Esports is a short form for electronic sports and it is a term used to signify bringing competition to video gaming. In an African setting, it involves gamers coming to an esports arena playing a game of FIFA, CALL OF DUTY etc, so as to get a chance to be called a king in that game and also to entertain the audience.
According to statistica.com, the Esports industry was valued at nearly 865million USD and this revenue is projected to reach a whopping sum of 1.79billion USD in 2022. Well these statistics show the potentials of the Esports industry which in coming years will see a rapid growth in several of its activities.
However, do not be deceived as these statistics have not transcended into the African scene yet but there are several Esports activities taking place in Africa which will pose a whole lot of legal challenges in the future should there be no anticipatory legislation to tackle them while the sector is still growing in Nigeria.
Before going into the uncertain regulatory landscape in Africa, it is pertinent to emphasize on the need for these anticipatory legislation/actions. According to reports, about 3000 gamers participate in the MTN tech plus gaming event in Nigeria, west Africa and also, I was present at the Naijagameevo University campus tour in the University of Lagos, where close to 200 gamers gathered to battle it out for who will be the king of FIFA and the PES competition. This points to the fact that Esports as an industry is here to stay in Nigeria and Africa but the question is WILL THERE BE A STABLE LEGAL ENVIRONMENT FOR IT WHEN IT STARTS TO BOOM?
The futuristic Esports needs in Africa that need present legal attention can be classified into three and they are:
For lawyers and aspiring lawyers reading this, there might be a general notion of being sufficient with the general knowledge of contract drafting but this does not only suffice in the Esports industry as there is need for a peculiar knowledge of the industry in other to draft a contract that will be fair to both parties.
For example, an Esports lawyer has to take the Twitch and other streaming account of the gamer into consideration and also must be familiar with certain virtual items that relate to the game as the ownership of these items is one that should be settled under an Esports contract so as to avoid unnecessary disputes. Another aspect that is the subject of ownership is the Ownership of game Avatars as created and developed by the gamers while in the course of their employment with the Esports team and this is subject to negotiations between both parties.
Lawyers need to know the dynamics of the industry so as to enable them arrive at the proper choice of law for the Arbitration clause to be inserted in the Esports contract. This will particularly be needed for an Esports team that has players from different countries in Africa.
The African Esports industry need lawyers that have special knowledge about the industry and can adequately protect their clients from unfair terms. This can be seen from the recent Esports contract dispute between Tfue and Faze clan, in which the dispute arose out of certain unfair terms in Tfue’s contract which was drafted by the initial lawyers of Faze clan and this goes to drive home the point of special knowledge of the industry.
This is a dynamic aspect of the Esports industry and it is one that tax experts and lawyers need to be fully aware of.
This dynamism can be simply examined by looking at the following scenario: An African Esports organizer starts an online FIFA gaming competition between a Nigerian Esports team that has foreign players and an Egyptian team in which this tournament is viewed by fans from both countries but the EA server they are playing on is located in South Africa and to top all of this, the sponsor that is paying the prize pool is a company from Ghana.
For the purpose of taxation, the fundamental question here will be which country has the taxing rights over the income? And this question will lead to further questions like Where are the players “performing” and can the players can claim credit for any overseas tax domestically?
To this effect, the answers are not definite yet as it varies on a case by case basis, but rather still my recommendations will be for the increase in the signing of bilateral double treaty agreement by nations involved in Esports activities, especially with those countries that have game host servers. This will help to properly anticipate many of the above dynamisms and tackle them appropriately before the issue of double taxation cripple the industry.
Another aspect of taxation relating to the Esports industry is that of “skin betting”, which has become some sort of digital currency in the Esports industry. Skins as they are called are basically virtual items acquired by gamers during games and these skins are used as digital currencies in online gaming markets for placement of in-game bets and sometimes used in a trade by barter scheme in exchange for other skins and most importantly, they can be exchanged for monetary value.
It is therefore important for prospective Esports lawyers and stakeholders to be familiar with this system and ensure that several tax mechanisms are developed to address this, as this system is already in existence in Africa in form of the buying and selling of FIFA ultimate team (FUT) coins.
This is the most important of all needs as this ensures that we have an ironclad legal structure that will in turn attract foreign investors, who believe that a return of investment can only be achieved if there is an existing legal structure.
With the growing rate of Esports activities, there is need for the creation of a central body to ensure the following at the bear minimum and they are:
-A holistic approach to the development of Esports in Africa by every stakeholder
-Proper development of policies/guidelines that will cater for the gamers and the gaming community at large and these policies/guidelines include rules relating to Cheating, anti-doping, integrity etc.
-Proper regulation of Esports through licensing of Esports organizers and an official yearly calendar for Esports activities in each country in Africa so as to avoid collision amongst Stakeholders.
The development of a legal structure cannot be undermined as this is the reason for recent Esports successes in Africa with the coming of the African Esports Championship taking place later this year.
With respect to Africa, there are plans to come up with a central body for the regulation of Esports activities and this is visible through the activities of different esports stakeholders representing their countries, who will be organizing qualifiers for the African Esports Championship and they are looking to be officially recognized as the regulatory body for the continent.
In conclusion, having stated the above legal needs for the African Esports industry, this then present a case for the industry lovers to collaborate so as to effectively tackle these needs ahead of time and not employ the customary norm of waiting for a boom or crisis to occur before we start providing solutions.
There is no question of whether the Esports industry will see a massive boom in Africa but rather it is a question of When? But while we are still waiting for the When, we have to start taking actions that will create the suited legal environment for the industry to thrive.
Written by Stephen Ojo – Inside Council for Esports Nigeria