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Navigating the Virtual Arena: Understanding Esports Sponsorship Contracts in Indonesia

posted 8 months ago

Indonesia is one of the, if not, the biggest markets for mobile video games in the world. It comes as no surprise that professional gaming has transcended from a niche hobby to a well-known profession for young adults. These video game competitions (Esport) have attracted millions of viewers in Indonesia offering substantial earning opportunities for organizations and players alike. For instance, the 2023 M4 World Championship for the video game Mobile Legends garnered an average viewership of 806,660 with a peak viewership of 4,270,270 eyes watching a single 30-minute match. Those views surely attracted sponsors which are central to the financial ecosystem of Indonesian Esport with brands competing to be shown in players’ jerseys and live streams. In this article, we delve into the intricate landscape of Esports sponsorship contracts, exploring the key components, challenges, and industry practices.

What is an Esport Sponsorship Contract?
An Esport sponsorship contract is a legal agreement between a brand and an Esport entity (team, player, tournament organizer, even the video game developer) wherein the brand provides financial support in exchange for exposure and marketing opportunities. Unlike traditional sports, the digital nature of Esports allows for a broader brand integration ranging from logo placement on team jerseys, and product placement on live streams, to interactive in-game content and social media collaborations. This broader brand integration requires additional awareness as parties may slip into breach of contracts if they neglect their obligations.

Key Components
Scope and Terms: Outlines the responsibilities of the Parties. Including but not limited to details about the brand’s role, financial commitments, and the duration of the partnership.

1. Rights and Licenses: Brands gain certain rights to use the Esports entity’s branding, imagery, and content for marketing purposes. Similarly, the Esport entity might gain access to the brand’s resources to associate better with the brand partner.

2. Obligations: The obligations of each party are specifically outlined, such as the brand’s commitment to the contribution, and promotional activities, and the Esports entity’s commitments in terms of content creation, representation, brand’s screen time, and participation in events.

3. Exclusivity: Brands may negotiate for exclusivity sponsorship to prevent competitors from engaging with the Esport entity during the contract period. Usually, brands compete for the most well-known team that the player base likes to associate with.

4. Compensation: This includes financial support, contributions, and additional perks or bonuses.

5. Performance Metrics: The contract may set certain performance metrics such as tournament placement, minimum live-stream hours per month, or social media engagement targets.

1. Fast-paced industry: Esports evolves faster than real sports, and the dynamics of the scene can change quickly. Teams and players that are notable today may not be as acclaimed next week.

2. Different games, different tournaments: Not all Esports are equal. Some Esports employ a franchising system to ensure each team has a minimum amount of screen time while some Esports do not guarantee even the most distinguished team a spot in their top tournaments. For instance, MPL (Mobile Legends Professional), the highest accolade tournament for video games Mobile Legends employs a franchising system wherein the franchised teams are guaranteed a spot in the tournament. This will also ensure that the sponsored team has enough screen time in the official broadcast. Meanwhile tournament for PUBG: Mobile has no franchising system resulting in the sponsored team not participating in PMPL (PUBG Mobile Pro League), the top tournament for PUBG: Mobile. Sponsors have been known to be hesitant in sponsoring teams they perceive as weak as a result. However, the top team also has the chance to not make it into the peak tournament.

3. Different games, different screen time: The type of video games also matters a lot for screen time. For instance, MOBA (Multiplayer Online Battle Arena) e.g., Mobile Legends, League of Legends: Wild Rift, Arena of Valor, has an average match duration of 12 minutes in which 2 (two) teams will be shown regardless of their performance in the match. Meanwhile, Battle Royale games e.g., PUBG: Mobile, Free Fire, and Fortnite, are not as forgiving, as many as 25 teams may compete in a match for 30 minutes wherein any team can have tough luck and eliminated in the first minute. This results in some poor-performing teams do not receive any screen time in the tournament.

4. Young Demographic: Unlike traditional sports, the Esports demographic is much younger which consists mainly of children with no purchasing power. One may question whether the money invested in Esports sponsorship equals more customers.

Key Takeaways
Esports sponsorship contract is as important as sponsorship as the backbone of financial support for the Esports ecosystem. These contracts are essential to manage the expectations and obligations of the sponsors as well as the Esport entity. As the Esports industry continues to flourish, sponsorship contracts should also follow as they play a pivotal role in shaping its trajectory.

This article has been contributed by Joshua Juanputra Purnawan of Armila Rako, a corporate law firm based in Jakarta. The above article does not, and is not intended to, constitute legal advice; instead, this article is for general informational purposes only. Information contained in this article may not constitute the most up-to-date legal or other information. Should the readers have any inquiries, readers can contact the authors at [email protected]  Any reliance on this article is at the user’s own risk.


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