8 Jun
2019

Esports: an untapped market for both brands and law firms

  • Nine esports teams are valued at over $100 million, yet many only have basic protection
  • Savvy firms are capitalising on this industry by launching unique practices
  • Sponsorship is the largest source of revenue in esports

If the esports market continues growing at current levels it will be worth $1.8 billion by 2022. Snowballing popularity of the industry has created a high level of engagement, with millions tuning in online to watch tournaments. A strong brand is a significant business asset to those gamers who are looking to attract more talent as well as sponsors and partnerships. Yet, today the top teams have relatively low levels of trademark protection. Law firms are now capitalising on the limited legal penetration to deliver specialised services to these gamers.

McNees Wallace & Nurick and Greenburg Traurig have both introduced esports practice groups in the past year to serve the legal needs of these teams and individuals, and dedicated esports firms have also cropped up.

“We initially entered the esports space because we discovered that players, influencers and streamers didn’t (and still don’t) necessarily have an appreciation for their own value or for the terms of the agreements they were signing,” says Evan Kubes, president and co-founder of MKM Group.

The data indicates that Kubes is not wrong. A number of high-valued teams have yet to fully appreciate the protections given by trademarks (see graph below). Cloud9 boasts the largest portfolio, with 58 trademarks, outstripping OpTic Gaming (35) and Gen.G (17).

Cloud9’s investment in its brand is not surprising at it is ranked as the most valuable esports company, worth $310 million. Each of the teams listed below are worth over $100 million, except for Envy Gaming which is just shy of this figure.

These portfolios appear small considering the scale of their operations. However, when we covered the esports industry in 2016, there were far fewer teams seeking trademark protection. It appears that the protection message is being heard, albeit slowly.

 

Source: CompuMark

The US is the favoured jurisdiction for most of these teams (see graph below). Optic Gaming’s portfolio stands out for its heavy Asian focus, with China, Malaysia and the Philippines featuring as its top three registers. Gen.G and G2 Esports have both opted to file through the EUIPO and thus have more European coverage.

Source: CompuMark

The core classes applied for by the major teams are class 9 (computer peripherals for esports; apps), 35 (promotion and management of esports teams) and 41 (organising esports tournaments and exhibitions) (see graph below). Only Envy Gaming, Team Liquid, Gen.G, Fnatic and G2 Esports have filed for class 38 (live streaming), which CompuMark’s director of custom and managed solutions, Robert Reading notes could be an important business opportunity.

Class 14 (jewellery), 16 (posters), 18 (bags), 25 (clothing) and 28 (games, toys) are other significant classes.

Source: CompuMark

Despite the increased attention on trademarks by the top teams, there has still been some oversight that could be potentially damaging.  ‘Team SoloMid’ has been registered by Beijing Zhumeng Technology Co Ltd in China for classes 25 (clothing) and 35 (business management et al). These marks were filed in August 2018 and registered in April 2019, according to Reading. It appears that third parties are now eying these brands.

Overall the esports industry is seeing an uptick in activity (see graph below).

Source: CompuMark

Esports is attracting more viewers across the globe each year

2019 is the first time the esports market will surpass the billion-dollar revenue mark, with 26.7% year-on-year growth. This year the global audience is expected to hit 453.8 million viewers worldwide, experiencing a growth of 15%. Viewership will consist of 201.2 million esports enthusiasts, as well at 252.6 million occasional viewers (see graph below). 79% of esports viewers are under the age of 35.

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Source: Newzoo

Esports tournaments are viewed through online channels, such as YouTube Gaming and Twitch. In the first quarter of 2018 esports viewers spent 17.9 million hours watching online. The reach of Twitch and YouTube Gaming can be seen in the graph below.

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Source: Goldman Sachs

North America is the largest esports market, with revenues of $409.1 million. It is projected to reach $691.1 million by 2022. China is another important jurisdiction, predicted to generate revenues of $210.3 million this year to overtake Western Europe as the second-largest region.

The Asia-Pacific area has high levels of viewer engagement, with 57% of esports enthusiasts residing here (see graph below).

Source: Newzoo

Number of sponsorships to rise

Esports will continue to grow in popularity leading to further exposure and scope. This creates major opportunities for teams, brands and lawyers alike.

Champion recently revealed a partnership with Foot Locker to launch apparel with the brands from five major esports teams. Gamers are being sought after as the new influencers because they have access to a desirable demographic and have a better ability to interact with consumers.

“Generally speaking, numbers tell us that esports is made up of primarily young males within the 14-25 years-old age bracket. This group is traditionally incredibly challenging to reach as they’ve been seen to have low attention spans and a high resistance to advertising,” says Saad Sarwar, CEO of Level99, a creative esports agency. “On the upside, they are a coveted demographic able to spend a lot on what they want.”

Various esports leagues run on a traditional sports business model, which includes the incorporation of sponsors and partnerships. In 2019 Coca-Cola was named as the official global beverage sponsor for non-alcoholic drinks for Activision Blizzard’s Overwatch League.

Sponsorship is the largest esports revenue stream worldwide, generating $456.7 million in 2019. Media rights is the fastest-growing revenue stream (see graph below).

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Source: Newzoo

Brands are critical assets for growing consumer recognition, which is needed to attract sponsors. “The more popular an individual or streamer, the more focused that individual is on developing his or her brand through the gamer name,” says Emily Doan, an associate at McNees Wallace & Nurick.

The importance of seeking trademark protections crops up again during sponsorship negotiations says Doan. There is often potential for co-branding, which means teams should have adequate protection for their own name, and also have a set of established brand guidelines. Those which are able to obtain sufficient protections for their brands thus have more revenue opportunities.  

Those in the industry are expecting more non-endemic companies to enter the space. “Whilst there are still brands not involved in esports, a lot of them know of esports and are waiting for a way in that feels right for them,” says Sarwar.

No matter the goals of an esports team, be it profiting from tournament victories or pursuing sponsorship opportunities, a strong trademark portfolio is a necessary prerequisite. Kubes likens esports to that of traditional sports, where the need for protection of brands and logos remains the same. “While it is not as prevalent as it should be – because esports is still in its infancy – as the industry continues to mature and professionalise, the more we expect to see esports players engage in trademark applications,” says Kubes.

Bridget Diakun

Data Reporter | World Trademark Review

[email protected]