eSports: The New Frontier of Sports & Entertainment Agreement

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.