Germany: Commercial Opportunities Of E-Sports Events - A Perspective From Germany

Last Updated: 10 September 2019
Article by Gabriele Engels LL.M. and Jille Louis Kikonga

In contrast to the UK and the US, e-sports is not officially recognized as an official sport in Germany (yet), barring players from their professional athletes' status. It is the German Olympic Sports Federation (DOSB) which has rejected it1, notwithstanding the current coalition government having recommended to officially recognize e-sports as a sporting activity already over a year ago2. Yet, in view of the rapid increase of viewers and turnover it is clear that advertising arrangements and intellectual property rights are critically important for publishers, organisers, sponsors, broadcasters, and players and need to be assessed.

Traditional football clubs such as Paris Saint-Germain, FC Schalke 04, Ajax Amsterdam or Manchester City are already very active in e-sports with their own teams and e-sport departments. The final of the first "ePremier League" at the end of March 2019 was broadcasted live via different TV and digital channels.3 The prize money offered in "The International 2019" (a Dota 2 world championship tournament)4  being held in Shanghai this August exceeds a record of USD 30 million5. The tournament will involve 18 top ranked teams made of 5 players.

Germany has seen a staggering increase in the popularity of e-sports: a recent poll6  indicated that 13 million Germans in 2018, and thus 19% of the population, have watched an e-sports broadcast, which is up from 7 million a year ago. E-sports has particular appeal with the younger generation with 44% among the 16-to-24-year-olds having watched such an event. The growth of e-sports represents an exciting and new advertising opportunity for companies, which is yet to be fully realized. However, there are significant legal implications in particular on the intellectual property rights associated with broadcasting and advertising in the e-sports industry. In particular, the advertising laws are complex and companies need to ensure compliance in this increasingly competitive market. The article outlines the key points to be aware of.

Protectability of e-Games

While traditional sports generally do not qualify as protected works due to a lack of a personal intellectual creation, required under German Copyright law7, this changes when it comes to video or e-games. The following features can be protected under the German Copyright Act (UrhG):

  • Computer program, software and the source code itself
  • Overall design as cinematographic work
  • Background music
  • Graphics, landscapes and the user interface as artistic works
  • Textual content as literary works
  • The game itself as compound work

These rights actually lie with the creator of the respective work; but in practice it is generally the game publisher who has a key role amongst the diverging interests of broadcasters, the competition organizers, sponsors and professional players.

Rights affected by the broadcast of an e-sports event

The organization of an e-sports tournament and its broadcast involve use of the publisher's copyrights in view of the public transmission of the game and this act of exploitation requires his consent and the granting of different rights. The main rights affected are the:

  • Right of presentation, as the protected contents are made perceivable to the present audience by means of using technical devices,
  • Right of broadcasting, as soon as the game is transmitted (e.g. by live stream) to the general public, and 
  • Right of making works available to the public and of communication of broadcasts, i.e. using VOD platforms.

The standard license terms of most video or e-games will explicitly prohibit the commercial use of the content, which means an organizer of an e-sports competition or event must have been granted the above rights separately under a different document. 

  • Further, the affected publisher's rights are supplemented by his right to claim injunctive relief in the case of a non-agreed alteration (or distortion) of his work which is capable of prejudicing his legitimate intellectual or personal interests in the work. Adaptations or other transformations of his work can therefore only be published or exploited with the rights owner's consent.

Irrespective of the above, the legal basis of the commercial use of game contents by the competition organizer lies is created by his actual control over the (e-sports) facility8. This domiciliary right can be exercised as the organizer deems appropriate - in particular he is free to charge a fee for entering the premises for reporting purposes. The organizer also controls the transmission signal and can grant licenses to third parties for them to stream the content online.

Legal frame for sponsoring and advertising

In terms of physical advertising at the place of transmission the general rules on advertising and sponsoring apply. This might change once the e-games played at the event contain adverts or, where the e-sports event is used commercially.

There is significant scope for conflict between the competing interests of in-game-advertiser and the sponsors of an e-sports event. An example is when games claim to be a lifelike reproduction of a sports event, such as the "FIFA" video game series9  with its aspiration to reflect football in the real world, using the original teams', players' and shirt sponsors. Legally, this conflict manifests in contractual exclusivity or non-competition provisions in the relationship between game publishers and advertisers on one side and on the other side between the event organizers and their sponsors. This potential conflict of interests should be considered and dealt with by corresponding disclaimers and exclusion clauses in the relevant sponsor agreements.

  • From a competition law perspective, the prohibition of surreptitious advertising must to be observed. The commercial intent of a sponsor or advert, qualifying as a commercial practice, must be disclosed to the viewer.
  • Of even greater importance are the provisions of the Interstate Treaty on Broadcasting and Telemedia (RStV). Based on the Kulturhoheit der Länder (sovereignty of the German states in terms of cultural aspects) it is not a federal piece of legislation, but a treaty passed by all federal states of Germany as law. Its provisions, in particular Sections 7 and 8 stipulate strict advertising principles and labelling obligations as well as requirements in terms of sponsored transmissions, which apply when an event is streamed live over the internet or videos of the event are made available on the internet (on demand) after the live event.

Technically, there are in principle two ways for the media provider or broadcaster to insert advertising: either the provider inserts adverts into the videos or he uses promotional content during the game or at the location of the game event. In both cases;

  • there must be strict separation between the promotional and editorial content, and
  • the promotional content must be clearly and easily recognisable as such.

a. If the media provider or broadcaster decide to insert the adverts, they must comply with the provision relating to insertion of virtual advertising10- notwithstanding the aforementioned copyright, unfair competition and contractual restrictions. Contrary to the wording of the provision, it does not cover the insertion of advertising into the game itself. Rather, it only declares admissible the replacement of advertising already existing at the place of the transmission - an example being virtual advertising images which have been digitally inserted on perimeter advertising boards. The provision is an exception to the above-mentioned basic principles, specifically the separation and recognition principle and the surreptitious advertising prohibition.

However, the broadcaster of the services can use split-screen-advertising (partial occupation of the screen by advertising or tailored advertising in different countries) in a live e-sports broadcast11, provided that both of the above basic principles are complied with. However, the use of technology is not limited to replacing existing advertising spaces, but can create new advertising spaces. For example, it is possible to place advertising messages on the edges or in the middle circle of a playing field which, would not be covered by the virtual advertising provision.

b. In the second case - where the provider or broadcaster takes over the adverts already inserted into the game - he is primarily responsible for complying with the RStV provisions, notwithstanding that he did not originally insert the adverts into the actual content. Therefore, it is generally the provider and broadcaster who are responsible for ensuring compliance with these principles.

Practical consequences for contract drafting

In view of the copyright issues and the organizer's right to license the broadcast of the event, careful drafting of new and a review of existing contracts is key. Of paramount importance is the need to consider the game publisher's copyrights and obtaining his effective and unconditional consent must be detailed in the agreement for an organizer to execute a planned e-sports event. In this situation, the organizer's right to grant sublicenses to broadcast, as well as the insertion of advertising and sponsoring in general, should be considered. Further, to remove the potential conflict of interests between the organizer's sponsors and in-game advertisers, existing contracts should be checked for exclusivity and non-competition clauses with the insertion of possible disclaimers where necessary.

Conclusion

The field of e-sports is in an exciting state of flux. Although the DOSB has meanwhile softened its tone, a change of stance on the recognition of e-sports as professional "real" sport appears unlikely in the near future. Nevertheless, German copyright law grants protection for e-games and those publishers whose rights are affected by the organization of e-sports events: both the transmission and the insertion of advertising content by an organizer or broadcaster might, technically, impair his rights. While the RStV seemingly provides for a special provision on virtual advertising, the requirement to replace advertisement at the place of transmission only permits it within a narrowly defined framework, regardless of what is technically feasible. As most video or e-games' standard license terms will in principle explicitly prohibit the commercial use of the content, an organizer of an e-sports competition or event must have those rights granted separately.

While the e-sports industry remains new and yet unchartered territory for most businesses, the continued rise in popularity and consequent commercial opportunities of e-spots will only increase. Smart businesses should be quick to develop an awareness in this field and use commercial opportunities in this fast growing industry; however keeping in mind the outlined legal implications.

Footnotes

1 dosb.de/ueber-uns/esport ; esportsobserver.com/dosb-esports-rejection

2 esportsobserver.com/german-parties-recognize-esports

3 premierleague.com/epl

4 dota2.com/international/battlepass

5 pcgamesn.com/dota-2/international-2019-prize-pool

6 game.de/jeder-fuenfte-deutsche-schaltet-bei-esports-ein

7 Sect 2 (2) UrhG requires the author's own intellectual creation in order to constitute a work within the meaning of the German Copyright Act.

8 German Federal Supreme Court (BGH), judgment of 28 October 2010, docket number: I ZR 60/09, "hartplatzhelden.de".

9 ea.com/games/fifa

10 Sect. 7 (6) RStV allows the insertion of virtual advertising into broadcasts under two conditions: (1.) the insertion of advertising is pointed out at the beginning and end of the consignment in question, and (2.) it replaces advertising already existing at the place of transmission.

11 forbes.com

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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