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April 20, 2023

Lack of Industry Standards Has Created a Wild West of eSports Contracts

Lack of Industry Standards Has Created a Wild West of eSports Contracts

If gamers and streamers want the same protections as their counterparts in music and film they will have to let attorneys into the fold.

The state of eSport bargaining balance is deplorable. Organizations have all the cards based on the rather ludicrous premise that professional gamers and content creators lack meaningful choice in their career endeavors.

We are left with a “cart before horse” dilemma. On the one hand, eSports organizations are, by in large, predatory and exploitative. They feast on poorly written contracts pulled off of Google in the hopes (and understanding) that most of the gamers will blithely sign away all of their rights. On the other hand, there are very few gamers willing to stand strong and let their attorney protect their rights. Instead, gamers are quick to site “industry standards” or simply ask one of their contemporaries how he or she approached their pending contract. The result, sadly, is a hasty and inattentive entry into unconscionable agreements. Frankly, that is because there are no “industry standards.”

It is always relieving to work on contract negotiations in music and film. The reason is simple. Those industries have developed sound standards in both the content of the contracts and the means and methods of the attorneys who negotiate them. Take a music licensing deal, for example. One would be hard pressed to find a music attorney who did not default to an arrangement by which the client pays the attorney something in the vicinity of ten percent of the total contract in exchange for review, redlining, negotiation, and communication regarding the contents of the contract. That carries value for the client as many of the terms in the agreement (copyright rights, performance rights, intellectual property rights, and so on) are difficult to understand. Thus, the artist would rather have an attorney interpret those terms and fight for better terms so as to protect them from future losses, or worse, limitations on future earnings.

In film and television, the arrangement is not dissimilar. Sure, the percentage of the contract to which the attorney is entitled might change, but the principles are the same. Actors and Directors want protections. They want to make sure they maximize the returns on their performance or work. So they are willing to break off a portion of the contract total to ensure that they are fully protected.

This method has not yet caught on in eSports, and it is likely for the following reasons: 1) Organizations do not pay gamers and creators enough for the talent to justify what they perceive as a big step in hiring an attorney; 2) Based on these wages, gamers and creators are hesitant to enter into percentage-based arrangements with attorneys; 3) the “unicorn” status of signing with an organization is so strong and one-sided that gamers and creators fear that any hesitation or pushback will result in losing the opportunity.  This cycle creates a “wild west” mentality in eSports, allowing organizations to maintain the upper hand in that they have internal counsel, sophisticated principals, and all of the money.

But there are solutions to this problem, and it is not too late for eSports to catch up and adopt the means and methods of contract negotiation that are alive and well in music and film.

Many of the problems with counseling a gamer or creator stems from sophistication. This is not to say, however, that musicians and actors are intrinsically more sophisticated than gamers and creators, but that the standards in the latter industries are already documented. They are out there. You can Google them. In other words, it’s just the way things are.

Conversely, in eSports, there are no standards. I have seen contracts that require a player to pay twice his annual salary to buy himself out of a contract compared to the organization’s requirement of buying out the contract for less than $1,000. I have seen clauses that alleviate organizations of any responsibility in paying their professionals if they (subjectively) do not have the funds to do so. I have seen organizations hold players hostage and demand buyouts exponentially higher than the players’ value. I regularly see contracts with typos, errors, and unconscionable provisions.

It makes negotiating hard, but it makes controlling expectations with your client even harder. Individual team contracts in eSports, for instance, vary drastically from organization to organization, some being 10 pages long and others being 40 pages long. At some point eSports will have industry standards. The Wild West will become a predictable and “safe” world, but that is not the case now. The best thing a gamer or streamer can do is simply contact an attorney and ask for advice. That advice may cost money. Retaining counsel is a worthy investment, especially when facing the three headed organization monster of exploitation, infinite resources, and sophisticated legal teams.


Nate Drexler

Attorney

Nate is an attorney working in the areas of general litigation, contract law, and corporate transactions. He has experience forming and negotiating contracts across a wide range of entertainment mediums including TV and Film, eSports, music, and corporate transactions. His experience has given him the opportunity to negotiate and finalize all aspects of talent deals involving actors, musicians, and esports athletes. He has handled a wide variety of agreements with multiple platforms and guild structures.

Before joining PN, Nate worked as an insurance defense litigator where he handled a multitude of cases ranging from Labor Law, Property Damage, Construction Defect, and Premises Liability. Nate graduated from St. John's University School of Law.

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