Digital Business01.04.2022 Newsletter
Just as in "conventional" sports, the marketing and commercial exploitation of events also plays a central role in generating revenues in e-sports. In addition to ticket sales, sponsorship and advertising, media exploitation of the event in particular is a source of revenue with great growth potential.
Here, however, the interests of the various players are frequently at odds - especially those of the organiser and the game manufacturer. Below, we explain the opportunities and risks for organisers concerning the commercial exploitation of e-sports events.
Video games: copyright protection in case of e-sports events
Unlike in conventional types of sport, the video game used in the event is protected by copyright. The public reproduction of the game content therefore constitutes an act of exploitation of relevance under copyright law that is subject to authorisation. The same applies to the broadcasting of the game as a live stream or the possibility of viewing it via video-on-demand platforms. Furthermore, if advertising content is to be inserted into the game or superimposed on game elements, this constitutes a transformation of the work, which may only be published with the author’s additional consent.
The standard licensing terms of video games usually forbid their commercial use. A separate contractual agreement between the game manufacturer and the organiser is therefore required and must cover all types of use intended by the organiser. This incurs a licence fee that is significantly higher than that for just being able to play the game. Since organisers could face considerably more expensive injunctive relief and damage claims in cases of doubt if they fail to conclude a corresponding agreement, this constitutes well spent "entry money".
Commercial exploitation of the domiciliary rights by the organiser
If the event organiser does not conduct the event digitally, but at an actual venue - as soon as the corona infection rate allows this again – then there is the possibility of commercialising the ensuing domiciliary rights. The organiser has the domiciliary rights through its actual dominion over the venue. It can therefore decide whether to grant access to the event only against payment of a fee, be this for spectators or for reporting purposes. As is common practice in the marketing of "conventional" sports, the broadcaster can also produce or have a third party produce the broadcasting signal and can grant interested broadcasters a licence to broadcast it in return for payment of an appropriate fee. An important prerequisite here is also that the organiser has been granted a corresponding broadcasting right by the game manufacturer.
Advertising and sponsorship of e-sports events
Physical advertising and sponsorship at the venue represent another opportunity for commercialisation. As far as the sponsoring of the event, the teams and the players are concerned, there are no specific peculiarities for e-sports. However, legal problems can arise if the video games used for the competition already contain advertising and the event is to be exploited in the media.
Video games increasingly contain integrated advertising content in the form of so-called "in-game advertising". The can create a conflict situation, especially in sports simulations, between the interests of the "real" sponsors of the virtual teams and the event and competing clan sponsors. The potential for conflict arises in particular from contractual exclusivity agreements between the respective protagonists. Such situations have to be taken into consideration and regulated by contractual exclusion clauses.
In terms of competition law, the prohibition of surreptitious advertising set out in Section 5a (6) of the German Act against Unfair Competition [Gesetz gegen den unlauteren Wettbewerb, UWG] needs to be observed in particular when advertising is integrated: if the event is broadcast live on the internet or offered for viewing afterwards, the provider of the live stream or the on-demand offer must observe the regulations of the Interstate Media Treaty [Medienstaatsvertrag, MStV] concerning the advertising and sponsorship. If the broadcaster, as the media provider, itself inserts the advertising into the recording provided by it, the advertising must be clearly distinguishable from the actual transmission by graphic means and must be recognisable as advertising.
If the advertising has already been inserted into the video game by the game manufacturer and the organiser, as the media provider, takes on this advertising, it is in this case also fundamentally responsible for the separation and recognisability of the advertising. However, the principle of so-called "imposed advertising" may apply in such cases: according to this, presentations that objectively contain an advertising effect are not objectionable insofar as the presentation is made for predominantly programmatic-dramaturgical reasons. For example: according to this principle, the broadcasting of perimeter advertising at soccer matches does not constitute a violation of the separation requirement by the broadcaster because the advertising is shown without the will of the broadcaster. If the organiser, game manufacturer and transmission provider act legally and actually independently of each other, this principle can also be applied to the transmission of e-sports events.
The boom in the digital industry is enabling the widespread commercial exploitation of e-sports events. However, if one is to avoid turning the financial exploitation into the very opposite, numerous legal aspects have to be considered here.
When using and transmitting video games, the organiser must especially observe the copyrights of the manufacturers and conclude contractual agreements to avoid the threat of injunctions and damage claims. The collision of sponsorship and advertising contracts, as well as the broadcasting of competitions, also involve several legal pitfalls that need to be taken into consideration when organising e-sports events.
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