HomeInsightsThe World’s fastest-growing sport: maximising the economic success of esports whilst balancing regulatory concerns and ensuring the protection of those involved

This article was first published in Gaming Law Review, Volume: 21, Issue 8, October 1, 2017. Final version is available at Mary Ann Liebert, Inc., publishers.

What Are Esports

Esport, at its simplest, is competitive video gaming: players competing against one another to win a prize.

Interestingly, esports is not actually new and its origins can be traced back to the 1970s.[1] In 1980, Atari held the Space Invaders Championships where 10,000 people competed for the honor of being the world’s best space invader (well, technically the world’s best at holding off invaders from space).[2] Things have changed dramatically since those days, and now, thanks to modern technology—in particular hardware, software, peripherals, and faster Internet access—esports are a global activity followed by millions.

Esports can be played at home or at specific venues. Any video game could be used in theory, but the most popular esports titles, according to recent viewing figures from Twitch, are: League of Legends, Defense of the Ancients 2 (DotA 2), Counter‐Strike: Global Offensive (CS:GO), Hearthstone, and Heroes of the Storm.[3] Esports can be team‐based activities or played individually competing with each other one‐on‐one. Already today there are well‐supported esports teams, superstars, passionate fans, loyalties, sponsors, success, and heartache. As the name suggests, esports turn video games into a form of sport. In fact, esports could soon be classified as a sport as it will already be a medal event in the 2022 Asia Games in China, and this move, according to Macquarie,[4] may pave the way for esports featuring in the Olympics in 2024.

Esports is a collective term. Just as there are multiple different sports, there are many different esports, including one‐on‐one fighting games and six‐vs.‐six multiplayer online battle arenas. On top of this, esports feature tournaments played across various platforms (such as PS4, PC, and Xbox One); competitions that take place both online and offline; events taking place around the world; and even competing leagues relating to the same games. This fragmentation of esports poses a number of difficulties to the sector when it comes to generating revenue and in relation to regulation.

The Rise of Esports

The numbers surrounding esports are staggering and point to an industry whose popularity is growing and shows no sign of slowing down. A May 2017 IHS Markit report[5] stated that there was a 19% rise in the amount of time people spent watching esports in 2016, taking the total time to over six billion hours. The report predicts that this figure is expected to increase steadily year‐on‐year and by 2021, it is anticipated that the total time spent viewing esports will rise to over nine billion hours.[6] In terms of viewing numbers, Newzoo has predicted that global audience figures in 2017 will reach 385 million,[7] with Newzoo also showing that as many 21–35 year olds in the United States watch esports as baseball.[8] Consequently, revenue derived from esports is expected to exceed $1.48 billion by 2020[9] and the biggest esports tournaments, namely the League of Legends and DotA 2 championships, will attract multi‐million‐dollar prize funds.


Given the huge popularity of esports and the anticipated revenue figures, it is unsurprising that there has already been a lot of acquisition activity in the sector. In 2014, Amazon bought esports streaming service Twitch for $970 million, only three years after it was founded.[10] Similarly in 2015, Swedish media company Modern Times Group acquired a majority stake in ESL, a league that organizes competitions worldwide, for €78 million.[11] These amounts seem like big numbers but on the evidence of the projections made by Newzoo, these acquisitions are already looking like excellent foresight and shrewd investments.

As ever, there are two sides to every tale. Despite the rapid rise in popularity, advertising revenues are not keeping pace with the overall industry growth. Ginx, an esports channel backed by Sky and ITV, had a UK peak audience share of just 0.01% in 2016.[12] Similarly, large esports tournaments in the U.S. attract viewing figures up to seven million. That’s a long way short of the Super Bowl, which exceeds 100 million.[13] Experts suggest that the reason for these modest viewing figures and low advertising revenue is due to fragmentation of esports generally but also because esports are consumed primarily by millennials who use a range of devices and apps to obtain content rather than traditional linear or video‐on‐demand pay platform channels.[14]

Many esports tournaments lack funds and even the biggest tournaments, including the League of Legends World Championship hosted by Riot Games, are often supported by fans through crowdfunding campaigns.[15]

Clearly, esports needs to marry its popularity with increased revenues. It may simply be that the field of esports has grown so fast that it doesn’t yet have the infrastructure to support itself. If this is the case, then one suspects that soon advertisers, broadcasters, and sponsors will be able to better monetize the various products and that this money can be reinvested back into the sector. Additionally, esports may look to increase its exploitation of media rights. The natural question to ask is whether esports will start to enjoy broadcasting revenues anywhere near the scale of some of its traditional counterparts.

In terms of mainstream traditional linear exploitation in the UK, in 2015 the BBC dipped its toe in the water by broadcasting the quarter finals from the League of Legends World Championship live from Wembley Arena on BBC3,[16] and in February 2017, BT Sport announced that it had finalized a deal with Electronic Arts (EA) to broadcast FIFA 17 matches live on TV.[17]

In December 2016, Riot agreed to a seven‐year, League of Legends media rights licensing deal with BAMTech, which reportedly paid a guaranteed $300 million in license fees.[18] We would agree with Riot’s esports directors Whalen Rozelle and Jarred Kennedy who described this as “a game changer for our sport,”[19] as it takes the esports model much closer to that of traditional sports and, leaving the money to one side for a moment, provides long‐term security and a commitment to the tournament. Riot operates 13 tournaments for its games around the world, with weekly matches running most of the year followed by regional and international playoffs. The rights granted to BAMTech gave it the “exclusive rights to stream and monetize League of Legends competitions.”[20] The exclusivity and rights in this context must refer to professional tournaments and events that are operated by Riot, and it must be accepted that there are very limited ways of controlling amateurs and the casual player from arranging their own low‐key online events. The value is in the “official” professional tournaments.

BAMTech’s exploitation model will include a dedicated streaming app to attract advertising sales and sponsorship opportunities, syndication to streaming platforms such as Twitch and YouTube,[21] possibly premium subscription opportunities, and integrations with connected devices. It remains to be seen whether it can recoup the minimum guarantees committed to Riot but surely businesses such as BAMTech, whose foundations are in digital streaming and extracting revenue from more than one outlet, are the more attractive licensee for these multi‐year, high value output deals.

In turn, as the money in the esports sector continues to rise and the market matures, the supervisory scrutiny is likely to increase.

Gaming Opportunities and Regulatory Scrutiny

One of the most significant challenges facing esports is the issue of regulation and integrity. As discussed, esports is a wide‐ranging term and the concept of a single regime regulating all competitions and leagues across all video games poses a difficult challenge. Nevertheless, there is an increasing need for integrity issues to be dealt with at a holistic level. Some issues in live sports are also present in esports, such as match fixing and the use of drugs, but the online nature of esports raises its own integrity concerns when it comes to players cheating, using proxies, players losing on purpose, and the possibility of hardware and software advantage. These integrity issues need to be addressed to maintain the growing popularity of esports and to ensure that the public has faith in the legitimacy of the product. Bookmakers currently offer numerous markets on esports events but, for this to be sustainable, people must be able to believe they are staking their money on a meritocratic event free from any machinations. If this is not the case, then punters will decrease and the appetite of bookmakers to offer markets on esports will wane.

Positive steps have been taken in relation to integrity, particularly in the foundation of the Esports Integrity Coalition (ESIC), an organization looking to regulate esports and which includes tournament organizers, regulators, and betting companies amongst its members. ESIC has produced an anti‐corruption code,[22] which applies to its members and aims to harmonize conduct around integrity issues.

Earlier this year, ESIC banned Connor Huglin from all events for two years for a breach of its code.[23] Huglin was caught using a software cheat/hack during the Mettlestate Samsung Galaxy Counter‐Strike: Global Offensive (CS:GO) Championship. CS:GO has seen a number of players caught cheating over the years, and whilst that in itself is a worry, the ability for ESIC to impose bans across various events and titles is a positive development.

It’s unlikely that all cheating can be eliminated from esports—the recent history of cycling, for example, shows that no sport is free of cheating. But rules to outlaw cheating and institute effective sanctions where people breach these rules can offer some remedy. This is where the broad and fragmented nature of esports poses issues. The vast number of video games, tournaments, and events means that banning a player from all activity is near impossible. The industry must work together, however, to ensure that it is doing all it can to ensure that esports is free from corruption or cheating.


Another concern facing esports is its relationship with gambling. There are a couple of key ways in which esports interrelate with gambling: through so‐called “skin” betting and also through the possibility of wagering on the outcome of video game matchups.

Skin betting

Skin betting, where players use virtual items earned or purchased within video games to wager on games, has been a black mark on esports for the last few years. A number of third‐party sites have been set up allowing skins to be used as currency on gambling products with the chance to win large sums. These sites frequently offer gambling services without a license and have no regulatory oversight to ensure they don’t make these services available to children.

In February of this year, two men were fined by the courts for operating gambling without a license via the FUT Galaxy website following a prosecution brought by the Gambling Commission of Great Britain (GBGC).[24] The service used virtual coins from the FIFA franchise but both the district court and the GBGC stressed that there was no association between the FUT Galaxy site and the video game or its publisher. Of particular concern with the FUT Galaxy service was the ability for children to wager money (virtual currency that could be exchanged for money through an unauthorized secondary market).

As long as illegal skin betting prevails, esports’ reputation will suffer. Skin betting may technically be discrete from esports, but the overlap between the video games themselves and the “skins” means that the two are inextricably linked in the public’s mind. One imagines that this can only harm future commercial opportunities.

Tackling illegal skin betting is not easy. Many of these sites can simply shut down and reopen and they may also be based offshore. However, as action already taken shows, there are those in the esports industry, as well as the GBGC, working together to try and put a stop to illegal betting. Publisher terms preventing the removal of virtual currency from platforms, greater security around the platforms, and tough sanctions on those in breach should all help to reduce or wipe out the instances of unlicensed skin betting. Cooperation is undoubtedly the key and further regulation throughout esports should allow for key stakeholders to be able to better work together.


Further significant challenges facing esports are the regulatory questions being asked about players wagering on the outcome of events and matches. In March 2017, the GBGC released a position paper[25] on, amongst other things, esports. One potentially significant outcome of the paper was the statement that players betting on themselves to win a match could be considered betting. Gambling legislation is silent on whether or not the act of “backing yourself” against another person in a skill‐game would be considered a bet, but it is clear that the GBGC has the view that, at the very least, it might be regulated betting with any operator providing such a facility being a betting intermediary.

With this being the case, it is important for publishers, platforms, and esports organizers to consider whether or not a skill‐based esports event, which requires players to pay and where players can win money, will be considered betting. The answers to these questions will depend upon (and differ according to) the jurisdiction in question, but the GBGC published some guidance in its position paper between events that may be considered wagering (and therefore potentially betting) or events that are a skill‐based competition (which is not betting and therefore does not require a license). The consistent theme in the GBGC’s guidance is that matchups involving two parties competing could be considered a bet if the operator charges commission and/or if other factors are present. This is seen in the position paper through the use of the phrases “bilateral contract”, “two recognisable counterparties,” and “a short contest played between two participants.”[26]

Only time will tell if the GBGC looks to regulate scenarios where money is wagered between two persons on the outcome of a video game event but, for the time being, those considering offering such services should be mindful where money or money’s worth is wagered and won. The challenge for game developers, tournament organizers, and trade bodies is to work with gambling regulators to ensure that they do not stifle this nascent industry, which is the likely result of unnecessary and disproportionate regulation.


The esports industry and its swift progression show no sign of slowing down. In fact, as the industry becomes more established and more sophisticated, it will be better equipped to maximize the clear commercial opportunities that exist. There are certainly challenges ahead with respect to integrity, fragmentation, monetizing viewership, and gambling. How esports reacts to these challenges will be critical to its long‐term success, but it is important to keep in mind that these issues are not unique to esports and all sport have faced (and are facing) very similar issues. Perhaps the key distinction between esports and other sports is the lack of coherent regulation and a clearly identifiable governing body. These things must follow, as it is not sustainable for such a large industry to continue without proper checks and balances. One expects that these elements will follow shortly and, arguably, esports can learn a lot from the mistakes that conventional sports have made in these areas in the not‐so‐distant past. Should that happen, it is not so fanciful as it might once have been to imagine esports featuring in the Olympics in the near future.


[1]Owen Good, Today Is the 40th Anniversary of the World’s First Known Video Gaming Tournament, Kotaku (Oct. 19, 2012), http://kotaku.com/5953371/today-is- the‐40th‐ anniversary‐of‐ the‐worlds‐ first‐known‐ video‐gaming‐tournament.

[2] It Is 1980 and the National Space Invader’s Tournament Finals Is Approaching, The Retroist (May 20, 2013), http://www.retroist.com/2013/05/20/it-is-1980-and-the-national-space-invaders-tournament-finals-is-approaching/.

[3] Ranked by eSports hours watched on Twitch, May 2017: Most Watched Games on Twitch, Esports Content and Total, Newzoo (May 2017), https://newzoo.com/insights/rankings/top-games-twitch/.

[4] See Jamie Ashcroft, Going for Gold: Is eSports on the Road to the Olympics?, ProactiveInvestors UK (May 2, 2017), http://www.proactiveinvestors.co.uk/companies/news/177162/going-for-gold-is-esports-on-the-road-to-the-olympics-177162.html.

[5] Ted Hall, Dan Cryan, Piers Harding‐Rolls, Jonathan Broughton, Daniel Knapp, and Chenyu Cul, Esports Video and the Future of TV, IHS Markit Technology (May 11, 2017), https://technology.ihs.com/592040/esports-video-and-the-future-of-tv.

[6] Id.

[7] Newzoo’s Global Esports Market Report, Newzoo, https://newzoo.com/solutions/standard/market-forecasts/global-esports-market-report/.

[8] Pieter van den Heuvel, U.S. Male Millennials View as Much Esports as Baseball or Hockey (Report), Newzoo (Oct. 12, 2016), https://newzoo.com/insights/articles/why-brands-and-esports-are-entering-esports/.

[9] See Newzoo’s Global Esports Market Report, Newzoo (Feb. 2017).

[10] Kim Gittleson, Amazon Buys VideoGame Streaming Site Twitch, BBC News (Aug. 25, 2014), http://www.bbc.co.uk/news/technology-28930781.

[11] Dan Pearson, Modern Times Group Acquires Majority Stake in ESL for €78m, GamesIndustry.biz (July 1, 2015), http://www.gamesindustry.biz/articles/2015-07-01-modern-times-group-acquires-majority-stake-in-esl-for-usd78m.

[12] Hall et al., supra note 5.

[13] Esports Viewing Shoots up but Ad Revenues Have yet to Ignite, Financial Times (May 8, 2017), https://www.ft.com/content/e7964358-3405-11e7-bce4-9023f8c0fd2e?mhq5j=e2.

[14] Id.

[15] Id. Lydia Mitrevski, Why Crowdfunding Is the Backbone of Esports, Esports Insider (June 8, 2017), http://www.esportsinsider.com/2017/06/crowdfunding-backbone-of-esports/.

[16] Esports, the Next Big Content Play, PDF, DocPlayer, http://docplayer.net/42380541-Esports-the-next-big-content-play.html.

[17] Guardian Sport, FIFA 17 Matches to Be Broadcast Live on TV for First Time by BT Sport, The Guardian (Feb. 23, 2017), https://www.theguardian.com/football/2017/feb/23/fifa-17-gaming-matches-broadcast-live-television-first-time-bt-sport.

[18] Darin Kwilinski, MLB’s BAMTech Inks $300M Exclusive Deal with Riot GamesESPN.com (Dec. 17, 2016), http://www.espn.co.uk/esports/story/_/id/18292308/mlb-bamtech-streaming-platform-inks-300-million-exclusivity-deal-riot-games-league-legends.

[19] Paresh Dave, Riot Games Reaches $300million League of Legends Esports Streaming Deal with BAMTech, L.A. Times (Dec. 16, 2016), http://www.latimes.com/business/technology/la-fi-tn-riot-bamtech-20161216-story.html.

[20] Kwilinski, supra note 19.

[21] Id.

[22]AntiCorruption Code, Esport Integrity Coalition (ESIC), http://www.esportsintegrity.com/the-esic-integrity-programme/anti-corruption-code/.

[23]Joe Ewens, CounterStrike Cheater Tests Limits of Developing Esports Regulation, Gambling Compliance (May 18, 2017), https://gamblingcompliance.com/premium-content/insights_analysis/counter-strike-cheater-tests-limits-developing-esports-regulation.

[24] Two Men Convicted after Offering Illegal Gambling Parasitic upon Popular FIFA Computer Game, UK Gambling Commission, (Feb. 7, 2017), http://www.gamblingcommission.gov.uk/news-action-and-statistics/news/2017/Two-men-convicted-after-offering-illegal-gambling-parasitic-upon-popular-FIFA-computer-game.aspx

[25] Virtual Currencies, Esports and Social Casino Gaming—Position Paper, UK Gambling Commission (Mar. 2017), http://live-gamblecom.cloud.contensis.com/PDF/Virtual-currencies-eSports-and-social-casino-gaming.pdf.