Esports have seen a boom in popularity over recent years. The world of competitive online gaming and online sports is constantly evolving, and businesses looking to tap into this lucrative market must be flexible enough to keep up. When setting up an Esports business, your business model can take many forms, including game broadcasting, competition hosting or making money via sponsorships, subscriptions and selling merchandise. This article will unpack the key legal considerations you should keep in mind when starting your own Esports business.
Creating a Business Plan
Firstly, it is important to decide what exactly your Esports business will be doing. Esports is a broad industry, and there are many directions that you can take. For example, your revenue might be procured through merchandise sales, broadcasting or subscriptions. The legal considerations relevant to your scenario will depend on the direction you choose and your specific business idea.
Use a business plan to help define your business objectives and how you plan to achieve your goals. It will also help you plan for the future and might point out any gaps in your strategy.
Drafting a business plan will allow you to work out all the logistics of your new business. It can also highlight legal issues that you may need to consider.
Choosing a Business Structure
Every business needs a business structure. Choosing the right business structure is one of the most important decisions you will make when setting up your business. There are four common business structures to choose from:
- company;
- trust;
- sole trader; or
- partnership.
Of the four, a company structure is most commonly the best choice when you are looking to grow and scale your business. Companies are more attractive to prospective investors than other types of business structures. The ability to raise capital and accept investment via the issue of shares makes the company structure the most suitable for a growing Esports business. Further, a company will be your best bet if you are looking for investment opportunities.
Company structures also offer the benefit of limited liability. As a company is considered a separate legal entity from its individual shareholders, that means that directors, founders and shareholders will not generally be personally liable for its actions (unless there are exceptional circumstances). Where the company incurs debts, each individual shareholder will only be liable up to the amount that they have left unpaid on their personal shares (which is most commonly $0). Whereas if you were to run a business as a sole trader, you would be personally liable for the actions taken by the business.
Continue reading this article below the formProtecting Intellectual Property
One of the legal issues often encountered by startups is protecting their intellectual property (IP). Esports businesses are likely to invest in and generate significant IP that needs protecting. You can protect your IP by registering a trademark for your business name, logo and the names of your games.
You should also put in place contracts with your contractors and end users that contain comprehensive IP protection clauses. These provisions will licence the IP for the other party to the contract and require the other party not to damage, infringe or harm your IP.
Another important consideration in the Esports space is who owns what when it comes to IP. If you engage contractors or employees to develop a game, you should make sure it is clearly known that you own the game that is developed. You can do this in a written employment or contractor agreement.
Further, you might license a game, video or image from a third party or publisher. When you license IP, be aware of any restrictions or controls on how this IP is used. The licence to use IP in a video game might restrict the use of the game to personal or non-commercial usage. Accordingly, it is important to look into this before reproducing or appropriating any IP that you do not own. You may need to seek approval from the copyright holder before you can legally broadcast a game via an online streaming platform.
The LegalVision Startup Manual provides guidance on a number of common challenges faced by startup founders including structuring, raising capital, building a team, dealing with customers and suppliers, and protecting intellectual property.
The guide includes 10 case studies featuring Australia’s top VC fund partners and leading Australian startups.
Key Takeaways
The changing face of sport and the boom in popularity of online competitive gaming has made starting an Esports business a viable and lucrative business opportunity. As with any business, it is important to assess the legal risks before jumping into the Esports industry. Establishing a sound business plan, setting up the right business structure and securing the use of important IP are all things to consider before you start your own Esports business.
If you have any questions on how best to set up your new business, our experienced business lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 1300 544 755 or visit our membership page.
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