Introduction

According to analysis by NewZoo, esports is projected to reach USD$1Bn in revenue by the end of 2019 and everyone wants a piece of the pie. More starstruck youth than ever are hoping to be the next Faker or Doublelift and earn worldwide acclaim. 

What’s the downside to esports’ massive growth in popularity and capital? A regulatory void that leaves aspiring players vulnerable to exploitation. Contracts for new pro players remain almost entirely unregulated, leading to exploitative agreements. 

Before digging into how you can negotiate contracts like a pro, you’ll need some background to better understand why bad contracts are so prolific.

Background – Contract Law in Esports

For decades, basketball, football, and other traditional sports have worked through countless legal and contractual issues. Esports, on the other hand, is a relative newbie, with only a few recent years of legal developments.

Low player salaries and poor working conditions have plagued esports since the industry first exploded in the 1990s. Many of these problems have come from a combination of poorly designed and abusive contracts that are common in esports. 

Players and organizations who aren’t selective with who writes, reviews and edits their contracts are at risk of losing tens of thousands of dollars, as seemingly small clauses can negatively alter a contract hugely. 

Contract disputes simply haven’t been litigated or arbitrated enough to bring esports up to date. Many contracts in esports, especially at the amateur level, are not even legally enforceable. 

Organizations that don’t shell out the money for an expensive professionally written contract routinely copy poorly written contract templates from the internet. These often contain incorrect clauses and poorly defined provisions that can invalidate the contract entirely. Players and organizations who aren’t selective with who writes, reviews and edits their contracts are at risk of losing tens of thousands of dollars, as seemingly small clauses can negatively alter a contract hugely. 

Educating new players on their rights has remained a very low priority for the industry and this poses potentially dire consequences for their careers. If you’re reading this article, you’re already ahead of the competition on signing a contract that works for you, not against you.

With that, here are 7 vital considerations every player should think about before signing a contract:

1. Contract Language

If you’re not talking to a lawyer (Protip: Do talk to a lawyer), you need to know what you’re signing. Do you understand the language the contract is written in?

Adam Melrose of Law in Esports writes that players can become stuck in low paying (or even non-paying) contracts because of terms that disproportionately burden them. Unreputable organizations have been known to exploit players who don’t natively speak their language by using complex legal jargon to get players to sign bad contracts. 

Here are some things to look out for:

  • Non-compete clauses: these restrict you from activities such as joining another team or playing competitively, even after the contract ends. Non-compete clauses can even prevent you from streaming on certain platforms that compete with team sponsors, costing you money and recognition. 

For more information about non-compete clauses, check out this great article by Kelley Warner Law. For some helpful examples of non-compete clauses in contracts, check out this database from LawInsider.

  • Ambiguity/Vagueness: undefined terms or intentionally vague provisions increase your liability or incurred costs when you sign. Get clarity on anything you don’t feel is clear. 

This article by LegalMatch has some more info on ambiguity in contract drafting, so check it out for further reading.

  • Loopholes: some contracts slip in terms that allow the drafting party to violate other sections of a contract under certain circumstances, leading to easy abuse.

Check out this great article by Business News Daily for more info on loopholes and other tricky contract clauses.

Take your time going through the contract and understanding what you’re signing away. Never let yourself get pressured into signing something you don’t understand or else you could end up in a situation you didn’t bargain for.

2. Choice of Law and Contract Jurisdiction

The country or state jurisdiction you sign a contract under is key to protecting your rights. While this point may sound boring and unimportant, it’s critical to understand or you could find yourself dealing with significantly higher legal fees, unfair laws, or lacking legal resources. 

Contracts should always specify the jurisdiction they fall under, as that defines which set of laws the contract operates under. If your contract doesn’t have a choice of law, it will get extremely expensive to challenge or litigate any part of it in court once you’ve signed off. 

This is even more important when signing a contract with an organization outside of your country because contract law changes from place to place.

3. Compensation

Contracts should be upfront about salary amount, tournament winnings, sponsorship revenue, payment schedule, and how much of that you take home. Don’t end up like Fortnite streamer Tfue who become locked in a contract with Faze Clan where Faze took an astounding 80% cut of all sponsorship deals they introduced. 

Additionally, keep in mind what expenses you’ll be expected to pay for during things like tournament travel; assume you must cover the costs of anything your contract doesn’t clearly specify.

4. IP and Branding

Your intellectual property and media rights are extremely important, so get the full picture of what brand and IP rights you’re signing away. These include your appearance in advertisements, your video game streaming profile, social media, image, and other important sources of revenue.  

Be careful of contracts that transfer your IP rights to the organization, especially the use of language like “lifetime” or “exclusive”. Some of the most popular streamers pull in millions of dollars in extra revenue from their IP, so push to keep as much of your brand as possible.

5. Performance Metrics

Your contract should clearly state what you need to do to stay on the team’s active roster. This includes how much you’ll need to practice and in-game performance metrics like a minimum average Kill/Death/Assist ratio to maintain. 

Many contracts also include behavioral standards you must follow and a basic level of professionalism to maintain on things like social media, so make sure that you can meet these. Counter-Strike pro player Smooya was unexpectedly benched, with a reduction in salary, after joining Epsilon Gaming because he didn’t speak Swedish.  

Push for clarity on these points or risk becoming the benchwarmer.

6. Employment Classification

Like the choice of law provisions point above, you need to know whether you’re an employee or an independent contractor under the local law. This affects things such as sick days, health insurance, and health-based exemptions from play and practice. 

Employees and contractors have different legal rights, so do your best to understand the basic rules and regulations for either classification and/or talk to a legal professional. 

7. Termination 

Similarly to the standards of being benched, know under what circumstances your contract could be terminated and how you can get out of your contract. Take note of exceptions that will terminate your contract early as a result of a breach of contract, misconduct, or through a mutual agreement such as a buyout from another team. 

Contracts commonly list buyouts twice or even three times as high as the contract value, so be careful signing any contract that would be difficult to buy out. As a young player, you don’t want to lose the best years of your career in a contract that doesn’t fit your needs. 

Conclusion and Going Forward

These 7 points are merely a starting point for any player joining a team who wants to exercise caution before signing a contract. This article is not a replacement for hiring a legal professional; any player who has the means to do so should contact a legal representative.It may be expensive now, but it could save you time, stress, and most notably money in the future. 

As esports grows, so will standardization. The process is slow, so take all precautions and educate yourself now when dealing with the risks and high-stakes of team contracts.

For further reading and information on contract law in esports, we’ve added several links below to check out: