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    Filling the void: Lockdown fuels growth in esports

    By Angela Weaver and Luke Overall

    With interest in virtual sporting events increasing under social distancing, Beazley underwriters Angela Weaver and Luke Overall consider potential media and tech-related risks associated with esports.

    The sporting world has been very publicly hit by the pandemic, with social distancing rules making both competing and live viewing impossible for months. It is no coincidence then that esports, its digital equivalent, has experienced a huge surge in popularity as many turn online to get their adrenalin fix.

    In the last few months viewing figures have risen exponentially, as the numbers of fans logging onto the platforms that stream live virtual events show. One major platform recorded an average number of concurrent viewers of more than 2.3 million in May 2020, compared to 1.4 million in January.[1] This comes on top of its phenomenal growth in the past 20 years into a billion dollar industry[2], while simultaneously remaining surprisingly under the radar among many – and arguably older – demographics.

    With almost every major sporting event cancelled or postponed, many new virtual tournaments sprung up and more traditional sports teams have experimented with esports for the first time to fill the void. There have been several firsts: the Madrid Open being hosted online, the World Boxing Super Series staged virtual match-ups, and the postponed Formula 1 season was replaced with a Virtual Grand Prix Series. For a few traditional sports teams, such as Paris Saint-Germain, that have operated esports teams for a number of years, this isn’t so new. But for esports rookies and their insurers, the complete reliance on technology and an interconnected web involving multiple players involved in staging esports presents new risk exposures and opportunities to consider.

    Within this virtual world, it’s not just the teams themselves – many players have stakes in the esports industry from tournament organisers to sponsors, vloggers and game developers as well as the players themselves and they have as much to lose if things don’t go to plan.

    Who own the rights?

    A notable difference between the two sporting worlds is around media rights. Unlike regular sports where no one ‘owns’ the game (e.g. football), esports centres around the video games that are the sole intellectual property of either the developer or the distributor – who retains complete control over how their game is used.

    The games remain subject to copyright laws that have been designed to protect the economic interests of the owner by giving them rights over how their work is used by third parties, which includes selling exclusive rights to others.

    However to complicate matters, some game developers tolerate, and sometimes encourage, media content from third parties on their games for non-commercial purposes. This is because having the gaming community engaged in generating and sharing content boosts the standing of the game. Permission should never be assumed and the owner can of course decide at any time to enforce the existing rights once again. There have been numerous disputes in recent years in the gaming world and understanding the ‘rules of the game’ is essential.

    Players that want to use a particular game for their own commercial interests, such as streaming game content or hosting tournaments, must have the correct permissions in place, and use it as stipulated in the agreement. Failure to obtain permission from the owner or a violation of the licencing arrangement can result in lawsuits for copyright infringement from the game owner.

    Tech reliant  

    Another key risk when it comes to hosting esports events is the reliance on technology and the potential for a glitch that could interrupt play or the ability to stream it globally in real time. Technology performance is core to all major sporting events, which run the risk of computer system or broadcast failures which could be the result of cyber breaches or loss of customer data. In the virtual world of sport, ensuring a smooth transmission and seamless streaming is even more essential.

    Transmission failure can be the difference between success and losing fans for good as well as financial loss. If the hosting platform were to fail, an event may be cancelled, and they may be liable for breach of contract and lost viewing or sponsorship revenue. There is also a lesser risk of professional negligence, which should be considered. Those supplying the technology on which the industry relies need to consider the potential costs of glitches caused by their products and services and consider having insurance in place to protect themselves financially.

    The last few months has opened eyes in traditional sporting domains to alternative ways to engage with fans and develop new revenue streams.  More big name sports teams are likely to break into esports – and not just in games aligned to their sports but into core esports titles such as Dota2 and League of Legends, as they seek to grow their brand with a broader fan base.

    Insurance that covers media and technology liability risks can address some of the risks associated with this shift online that clubs need to consider if they venture into this world. As we move out of lockdown, the esports industry is likely to capitalise on its moment on centre stage to further grow its popularity. Effective risk management, including risk mitigation, is integral to building a long-lasting offering. 

     

    For more information please visit our website www.beazley.com

     

    [1] https://twitchtracker.com/statistics

    [2] https://newzoo.com/insights/articles/newzoo-global-esports-economy-will-top-1-billion-for-the-first-time-in-2019/#:~:text=2019%3A%20A%20Momentous%20Year%20for,year%20growth%20of%20%2B26.7%25.

    About the author:

    I am Focus Group Leader for media & entertainment, within PE, which is in turn within Specialty Lines.

    Angela Weaver

    About the author:

    I work within the US Private Enterprise team in London headed up by Richard Everall. We write predominantly coverholder business up to $5m within the US across a broad array of lines, including miscellaneous Professional Liability, Tech & Media Liability, BBR, Products/GL and Misc Medical Liability.

    Luke Overall