Academic journal article Columbia Journal of Law and Social Problems

Tiebreaker: An Antitrust Analysis of Esports

Academic journal article Columbia Journal of Law and Social Problems

Tiebreaker: An Antitrust Analysis of Esports

Article excerpt

I.INTRODUCTION - ESPORTS AND THE RELEVANCE OF ANTITRUST LAW

Electronic sports (esports) is a burgeoning entertainment industry in which viewers worldwide watch professionals compete in video games like League of Legends, Overwatch, and StarCraft.1 Just as with conventional sports, dedicated fans flock to tournament stadiums, watch live broadcasts of events, and view past broadcasts which have been uploaded to websites like YouTube.2 Esports content generally consists of audiovisual footage of competitive gameplay with live color commentary and analysis, interspersed with shots of players, pre- and post-game interviews, highlight reels, and similar sorts of sports entertainment staples.3 Esports has experienced astronomical revenue growth, from $120 million in 2012 to $696 million in 2017, with projections that revenue will reach $1.48 billion by 2020.4 Forty-six million unique viewers watched the most popular tournament of 2017, Intel Extreme Masters Katowice - almost half of the 111 million who watched the Super Bowl.5 In 2017, over 17,000 players competed for a total of $114 million in prize money across more than 4000 tournaments,6 with the single largest prize pool of over $24 million for The International 2017, a Dota 2 tournament.7 Tournaments and teams are sponsored by companies like Intel, Coca-Cola, and Mountain Dew which target a wealthy, young, and predominantly-male viewer demographic.8 In light of esports' rising popularity, traditional sports organizations like the National Football League, or NFL, are positioning to enter the market.9

Esports appears a vibrant, growing industry with healthy competition (in both senses of the word), unafflicted by cartels, price-fixers, and other classic anticompetitive culprits. Embedded within esports' fundamental technological and social features, however, is a core antitrust concern: a single game producer owns monopoly rights to the game being played, and exercises those rights in the context of a substantial downstream market of viewers, players, teams, broadcasters, and advertisers.10 Nobody owns football, soccer, or tennis, but companies do own esports games. The NFL cannot ban people from playing football in the NCAA, or in their backyards, but Valve Corporation (Valve) could permanently ban anyone from playing its popular game Counter-Strike.

Intellectual property (IP) rights in esports currently account for 14% of the total global revenue stream from the industry, with $95.2 million spent on the acquisition of media rights in 2017 - a monumental 81.5% increase from 2016.11 And, though hundreds of games comprise the esports market, prize money (a proxy for viewership and revenue) is highly concentrated at the very top. In 2017, the top ten esports titles accounted for 82% of all $111 million prize revenue split primarily across games owned by three major publishers: Valve (50%), Activision Blizzard (Blizzard) (17%), and Riot Games (Riot) (10.5%).12 Assuming for simplicity that prize revenue corresponds roughly with market share,13 the HHI14 of the esports market15 - a metric of measuring market concentration used in antitrust merger analysis - is over 2900, well above what the Department of Justice considers to be a "highly concentrated marketplace."16

Moreover, IP control over the fundamental asset undergirding all esports - the games themselves - gives game publishers exclusive rights to effectively control all of the downstream conduct of tournament organizers, broadcasters, teams, and players.17 For example, three years of licensing disputes between the Korean E-Sports Association (KeSPA) and Blizzard concerning the broadcast of StarCraft - the most popular esport in South Korea - culminated in 2010 litigation in that nation's courts.18 Blizzard, the publisher of StarCraft, had entered into an exclusive partnership with Gretech-GomTV for the broadcast and operation of televised StarCraft tournaments.19 Other television networks, failing to reach a licensing agreement, made unsanctioned broadcasts of tournaments organized by KeSPA, which advanced the novel argument that StarCraft should be considered part of the public domain. …

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