Esports revenues are soaring – watching the world's best video gamers has become big business. And, as in any events business, electronic sports carry risks – for organizers, for venues, and for sponsors. Understanding those risks is the first step towards insuring against them.
By Dominic Sacco
What began as an underground activity has become one of the most exciting and fastest- growing industries of the 21st century. Esports (aka electronic sports) has become its own separate entity, with different tournaments, professional players, teams and games for fans to follow. It is essentially competitive video gaming, where people play against one another either online or at events in arenas, usually for a cash prize.
Viewers can watch games such as League of Legends and Counter-Strike live online via streaming platforms such as Twitch and YouTube and in person at stadiums, with the biggest esports tournaments pulling in millions of spectators. Esports has even caught the eye of big sports clubs such as Manchester City and Paris Saint-Germain, and brands like Coca-Cola, Samsung and Red Bull.
Global revenues from esports – including advertising, sponsorship, ticketing and merchandise – rose 33.9% year-on-year to $660 million in 2017, according to market analyst Newzoo. This is expected to grow to $1.5 billion in 2020.
But what kind of risks are faced by esports tournament organisers and professional teams in this burgeoning sector?
Wouter Sleijffers, CEO of one of the world’s top esports clubs – Fnatic – says an important risk is whether their professional players pick up an injury or fail to turn up at an event.
“In those cases we’ve been able to tap into contracted substitute players or stand-ins, as long as it’s allowed by the rules,” he says. “However, in the past, some teams have needed to cancel participation due to visa restrictions or not having enough time to apply for a visa, depending on the origin of the player and location of the event.
“Generally speaking, we assess risks on an ongoing basis and work with experienced people internally and externally to minimise risk. In esports specifically, due to the increased stakes, investments and valuations, it’s becoming more and more important that we remove any unwanted eventualities and insure ourselves for negative scenarios.”
Francis Hernandez, International Entertainment Manager at Chubb, highlights esports player injury as a potential risk. “Injuries can affect the team’s performance – if they have to sub someone else in – and the viability of the event,” he comments. “Insurance could cover non-appearance but the underwriters would need detailed information, such as medical details.”
Emma Bennett, Chubb’s Head of Affinity, Employee Sponsored Benefits & Direct Marketing for Accident & Health, agrees: “There’s got to be a duty of care. There’s a lot of prize money around esports and, because of that, they’re going to be looking after the welfare of the people involved in esports, whether it’s preventing the likes of carpal tunnel syndrome [a wrist problem] or perhaps poor lifestyle – so ensuring players have regular breaks and proper nutrition.”
Personal accident cover could provide affected esports players with a lump sum of around £20,000, depending on the incident. There is also higher-frequency cover that would kick in if the player needed counselling following trauma, for example. However, it is important to note that injuries in esports can be very different to those picked up from physical sports.
Emma explains: “Some of the challenge around writing esports may be the fact that injuries are gradual and may happen over a period of time, for example, wrist injuries caused by repetitive strain injury, as opposed to a single and defined event that can be measured, such as a footballer who tripped, or tried to head the ball and got injured in the process.” There are other options available, such as death, disablement and disgrace insurance. So, if a player disgraces him or herself, and their team no longer wants anything to do with them, the club can buy a policy that protects the contract value they would have had to pay that person.
As with traditional sport, part of the appeal of esports is the fact that almost anything can happen during a match. But because of the live nature of broadcasting, technical problems can arise and streams can go down. It is rare, but entire events can even be cancelled.
For esports tournament organisers such as ESL, the show must go on. ESL UK Managing Director James Dean says working closely with game developers and players is key to minimising risk. “As long as we are working closely with the IP owners, we can work towards player education and understanding – managing their expectations of what opportunity esports presents,” he comments. “Educating different industries in an open and honest manner is the best way in which we can minimise the risk for the esports industry.”
Prevention is not always the cure, as some unexpected situations may still arise that could result in a loss of earnings or event interruption. And Chubb’s Francis Hernandez says, this is where insurers may come in, either offering an annual policy or one-off solutions. “I think the least event organisers should look at doing is to protect their expense exposure, so that if an event does get cancelled for whatever reason, they want to be in a position where their balance sheet ends up at zero again as a bare minimum,” he explains. “Something could happen to the venue, for example, it could burn down or have an electrical blackout. Terrorism insurance is also one of the things we get asked for now.”
Regardless of the potential pitfalls, esports is in an extremely exciting phase right now. And as the sector grows, the demand for insuring tournaments and players will surely grow along with it.
For more articles from Chubb UK, see Progress magazine.