Electronic Sports (“eSports”)
is a rapidly growing and evolving international industry, and is slated to
reach a global audience comparable to the size and reach of the National
Football League in 2022. In today’s digital streaming environment, professional
eSport “athletes” often find themselves in simultaneous roles as part competitors,
entertainers, artists and content-creators on platforms such as YouTube and
Twitch.
As emerging eSports gamers begin
to navigate the world of professional gaming, they will inevitably encounter complex
legal and business challenges when dealing with player and service contracts,
league associations, and brand endorsement deals. eSport athletes are often
young and inexperienced, with athletes as young as eleven years old entering
into gamer contracts.[1]
Without a regulatory body overseeing the eSports industry, eSports athletes
(and in some cases, their parents) are often the ones who negotiate and agree
to contractual terms with teams and organizations. This can be a daunting task
for those with no legal and business background unless they are represented by
a lawyer or agent. Unsurprisingly, eSports teams and organizations can take
advantage of their inexperienced athletes with complex legal agreements which can
result in unfair compensation schemes and the transfer of certain rights an
athlete would not normally want to give up. These problems are at the heart of
a current lawsuit in California, one of the first of its kind, involving professional
Fortnite athlete and streamer Turner Tenney, better known as “Tfue”.
The FaZe Clan Gamer Agreement
In April of 2018, Tenney entered
into a “Gamer Agreement” with his eSports team and management company, FaZe
Clan Inc. (“FaZe Clan”). The Gamer Agreement mirrors a professional
sports service contract, where Tenney agrees to render his services as a
professional Fortnite athlete on a sports team as part of FaZe Clan.
An assessment of the now-leaked
Gamer Agreement reveals a myriad of restrictive provisions preventing
Tenney from acting in his professional capacity or otherwise being competitive
in the marketplace without the intervention of FaZe Clan. A few key issues of
the Gamer Agreements include:
- While Tenney is referred to as an independent contractor:
i. FaZe Clan supplies all of his equipment and uniform;
and,
ii. Tenney is required to attend scheduled team events,
tournaments, practices and to provide promotional services/content creation
required by FaZe Clan;
- The inclusion of an exclusivity clause preventing Tenney from working with other companies without express written permission from FaZe Clan;
- A clause preventing Tenney from being signed with any other Fortnite teams without a “right of first refusal” which provides FaZe Clan to match the terms of any offer from another team;
- A termination clause that allows FaZe to terminate Tenney for any Gamer “incapacity” lasting seven days in aggregate, which is described as any physical, mental or other impairment; and
- FaZe Clan is granted unlimited and ongoing rights to any of his intellectual property works Tenney produced while under the Gamer Agreement.
The Gamer Agreement also includes an aggressive compensation
scheme in favour of FaZe Clan. For instance, if a brand endorsement deal that
featured Tenney on any of his social media platforms was introduced by Tenney
to FaZe Clan, FaZe Clan was entitled to a 50% commission fee. If a deal was introduced
to Tenney by FaZe Clan, FaZe Clan was entitled to an 80% finder’s fee.
The Tfue Complaint
On May 20, 2019, Tenney filed a complaint
with the Superior Court of the State of California against FaZe Clan to terminate
or void his Gamer Agreement. In his complaint, Tenney alleged that he entered
into an “oppressive contract” with FaZe Clan in 2018 when he was only 20 years
old. In addition, Tenney claims that the agreement violates both the California
Business and Professions Code and California’s Talent Agency Act.
Tenney believes that there is an
unfair power dynamic that exists between players and management groups, and
seeks to redress that power imbalance through this lawsuit. He believes that
most eSports athletes are very young, often uncomplicated and very trusting
when they enter into such restrictive and oppressive contracts, leading easily
to exploitation and manipulation. Among other things, Tenney’s aim is to set an
example for the rest of the industry and shift the power back to the athletes.
The Future of eSports &
Entertainment Agreements
The eSports industry will be
watching this dispute very closely, with its first hearing date being scheduled
for September 20, 2019. The lawsuit has sparked a broader conversation on the immediate
need for regulation and oversight for the eSports industry, especially given
that it is set to outgrow other major sports leagues around the world. If
litigated, Tenney’s lawsuit has the potential to set a precedent for how Gamer
Agreements should be interpreted by courts. In light of this, eSports
organizations and athletes should revisit their own agreements to ensure that
terms are fair and equitable and in compliance with any applicable laws.
For more information about issues
raised in this post or of the eSports industry as a whole, please contact Mike
McDonald at 613-695-7800 ext. 102.
Disclaimer: This article is provided as
an information resource and is not intended to be relied on or replace advice
from a qualified legal professional. You should contact a legal professional
before making any decisions with respect to the information discussed in this
post. Any use of this document does not constitute a lawyer-client
relationship.
[1] In
Tenney’s lawsuit, it was alleged that fellow FaZe Clan member and Twitch
streamer H1ghSky1 was only 11-years-old when he entered into a Gamer Agreement
with FaZe Clan. The age of H1ghSky1 was confirmed and Twitch removed his
account from the platform because he did not meet age requirements.
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