Esports is growing up: IP law and broadcasting rights

Riot has developed its own broadcast, the League Championship Series, which they also govern, allowing control of the esport. Riot Games

Question: Can one entity own the entire esports ecosystem? The league, broadcast, teams, players, game and governance? Think along the lines of another major sport, like the NFL. It's possible, and the main reason for this is the power of intellectual property (IP) law and its growing importance in the burgeoning esports industry. Right now there is a land grab for market share and control in esports. The industry is growing quicker than anyone expected, primarily due to many recent developments surrounding mainstream awareness from the sports and entertainment industry. This has some esports industry founders pitted against each other and those within a position of power re-evaluating their approach to the space, particularly around IP law. Let's start with looking at the ecosystem in esports.

Bringing ecosystem in-house

One of the biggest developments in esports recently is publishers of the games taking a more active role in producing and governing the competitive aspect of their game titles. Typically, it has been the role of third-party tournament organizers such as the Electronic Sports League (ESL), Major League Gaming (MLG), FACEIT, OnGameNet (OGN), et al. Game publishers allow, support or even pay these third parties to host tournaments and leagues, which act as a marketing arm for their game(s) globally.

Riot Games, on the other hand, through a passion for competitive gaming and also a survival tool to prolong the longevity of its successful title League of Legends, decided to invest considerably in creating an esports department back in 2011 and have moved towards bringing the production and governance of the competitive aspect in-house, creating a closed ecosystem. They still rely on some third parties in emerging markets, but they are trending towards taking ownership over all regions to ensure quality and consistency. In traditional sports, broadcasting rights are one of the primary sources of revenue -- they account for almost 50 percent of the revenue for the NFL, which is more than a whopping $40 billion from 2014-2022. Networks such as CBS, NBC, Fox and ESPN will purchase these rights for specific games, days or time slots.

Dispute over broadcast

The only part of the aforementioned esports ecosystem that isn't closed is the broadcast. Recently, the topic became contentious for one of the oldest esports: StarCraft. Prior to the launch of their StarCraft II title in 2010, Blizzard and the Korea e-sports Association (KeSPA) in South Korea disputed over the broadcast rights of StarCraft; KeSPA had been broadcasting StarCraft for years at this point, and argued they helped make StarCraft what is is. Blizzard argued it was their game, and they had the rights to decide who could broadcast the game. Blizzard ultimately awarded the broadcast rights to GOM.tv for StarCraft II. Any local parties had to then negotiate with GOM.tv for a licensing deal.

The whole scenario ignited an IP lawsuit that was settled out of court. Having spoken with some IP lawyers, it was a very open and shut case in that Blizzard owned the IP and KeSPA pretty much caved on all accounts. If we were to draw my earlier NFL comparison to Riot Games and the League Championship Series (LCS), an example could be Riot doing a deal with Twitch.tv for the North American LCS on a Saturday and then YouTube Gaming on Sunday; or even allowing YouTube the rights to collegiate games and Twitch the professional circuit.

The same could go for the other leagues and local platforms in their respective regions for Europe, Asia, CIS (Russian) and Latin American markets. Those broadcasting rights are a small fraction compared to the behemoth of NFL licensing agreements, but they are and will become increasingly important. Non-endemic brands (brands that may have little or no tie to the market they are targeting) are starting to realize how attractive and engaged the esports demographic (18-35) is and are heavily evaluating this space with the likes of Coca Cola, Intel, HTC, GEICO, Monster, and more already involved.

What publishers are doing

Can publishers bring the entire ecosystem in-house? Riot Games has been the leading publisher in terms of creating stability and infrastructure for esports. The other major publishers of the big esports titles, Blizzard and Valve, opted for different strategies historically. Valve has typically been very hands-off with the odd marquee event, working primarily with third party tournament organizers. However, it has started to create structure for its games and begun acting as a governing body. Blizzard has historically been in the middle, creating a global circuit but also working extensively with third parties. As we rang in the new year, Activision Blizzard, Inc. acquired Major League Gaming (MLG) for $49 million In short, Activision Blizzard acquired a strong trademark (MLG), an underdeveloped streaming platform, and hired executives from the sports and entertainment industry, announcing Activision Blizzard Studios.

In part, I believe this is a content play which will allow the company to create shows and movies leveraging its very strong IP in the gaming industry.Think about a movie or scripted show centered around your favorite game and not having to outsource it. What is most interesting to me is that this could significantly impact the future of esports when it comes to broadcasting rights. Build their own streaming platform (TV Network) Activision Blizzard could put significant resources and manpower behind the newly acquired MLG.tv platform and host all of its leagues there. Then it could sell ad inventory itself, instead of relying on third parties like Twitch, YouTube or even ad agencies.
Mark Cuban briefly weighed in, saying "There will be new games, and it's difficult to run a live event. Publishers will have the control, but this is just the beginning."

It's a huge undertaking; Activision Blizzard is not averse to making big moves, and it certainly has the capital to do so. While Twitch's traffic primarily comes from individuals streaming, and not tournament streaming, it would impact its numbers quite significantly if tournaments moved off the platform. Activision Blizzard could start promoting their tournaments inside the game(s), much like Riot Games does in League of Legends. I don't think it's too far-fetched to think that Activision Blizzard could start with tournaments, and after establishing a successful foundation for the platform, move to exercising its IP rights and preventing third-party streaming platforms from having, for example, Call of Duty streamed on their platforms.

I believe this won't happen this year, or even in the next few years; but it does bode for an interesting future for the esports industry.