E-Sports and Consumer Protection Lauren B. Aronson Counsel Crowell & Moring, LLP laronson@crowell.com
Recent Headlines 2
E-Sports: Millions of Hours Streamed Source: https://newzoo.com/insights/rankings/top-games-twitch/ (October 2017) 3
E-Sports: Huge Opportunities for Brands Source: think with Google 3 trends on YouTube prove that gaming culture isn t so niche (June 2017) Gamers are a highly engaged and influential audience on YouTube Tournaments draw hundreds of millions of viewers Watch time of esports videos on YouTube has grown by over 90% in the past year 4
E-Sports: Growing Revenues Source: Are You Game?, AdAge http://adage.com/article/news/esports/308447/ 5
E-Sports: Growing Revenues Source: Are You Game?, AdAge http://adage.com/article/news/esports/308447/ 6
E-Sports: Shifting from Wild West Model to Leagues Riot Games, owner of League of Legends, announced a new franchise model for its North American League Championship series $10 Million Fee Players association similar to traditional sports league Shared media deals among teams, pro players and Riot Merchandise Activision Blizzard announced a franchise model for Overwatch League Teams Aims to have at least 28 international, city-based teams at a reported franchise fee of $20 million 7
Key Demographics are on Social Media 100% of the E-Sports audience is on social media Live stream gaming (Twitch leads) Streaming tournaments YouTube deal with tournament sponsor FACEIT to exclusively stream ECS Counter-Strike: Global Offensive league Strategy tips, unboxings, game reviews Key demographics are watching/playing E-Sports Twitch users are 75% male, 73% 18-49 YouTube E-sports demographics less clear, likely similar 8
Social Media and E-Sports = Consumer Protection RiskS Move from interruption advertising to sponsorships Sponsor broadcasts Sponsor tournaments and competitions Paid placements, product shout outs during broadcasts Unboxings Demos Branded hats and apparel Not just video games other content can be promoted within broadcasts, videos Foods, soft drinks, and other consumer products 9
FTC Endorsement Guides Actively Enforced The FTC has taken a broad definition of Sponsored Advertising. If the answer is yes to any of these questions, it is sponsored advertising. Was the speaker compensated by the advertiser? Was the product or service provided for free? Did the advertiser or someone on advertiser s behalf solicit the opinion? Is the speaker acting independently or on behalf of the advertiser or its agent? 10
Scope of Endorsement is Broad An endorsement is an advertising message that consumers are likely to believe reflects the opinion, beliefs, finding or experiences of a party other than the sponsoring advertiser. An endorsement must reflect the honest opinion and experience of endorser. An endorser must be a bona fide user. An endorser cannot be an express/implied claim that would be false or deceptive if made by advertiser. All material connections must be disclosed. Even a pin on Pinterest can be an endorsement. (Cole Haan) 11
Material Connections MUST be Disclosed A material connection is a connection that the consumer does not reasonably expect between the endorser and the advertiser, which may impact endorser s reliability. A gift, incentive, reward no matter how nominal, including sweepstakes entries, free product, discounts, gift cards, and coupons. Also includes an employer/employee relationship. Material connections must be disclosed. Both the advertiser and the endorser are responsible for disclosing the material connection 12
The Celebrity Exception Does Not Apply to Influencers The so-called Celebrity Exception : The disclosure of payment to celebrity endorsers in traditional advertising is NOT required because consumers generally understand that celebrities are paid by an advertiser. However, the celebrity exception does not apply in social media. If a celebrity endorser tweets about your brand to her followers, the celebrity must disclose that the tweet is an advertisement. Social media influencers are not celebrities for purposes of FTC disclosure requirements. 13
FTC Enforcement Warning letters in 2017 to influencers Updated FAQs on testimonials, endorsements Several key settlements in gaming space failure to disclose material connections Settlement with Network Machinima (2015) Settlement with Brand Warner Bros. (2016) Settlement with Influencers and brand CSGO Lotto (2017) 14
Working with Influencers: Key Tips Disclosure Requirements Don t assume a platform s disclosure tool is adequate compliance. No disclosures in video description box disclosure should be in the video itself. Superimpose disclosures on screen Audio disclosures must be in volume, speed, cadence that consumers understand Audio alone not sufficient followers may watch videos without sound. On Instagram, disclosure must be within first 3 lines of text or on picture itself not after click more If possible, #ad at the beginning of the tweet Thank you to the company is not enough disclosures should clearly communicate relationship with brand. No blanket disclosures No hyperlink or button stating Disclosure or Legal For Brands Put disclosure requirements in agreements Don t forget: brands are responsible for claims Monitor content for compliance and terminate influencers that fail to comply no third chances 15