By ESG Analyst Alexis Legault-Toffoli
What are Esports?
Esports, short for “electronic sports,” are multiplayer video games that are played competitively by professional players for spectators. Just like how conventional sports include football, basketball, baseball, and more, Esports is an umbrella term which refers to professional competitions from various video games, such as Dota 2, League of Legends, CSGO, Valorant, Overwatch, and Call of Duty. For each sufficiently popular video game, leagues are established to host international competitions.
As an industry, Esports grew rapidly. It emerged in the 1980s as small-scale grassroot tournaments with prize pools and arcade games. Today, Esports includes large-scale international tournaments, filling up stadiums and with high viewership. Major investors, such as Coca-Cola, Toyota, Red Bull, Intel, Microsoft, and American Express, are involved by sponsoring leagues and individual teams. Additionally, prize pools can be massive, such as the 2021 40 million USD prize pool for the Dota 2 International championship.
Various organizations compete in these leagues by forming a team with salaried professional players. The star players in the most lucrative games reach millionaire salary status and become minor celebrities. Teams frequently have a support staff with managers, coaches, physical trainers, nutritionists, and a facility to practice. The nature of competition makes it so that intense training is required by players to compete at the highest level.
Universities have also gotten involved in Esports by hosting their own leagues and teams, and by offering scholarships. Thus, Esports is an emerging highly professionalized industry with substantial money involved.
ESG Concerns in Esports
Like any new industry, Esports is facing the challenges of non-existent and inadequate legislation, leading to some ESG-related concerns. In many regards, Esports are similar to conventional sports when it comes to competitions. In fact, numerous governments have applied sports legislation to Esports as a palliative solution. However, as this initiative and Medeiros and Sayeg’s article note, this leaves some glaring ESG issues, notably for investors and players.
Risks for investors:
Since policymakers frequently do not understand Esports, legislation is slow to adapt. This entails a lack of laws guaranteeing transparency, laws facilitating the commercialization of assets and players, and laws enabling the allocation of resources to help Esports grow. As a result, private corporations are the primary investors backing Esports while facing the obstacles and risks of inadequate government policies.
The frequent visa issues illustrate how current laws fall short of enabling the success of Esports. Professional players come from across the world while competitions and in-person tournaments occur in specific countries. This means foreign players must get work visas for the required country to compete. There are frequent incidents of governments denying entry to competitors, resulting in unfair disadvantages as some players cannot compete. This is due to many countries not recognizing the nature of Esports and not offering sufficient support in fast-tracking the visa process for professional players.
Additionally, Esports greatly differs from conventional sports. No entity owns traditional sports like football, whereas the video games used in Esports are the intellectual property of their respective developers. These entities have complete control over the distribution and licensing of their games. Hence, Esports leagues are entirely dependent on the cooperation of developers, who either run the league themselves or outsource it. This adds another layer to the challenges corporations face when investing in Esports.
A good example of these risks comes from the game Overwatch, which is owned by Activision-Blizzard, who ran the Overwatch League. Due to the massive sexual misconduct lawsuit in 2021 against Activision-Blizzard, the Overwatch League lost most sponsors, rendering the league unprofitable for most teams. Following some internal restructuring at Activision-Blizzard, teams proceeded to sue the Overwatch League for not following through with its promises due to the changing financial situation.
Risks for players:
The lack of international organizations enforcing ethical standards has led to numerous unprofessional and unethical practices behind the scenes. There have been cases of coaches and managers abusing players, stealing prize pool earnings, not paying players, and more. With most instances going unreported, the two following cases are representative of these issues.
First, in 2022, the team Evil Geniuses from the LCS (League of Legends Esports) abused and neglected one of their players, leading to serious mental health deterioration. In general, professional players deal with high levels of stress, which in healthy circumstances are managed and supported by the team staff. In this example, the player Kyle ‘Danny’ Sakamaki from Evil Geniuses was facing serious mental health problems. The team staff left the player’s issues completely unattended and repeatedly denied his requests to take breaks from the competition for his health. The manager kept pushing Danny to play while looking to sell him to another team to minimize financial losses. This complete neglect of a player’s health in favour of profit demonstrates why international standards are needed in Esports to protect players from abuse.
Second, coming back to the Overwatch League, in 2021 right before the regular season started, the team LA Valiant dropped their entire roster. At this point, most players from the LA Valiant had refused offers from other teams and set themselves up to play with the LA Valiant for a year. The LA Valiant gave their roster no warning, meaning that most of the players were out of a job for an entire season since most other teams had already finalized their rosters. This move was deemed extremely unethical, but the players had no protection since the Overwatch League guidelines did not prohibit this type of behaviour.
Final Thoughts:
Overall, while Esports is a promising and emerging industry, it is in desperate need of international regulations to uphold ESG values. The international nature of Esports makes it difficult to have consistent standards as most practices are left to the discretion of the organization hosting the league. Luckily, associations and organizations are slowly advocating for change, but more needs to be done to enable the growth of Esports and the protection of players throughout the entire industry.
Sources and Additional Links:
Medeiros, Breno, and Sayeg, Ricardo. “E-Sports and the Application of Sports and Labor Legislation.” International Journal of Innovation: Iji Journal, Issn 2318-9975, Vol. 10, Nº. 2, 2022. 212-240, 2022. https://periodicos.uninove.br/innovation/article/view/21570/9672
https://www.verdict.co.uk/gaming-industry-esg/
https://www.washingtonpost.com/video-games/esports/2021/01/29/overwatch-valiant-china-league/
https://millerthomson.com/wp-content/uploads/2020/02/esportslegalplaybook_feb2020.pdf