.
9. Revenue Sharing Clause
Via this clause E-Sports players are usually guaranteed a share in the percentage of the earnings of the team through revenue of sale of merchandise which includes in-game items like skins, coins, and part from this prize money, sponsorship, and revenue from live streaming. Furthermore, subclauses regarding player-specific revenue and team-specific revenue could be added under this clause which can specify that players can be provided a higher percentage of earnings than those of the team in some cases and vice-versa. For example, prize money from tournaments is split between team members with the team taking a minor percentage, and in the case of sponsorship revenue, the team should take major revenue and the player should be provided a minor share of the revenue. In past revenue sharing disputes have led to litigation so it becomes an essential clause to be drafted with utmost precision.
10. Roster Management Clause
Another key clause of the E-sports contract because the roster management strategy of the team can directly hamper the player’s career. Roster management is a process that involves strategizing the use of player resources by the team who has a contract with them. Hence this clause will contain information like initiating the game during the tournament, competition, or league and the number of substitute players.
11. Termination and Renewal Clause
Another crucial clause for the E-Sport contract deals with the aspects of compensation in case of pre-termination of the contract; also, as the quantification of the value of the remaining contract for the team who has invested in the player proportionately. Under this clause post-termination obligations for the player are also covered such as deletion of the confidential data from his devices, non-disclosure of the confidential information and meeting between the parties to the rivals, return of equipment, etc. Under this clause Non-Compete and Non-Acceptance of any other contractor or team’s offer are also covered. Renewal of the contract is also covered under this clause. In all, we can say that this clause helps to keep a check and balance on the player who by the team who is playing for the team. Another name for this clause is the buyout clause.
12. Dispute Resolution Clause
Under this clause the jurisdiction of the law which will govern the contract is covered and which court or tribunal or forum will be preferred by the parties or will it go for alternative dispute resolution. Moreover, the location of such preferred court or forum, or tribunal is also mentioned under this clause.
13. Confidentiality Clause
This is considered to be one of the most essential clauses in any contract and the same goes with an e-sport contract too. Certain aspects such as resources, team plans, strategies, and delicate information which may lead to the success or failure of the team are dealt with by the players during the tenure of the contract hence it becomes important for the teams to protect this confidential information via confidentiality clause in the contract.
Potential Challenges to E-Sports Contracts
Online gaming provided a boost to Indian Sports Industry at large, presently we don’t have any such specific legislation to regulate online gaming in India. Some of the potential challenges of E-Sports Contracts in the gaming industry are:
1. Age
The average age of Professional E-Sport players is around 15-17 years; Players in the e-sport industry start in their early teen years and retire by the age of 22-24. As per the Indian Contract Act, a minor is not competent to enter into a contract which makes this issue crucial in India, where teenagers who are less than 18 years of age and are not competent to contract and want to enter into a contract with professional e-sports platforms. Even if they do enter into a contract such contract is unenforceable and void.
2. Legality & Absence of Governing Law
While entering into a contract, the enforceability part becomes troublesome in absence of any governing law. Since Gaming Industry is in a nascent stage in India hence no such specific law has been enacted so far to govern it, hence it’s bound to go through leaps and bounds in the legal arena now and then.
3. Terms of Employment
Hiring a Player as an employee will entitle the e-sport player to statutory benefits and protections under the Labour Laws. Therefore, it’s a matter of consideration whether the player will be considered an employee or an independent contractor. So, organizations may prefer to hire e-sports players as contractors not as an employee as it will favor the organization in terms of employment benefits to be provided to the employee as well as exploitation rights since there is no specific legislation governing e-sports in India.
Way Forward for E-Sports Contract
E-Sports have been officially recognized by the Commonwealth Games, the International Olympic Committee, and the Olympic Council of Asia. Looking towards the present trends of the gaming industry in the Indian market, it’s a proven fact that it’s going to be the biggest market in the world as the valuation of the Gaming Industry[iii] in India by FY 2025 is valued at Rs. 1100 crores[iv]. Even though there are some legislations to govern online gaming and Fantasy Sports but there are no such specific provisions for e-sports. Even though the Online Gaming (Regulation) Bill, 2022 as a private member bill fails to address the difference between online gaming and casual gaming, and also has issues related to Data Privacy and Protection and KYC norms. It’s high time the central government should awake and work after enacting specific legislation for e-sports that will address the potential problems that are arising in the industry and regulate it.
[i] Pranbihanga Borpuzari, A Rs. 11 Billion Opportunity, India Needs to create support structure for E-Sports: Upmanyu Mishra, The Economic Times, 21 July 2022, <https://economictimes.indiatimes.com/small-biz/entrepreneurship/a-rs-11-billion-opportunity-india-needs-to-create-support-structure-for-esports-upmanyu-misra/articleshow/91591113.cms?from=mdr>
[ii] Ashish Pherwani, The Dawn of E-Sports in India, Ernest & Young (EY), 21 July 2022, https://www.ey.com/en_in/media-entertainment/the-dawn-of-esports-in-india.
[iii] Garima Chauhan , Swayam Samarth & Bhavishya, A Comparison Of Esports Regulations In India & South Korea: What India Needs To Learn (Part 2), Mondaq, 22 July 2022, https://www.mondaq.com/india/gaming/1208536/a-comparison-of-esports-regulations-in-india-south-korea-what-india-needs-to-learn-part-2.
[iv] Supra Note 1.
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