SII Focus 16th December 2015

Growth of eSports: regulatory concerns

Public perception of esports

The idea that eSports should be considered as sport at all can draw a certain type of ire from some. “If I am ever forced to cover guys playing video games, I will retire”, a former ESPN host stated on the air[1]. The commentator, while discussing ESPN 2’s coverage of an eSports tournament, referred to the participants as “nerds” and continued: “I’ll tell you what that was the equivalent of there: of me putting a gun in my mouth and having to listen to that”.

The rapid growth of eSports
In spite of this perception, the popularity of eSports is booming. Between 2012 and 2014, the number of eSports ‘enthusiasts’ grew from 58 million to 89 million[2]. During that period, the total time those fans spent viewing eSports has nearly doubled. According to gaming market research company NewZoo, since May 2015, 33.8 million people have watched or participated in eSports in the US. In 2013, the League of Legends (a popular eSports game) world final pulled 32 million streaming viewers compared to 8.2 million the previous year. While the viewership of the 2014 final (which took place in a sold out Seoul Olympic Stadium) dipped to 27 million, concurrent views peaked at 11.2 million, compared to 2013’s 8.7 million. The recent 2015 world final (which sold out Berlin’s Mercedes-Benz Arena) drew 35 million unique streams, and peaked at 14 million concurrent viewers. Put into perspective, the 2015 National Basketball Association (NBA) Finals averaged about 20 million views per game. That was the most watched series in NBA Finals history.

What are eSports?

ESports’ is an umbrella term for professional video game competitions. The term encompasses all sorts of electronic game competitions: from popular console first person shooters like Halo and Call of Duty, to fighting games like Mortal Kombat and Street Fighter, to PC games like Team Fortress, Counter Strike, Star Craft, DOTA and League of Legends.

Industry revenue

Digital goods measurement company SuperData Research values the 2015 global eSports market’s year-over-year revenue at US$748.8 million, and expects the market to surpass $1.9 billion by 2018. To date, so far in 2015, the US market has generated $143 million in revenue. That number is second only to Asia, which generated $374 million in revenue in the same period.  Of the $143 million revenue generated in the US market, $111 million came from corporate sponsorships. Total prize pay-outs for eSports competitions in 2015 topped $11 million. The total e-sports prize pool increased 97% between 2014 and 2015. This growth has turned a once private leisure experience into a professional global business, and a social one too.

Competition organisation and governance structure

There is no centralised governing body in eSports. A number of various eSports leagues like Major League Gaming (MLG) and the ESports League (ESL) operate professional competitions for various games. Likewise, some game developers, like Riot Games, organise their own professional competitions for their own games (in Riot’s case, League of Legends). Some countries are beginning to organise national eSports associations. South Korea (where eSports are widely popular) has set up a national eSports federation, the Korean ESports Association (KeSPA), to manage and organise domestic eSports competitions. These eSports leagues can overlap in competitors, game type, and geographic area. In addition to these competitive tournaments, many eSports teams and players often stream exhibition matches online, most notably via online streaming service Twitch.tv.

Teams

ESports players competing at the highest level of the sport are generally organised into teams. These eSports teams often field squads in a number of different games and compete in multiple eSports leagues. For example, one of the more popular European teams, Fnatic, currently fields teams in six different games in at least three different competitive leagues. Some teams have a large international footprint. The above-mentioned Fnatic is a UK based company, with offices in London and Serbia, and a gaming house in Germany[3].

Players

Players are mostly male aged 18 to 25. Many players tend to retire in their mid twenties. Most of these relatively short careers arise from player burnout, injuries, and the deterioration of reaction time and fine-motor skill retention that occurs around the age of 24. Not counting sponsorship pay-outs, the total earnings of some of the highest paid players top the $1 million mark. However, since sponsorships account for about ten times the revenue of competition pay-outs, actual earnings may be much higher. Players generally ‘train’ for 12-14 hours a day. Training regimes include almost constant gaming, including training scrimmages against other professional and semi-professional eSports teams.  This work ethic is not always viewed positively. Long playing times and gaming addiction had become so prevalent in South Korea that the national government passed a law banning all players under the age of 18 from playing between midnight and 8am.

Integrity issues

As explained in the introduction, there is an on-going debate about whether eSports are ‘real sports’. However, while that debate continues, eSports face the same integrity issues that face global sport. ESports have been plagued with match fixing and doping scandals. Because of doping issues in the sport, the ESports League has adopted the World Anti-Doping Agency’s (WADA) List of Prohibited Substances and Methods last summer for its competitions.

The growth of the eSports industry compounds these issues. Growth is so fast it may outpace regulation and governance. Increased pressure to perform and stay economically competitive may push less scrupulous teams and players towards less scrupulous actions[4]. As mentioned previously, unlike other sports, there is no central governing body for eSports. Should players or teams become banned by a certain competition body, there is nothing stopping them from continuing to compete in a separately organised competition[5].

Considering the global nature of the sport, the huge sums of money involved and the young age of most players, regulation is lacking in areas such as player movement and wages. There are parallels with another sport where youth and money provide the ideal recipe for corruption issues such as trafficking of players and minors to develop and flourish – football. While some eSports competition organisers, like Riot Games, have set up some rules regarding player movement and player remuneration, there are no minimum standards or licensing programs for eSports teams, or gaming houses. Some e-sports organisations use false promises of money and training support to lure players across continents, later forcing players to pay their own way, and changing contract terms without the players’ consent. Again, this is similar to the problems that football has faced with ‘fake agents‘. Reports of eSports organisations failing to pay players their agreed salaries are numerous. ESports teams have even threatened players when disputes over non-payment of salary arise.

Conclusion

ESports is a fast-growing industry that is poised to break into the mainstream, if it has not already. However, the pace of growth itself creates new problems for maintaining integrity and good governance. With its relative youth, the sport has a chance to confront these issues before they become serious problems.

 

1. It should be emphasised that Cowherd did not leave ESPN due to its burgeoning e-Sports coverage.
2. Gaming market research company NewZoo splits eSports enthusiasts into three categories: 1) Regular Viewers/Participants, such as those who watch and regularly participate in eSports competitions; 2) Occasional Viewers/Participants, such as those who watch and sometimes participate in eSports competitions; and 3) Regular Viewers, those who regularly watch professional
and amateur eSports competitions.
3. In most cases, Players live eat, sleep, and train together at these houses, which are financed by the team.
4. One major match fixing incident involved teams throwing matches to keep the North American Counterstrike market running.
5. Save, of course, informal rules and public outcry.

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