Photo of a pen, an Xbox One controller and a copy of an e-sports player contract.

Booming e-sports industry faces contract challenges

By Yifan Wu

Jeroen “Xaliea” Klaver is a 21-year old veteran in his field. During his four-year career competing in “Smite”, a popular online multiplayer game, the Amsterdam native earned $46,170 in prize money. But the paychecks from Team Paradigm, where he played in the 2016 Smite Pro League, never added up.

Lydia Picknell, Paradigm’s owner and general manager, refused to share any financial records at the request of Klaver and his four teammates. Instead, she offered them the chance to sign a contract. It sounded like a step towards legitimacy for the players until they saw the fine print: “The Player shall receive a salary of $1 USD per month.”

“At the time, we already had distrust with Lydia and the entire deal was a mess because we considered Lydia a friend,” Klaver wrote to Medill Reports in a Twitter direct message. “But when we got the contract we lost all hope that it’d end in a friendly way and felt pretty betrayed.”

Picknell did not respond to requests for comment.

Contracts are now common in e-sports. Game developers and publishers now organize professional leagues where players play in tournaments that attract millions of viewers and contain seven-figure prizes.

But legal issues, like Picknell’s $1 per month offer, have started surfacing in the rapidly growing industry. Lacking structure and oversight, e-sports has a long way to catch up to major sports leagues in regulation, especially in protecting the players from exploitation, insiders say.

Roger Quiles is a New York-based sports attorney specializing in e-sports. The lifelong gaming enthusiast was a sports firm associate working with collegiate athletes when he read about an e-sports organization withholding payment to players. It immediately hit him that when it comes to legal issues, competitive gaming is a virtual Wild, Wild West.

Quiles said most e-sports players are young adults, opening a window for teams to take advantage of their reluctance to hire attorneys and include terms that are, at best, unfavorable to players. In worst-case scenarios, organizations add responsibilities that players cannot legally perform.

“If you are an experienced attorney, you can easily spot the bad languages in an e-sports contract,” Quiles said.

One issue is the way e-sports teams classify players as independent contractors, rather than employees. Despite meeting the definition of an employee in their work schedule and contributions to the teams’ business, e-sports players rarely receive employee contracts.

“There are players-as-independent-contractors contracts, and then there are employee contracts. Most contracts are [the] former,” Quiles said. “They get a 1099 as opposed to a W2. That means no benefits. Employees are entitled to more benefits, like health care and sick days.”

In e-sports, many organizations have their own team houses where players can live and play together nonstop. Every day, players spend up to 12 hours practicing, making videos for the team’s YouTube channel and representing the team on live stream platforms such as Twitch.tv.

Players’ branding is directly linked to the teams’ sponsorship revenue. In addition to selling merchandise like jerseys, team-themed headphones and controllers, team owners also profit from in-game purchases. For instance, loyal fans of Klaver and Team Paradigm can spend 400 gems, an in-game currency of “Smite” that costs $7.99 on Amazon.com, on a bundle that includes an armor item with Paradigm’s logo on it, which they wear to support the team.

Contracts with foreign players are more complicated with visas in the picture. To compete and represent a U.S. team in U.S. legally, an international player must be on a valid P-1A Internationally Recognized Athlete visa.

U.S. Citizenship and Immigration Services now consider popular e-sports games like “League of Legends,” “Dota 2” and “Counter Strike: Global Offensive” to be professional sports, but players competing in smaller e-sports titles face a case-by-case vetting.

The lengthy application process for a P-1A visa has driven teams to use a shortcut: in form of a B-1 visitor visa, which the U.S. Department of State designates for athletes competing for prize money only.

William “Leffen” Hjelte joined Team SoloMid in March 2015 as the first “Super Smash Bros. Melee” player on the California-based e-sports team’s roster. Months later, immigration services deported the 20-year old native of Sweden and denied him entry after discovering that Hjelte was an employee of the team during his stay in the U.S., using a B-1 visa.

For an entire year, Hjelte watched all major events in the U.S. from afar. His prize earnings dwindled from more than $37,000 in 2015 to $20,307 in 2016.

Team SoloMid finally secured a P-1A visa for Hjelte last October, ending “a very grueling process for everyone involved, especially Leffen,” according to a statement on the team’s website.

“Part of the reasons that a visa is more important today is the quite interesting and hostile immigration environment we have today,” Quiles said. “It may be more difficult for a person who is deported to get back in the country.”

Transactions are the primary emphasis for Quiles’ firm, but the cases that attract the most attention are public disputes between disgruntled players and their teams.

Before becoming coordinator of Robert Morris University’s e-sports program, Ferris Ganzman was a professional coach and analyst in “League of Legends,” the most popular computer game and established e-sports title in the world. In his career, he saw many players venting frustrations with their organizations on Twitter.

“The player gets upset about the way the team is playing, or maybe got benched by the team,” Ganzman said. “Now he feels like taking things public is the best shot to get out of the contract. It is very immature, but that’s how it usually goes in e-sports.”

Quiles said the best way to handle unhappy e-sports athletes’ short temper and attention span is to be direct with them.

“I just sit them down, and lay out the situation for them,” Quiles said. “I told them they could keep dragging it with all of the Twitter drama, or they could resolve it and get over with it in the fastest and cleanest way possible. They listen most of the time.”

For Quiles, social media spats involving players pale in comparison to incomplete rules involving professional leagues.

A client, whose identity Quiles declined to disclose, was in a rocky relationship with team management when the organization decided to exit its professional league. The team soon released its entire roster except Quiles’ client to ensure that he would not be able to transfer to another team in the same league and keep competing.

The standoff ended when team eventually released the player, allowing him to explore free agency. But the lack of a rule protecting players in such situations dumbfounded Quiles.

Months after the case was resolved, Riot Games, developer of “League of Legends” and the organizer of the professional league for the game, amended its rules to include terms that prevented disbanded teams holding the rights to players.

Ganzman and Quiles both say that a long-term solution for teams and leagues across different e-sports titles is to bring former professional players on board to help with team operations and to bridge the communication gap between players and owners. It has been a popular move for the past year.

For Matthew “Burns” Potthoff, a former professional “Call of Duty” player, recently began consulting Team eUnited, a multi-sport organization he now co-manages.

“My biggest advantage is my failures as a player,” Potthoff said. “People always want to make changes and take things to Twitter, but I keep reminding them it’s more about talking stuff out so they can appreciate their teammates.”

Potthoff says players in shooter games like “Call of Duty” and “Gears of War” eventually will have agents, a belief that Ganzman and Quiles share.

“I think as more money comes up, players will realize that they need to protect their assets with the help of agents and lawyers,” Ganzman said. “I won’t be surprised if the players come together and get a collective bargaining agreement in the next few years.”

Photo at top: A pen, an Xbox One controller and a copy of an e-sports player contract.(Yifan Wu/MEDILL)