What Do Esport Organizers Need to Know If They Get a Sponsor?
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The esports industry has seen tremendous growth in revenue and viewership in recent years.
“When I look at 2018, I feel like it was the year that esports really started cracking into the mainstream,” Jack Etienne, owner of North American esports team Cloud9, told CNBC recently. “To me it feels like we’ve broken a barrier that we’ve never attained before in esports.”
This has naturally brought the attention of sponsors with famous, recognizable brands. “It’s really beginning to mirror actual sports in terms of who’s advertising,” Eric Haggstrom, forecasting analyst at eMarketer, told CNBC.
If you are an esports organizer and have found a sponsor for your esports event, you may have thought that you reached the end of all your problems. The money is here, and you have nothing more to worry about.
The reality is, the relationship between you and your sponsor is a legal one. Naturally, anytime money is involved, legal issues may arise. Following these few simple steps could save you a few headaches.
Put It In Writing
First and foremost, it is important to sign a written agreement — a contract — with your sponsors. No matter how big or small your tournament is, having a contract is a must. If any legal issues ever arise, it is difficult to prove your claim without a written agreement.
The written agreement, at a minimum, should state what each party’s responsibilities are, how much you are to be paid, and when you are to be paid.
As always, it is highly advisable to consult a lawyer. But whatever you do, don’t let it stop you from having some form of written agreement in place.
Think of Intellectual Property Protection
You’ll use your sponsor’s logo at the tournament venue and promotional materials. The sponsor may use your tournament trademark in their promotional materials. That means using each other’s intellectual property.
That’s why it is important to include a contract clause regulating the way each of the sides may use the other side’s IP. Even though it is mutually beneficial to use each other’s signs and symbols, a simple misunderstanding may lead to long-lasting legal issues you want to avoid from the start.
When in doubt, always get permission before using a sponsor’s (highly valuable) brand name and trademark.
Include Liability Disclaimers
People and companies are held responsible for the consequences of their own actions unless they sign a contract with a clause limiting such liability. Your esports lawyer is likely to advise you to include such a clause with which you’ll limit your responsibility for damages due to the sponsor’s recklessness. As a result, if they do anything that causes damages to another person during your tournament, you’ll keep yourself away from legal trouble.
Brands Typically Do Not Pay Out for a Month After the Event
If you thought that securing a sponsorship deal means that you are going to organize the tournament with their money, you could be in for an unpleasant suprise. In most cases, sponsors payout after the event, very often around one month after the tournament ends.
In the meantime, it’s up to you to find money to cover all the costs associated with the event. The timeline usually looks like this: you’ll pay for streaming costs, venue costs, winner prizes, and after a while, you’ll get the money from the sponsors. Make sure you plan accordingly.
You Still Must Be Compliant with the Laws
No matter what you’ll include in the sponsorship contract, do not forget to stay compliant with the laws affecting esports tournaments. They have to meet a number of legal requirements related to prize pools, entry fees, lottery and gambling laws, and other laws. Laws vary greatly from state to state. Maryland, for example, just passed a specific law geared towards esports. Other states, like Arizona, require prior registration with the state government before you can organize an esports event that both charges entry fees and awards valuable prizes. Be sure to read up on your state and how to properly conduct an esports event in your area.
Andre J. Castillo and his law firm, Castillo Corporate Counsel, PLLC, provide business law services to tech start-ups, and small- and medium-sized businesses. In this capacity, he has represented companies in deals with the world’s largest video game publishers, Fortune 500 companies, and government agencies. An avid esports fan himself, Andre can carry his own against top players in the Street Fighter, Marvel vs. Capcom, and Samurai Showdown series. He can be reached via email at andre@cccp.llc.
