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E-sports – a new ball game

For those who watched the team selection day for the NBA 2K league, you may have been forgiven for being confused. The selected ‘athletes’ were not the giants of the basketball court that we are used to associating with the NBA. But have no doubt, these guys can slam dunk it with the best of them – just using a console rather than an actual basketball. With the commencement this year of the so called fourth league of the NBA, we can be left in no doubt that e-sports are a thing (although just exactly what that thing is remains unclear).

Currently, the world’s largest gaming market is in Asia. This market is primarily driven by the Korean and Mainland Chinese gaming industries; Hong Kong is behind the ball. However, with the recent gold medal win by the Hong Kong team in the 2018 Asian Games,[1] public interest in e-sports in Hong Kong is at an all-time high.

However, as this lucrative industry continues to grow, the demands to be legitimised as a genuine sporting arena bring with it its own challenges as to how to regulate and control this new sporting frontier.

The legitimacy of e-sports

Whether e-sports should even be considered a real sport or not is a hotly contested issue in itself, with players from opposing teams firmly rooted in their positions.

The defenders

On the one hand, there are the traditionalists who refuse to view e-sports as anything other than recreation. One such traditionalist, the President of the International Olympic Committee (“IOC”) Thomas Bach has been critical of the highly violent nature of most video games. Traditional sporting athletes have also expressed concern over the conflict of e-sports with the IOC’s advocacy role for physical activity.[2]  Then there is the fact that the game itself is proprietary. The owner of any given game has absolute control of the rules and parameters of the game and can change them at any given time.[3]  This is in stark contrast to traditional sports which are often overseen by a global regulatory body (take for example soccer which is overseen by an international governing body called FIFA).

The attackers

However, the gaming industry itself is keen to see e-sports legitimised and are pushing hard for inclusion into the world’s biggest sporting events. The ICO and the Global Association of International Sports Federations recently hosted an e-sports forum in Lausanne Switzerland to begin a dialogue.

E-sports were featured at the 2018 Asian Games as a demonstration event and will be a medal event in the 2022 Asian Games. Supporters of e-sports are hopeful they will be included as a demonstration event in the Paris 2024 Olympics.

The goal – why inclusion may not matter

The fact remains however that e-sports may not need inclusion into traditional sporting competitions to be legitimised. E-sports as a business is booming. A market analysis by NewZoo estimated that the global games market will generate revenues of $180.1 billion by 2021.[4]  Revenue in Asia alone has totalled US$328 million, making it the dominant region for e-sports. Viewership is forecasted to grow to nearly 600 million by 2020, rivalling even the biggest traditional sporting events.[5]

With these dollar signs in mind, it is clear that e-sport tournaments will continue regardless of whether they form part of traditional sporting contests or not.

Hong Kong – no longer on the bench

As this industry grows so does the desire to not sit on the sidelines. To that end, Hong Kong has implemented a number of key steps to promote the e-sports sector in Hong Kong. This includes:

  • Money: the Hong Kong 2018-2019 budget has set aside HK$100 million for the e-sports sector. This money will primarily go to Cyberport to put towards promoting e-sports in Hong Kong through various channels.[6]
  • Venue: Cyberport will make space available to host regular e-sport events and for training.[7]
  • Game development talent: the Hong Kong Digital Entertainment Association has organised an internment scheme for graduates to work at digital entertainment companies.[8]
  • Player talent: Cyberport and HKU SPACE jointly created a “diploma in esports science” programme in order to cultivate professional talents. The first course date commenced in July of this year.[9]
  • Associations: the Hong Kong E-Sports Co, Ltd was established in February 2013 to promote the development of e-sports in Taiwan, Hong Kong and Macau. Along with the Esports Association of Hong Kong, stakeholders now have a direct association to promote stakeholder needs.

However, as a player in this space, Hong Kong must now turn its attention to the host of regulatory related concerns which have grown alongside this growing industry.

The referee

Most professional sports leagues are heavily regulated by a global body. It is these bodies who, in addition to formulating the rules of the sport, are tasked with ensuring that the integrity and reputation of the sport and its players and stakeholders remain intact. The lack of such a governing body for e-sports has left open the possibility of stakeholders running foul.

What regulatory bodies are there?

The differing nature of e-sport games and tournaments has made overarching global regulation for e-sports difficult at best and impossible at worst. This does not mean that there have not been attempts to try.

The most well-known regulatory body is the Electronic Sports League (“ESL”). ESL has teamed up with the World Anti-Doping Agency to create an anti-drug policy for e-sports. Some tournaments have seen random drug tests performed on the ‘athletes’. In turn, ESL has co-founded the Esports Integrity Coalition (“ESIC”). ESIC primarily focuses on integrity issues such as match fixing and gambling related issues.

However, ESL and ESIC often rely on the participation of the broadcaster and the game publisher to be able to implement their regulations over tournaments. These commercial bodies typically are in control of the regulation for each tournament and consequently a light touch approach to regulation is adopted. The industry consensus seems to be that a more global and consistent approach should be adopted. The below outlines a few key focus areas for e-sports regulation in Hong Kong.

Employment law

The treatment of e-sports players under employment law leads to a myriad of concerns. For example, in most jurisdictions, a person who is considered a sportsperson is subject to specific taxation and immigration laws. So the question becomes, is an e-sport player a professional “sportsperson” for those purposes.

The definition of “sportsman” under the Inland Revenue Ordinance (Cap. 112) is quite wide and refers to a person who gives a performance in any kind of sport which the public may be permitted to see or hear.[10]  Arguably e-sports may currently not be conceptualised as a “sport”, although we fathom that might well be a line ball call depending on the game and context. However, if e-sports were to be included at the Olympics, the position may be further complicated. Relevant considerations include how to treat a player’s winnings from a taxation perspective and whether the approach for taxing a sportsperson’s winnings should be extended to all e-sports.

In the immigration context, it is unclear how foreign players who may want to enter Hong Kong to compete in a Hong Kong tournament should qualify for a visa. Should the foreign player qualify for a visa under the admission scheme for talent, professionals and entrepreneurs? Further, are they even employees in the first place, capable of being sponsored for a visa and if so, who is the employer?

Employment law considerations extend to how a player’s rights should be protected. This is particularly important in an industry where many of the best athletes in the world are under the age of 18 (eg. Victor De Leon III, otherwise known as Lil Poison was only 6 when he turned pro). This is obviously at odds with minimum working age requirements in most jurisdictions (including Hong Kong) and many young players may lose the benefit of protections offered to young workers under local employment laws.

Areas such as child protection, complaint investigation, gender diversity, mental health, discrimination and vilification are just a few of the areas which fall under the employment law umbrella which you would typically expect to see covered under a traditional sporting regulator but which are noticeably absent in the e-sport arena.

Gambling

Hong Kong has strict laws surrounding gambling. Under the Gambling Ordinance (Cap. 148), gaming (meaning the playing for money of any game of chance or skill and chance) is illegal. Though there are many exceptions to the illegality of gaming, many e-sports involve elements of chance that could potentially bring the game into the gaming definition. Whether the legitimisation of such games as a “sport” could have an impact on this remains to be seen.

Intellectual property

There are numerous stakeholders involved with e-sports including game publishers, event organisers (including certain e-sport leagues), broadcasters (including major e-sport streamers such as Twitch), competing teams, individual players and sponsors. Each stakeholder attracts their own unique intellectual property (and other) considerations.

Stakeholders need to be aware of the rights of each party. For example, event organisers need to ensure that they obtain the appropriate licences from game publishers (who typically hold the copyright over the game) before making a game publicly available. The same licensing requirements apply to broadcasters.

The area of intellectual property rights surrounding players is less clear. For example, could a style of play amount to copyright in the same way entertainers can attract copyright? Can a player’s choice of an e-sport name be trademarked? Arguably yes on both fronts although this point is far from clear.

Sponsorship can also be a murky area. The use of players and their social media influence is a common form of sponsorship for e-sports. However, different jurisdictions regulate this form of advertising in different ways. Sponsors should be aware that they will often be held to account for social media posts made by players. Further, certain jurisdictions often have strict rules surrounding covert advertising.

The result

Hong Kong is in a position to welcome the growth of the gaming industry, but participants should be aware of the regulatory considerations and pitfalls. While most parties agree that the push for legitimacy must in turn be matched by proper regulatory guidance, the form of that guidance is still far from certain.

Our recommendation: get into your starting line-up (but don’t drop the ball).

 

[1]     Won by Lo Tsz Kin, otherwise known as Kin053, in the Hearthstone tournament; Careem, Nazvi, (31 August 2018), Asian Games: e-sport glory for Hong Kong as Kin0531 wins Hearthstone gold in Jakarta, available here (as accessed on 25 October 2018).

[2]     Forrester Nicole W, (2018), Why esports shouldn’t be in the Olympics, available here (as accessed on 24 October 2018).

[3]     Hong Kong Cyberport Management Company Limited, Report on promotion of e-sports development in Hong Kong, Hong Kong, 2017, page 4.

[4]     Panakeet Juree, (2018), NewZoo’s esports business predictions for 2021: esports will propel gaming into a bigger industry that traditional professional sports, available here (as accessed 24 October 2018).

[5]     Hong Kong Cyberport Management Company Limited, Report on promotion of e-sports development in Hong Kong, Hong Kong, 2017, page 6.

[6]     The Government of the Hong Kong Special Administrative Region, The 2018-2019 Budget, at paragraph 70 available here (as accessed on 25 October 2018).

[7]    Hong Kong Cyberport Management Company Limited, Report on promotion of e-sports development in Hong Kong, Hong Kong, 2017, page 3.

[8]     Hong Kong Cyberport Management Company Limited, Report on promotion of e-sports development in Hong Kong, Hong Kong, 2017, page 15.

[9]     HKU SPACE, (21 May 2018), Cyberport and HKU SPACE Join Hands to Launch E-Sports Programme, Hong Kong, available here (as accessed on 25 October 2018).

[10]     Section 20 of the Inland Revenue Ordinance.

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