Esports on an upwards trajectory in Hungary

Hungary is no exception to the quickly spreading worldwide esports phenomenon. As an example, the Hungarian government substantially supported the organisation of a large international esports event in Budapest this spring. According to a survey published last year, the number of Hungarian esports players has already reached approx. 200,000 and continues to rise, with 4 out of 5 players under 25. Several football clubs have also recently established an esports department.

With its rapid rise combined with so many young, technologically-driven and consumer-focused eyes on esports in Hungary, esports presents an exciting opportunity for everyone who is going to be involved. One of the first key issues that the developing sport faces in many jurisdictions is how to establish the appropriate self-governing body for the sport in order to attract broadcasters and sponsors, as well as to promote education, grassroots structures and amateurs throughout the entire sport.

Given the popularity of esports in Hungary, the establishment of an esports federation should be just a matter of time. In any case, before embarking on such a complex project the legal issues detailed below should also be carefully considered.

How to establish an esports federation in Hungary?

Based on its definition (in short, esports take the form of organised, multiplayer video game competitions among several players), esports must qualify as a sport under the Hungarian Sports Act (HSA). If a game qualifies as a sport then a sports federation for that game can be established, pursuant to the statutory requirements of the HSA.

The first entity which qualifies as the esports federation will be entitled to exclusively govern the sport in Hungary, based on the “one sport one federation in one sport” principle under the HSA.

As a first step, clubs which are already duly incorporated and active in the esports scene in Hungary must establish an association which can later become the sole esports federation. If such association would like to become the sole esports federation it needs to comply with the following criteria:

  • Upon applying at the competent registry court to be recognised as the sole governing body for esports in Hungary, the candidate esports federation must: (i) have at least 10 clubs as direct affiliated members; (ii) regularly organise esports competitions in the preceding three years from when applying for the governing body status; (iii) have at least 100 registered players directly registered with the member clubs as players; and (iv) adopt the necessary internal regulations prescribed by the HSA for sports federations (such as competition, transfer, disciplinary or anti-doping rules).
  • Furthermore, an aspiring association may only have the status of a sole esports federation under the HSA if esports is either a sport recognised by the International Olympic Committee (IOC), or if the international federation of esports is an affiliated member to SportAccord. Currently, none of these two criteria are met. However, there are some discussions that esports would be part of the Paris 2024 Olympics, whereas some international bodies of esports, such as the International Esports Federation or the World eSports Association are expanding rapidly. Given that organising esports competitions in Hungary for three consecutive years is a precondition as mentioned above, it should not be impossible that esports will be recognised by the IOC, or one of the international esports federations will become members in the SportAccord by the time the candidate esports federation concerned will be applying for the sole governing body status.

Extra challenges for the future esports federation – what to look for?

Even if esports can be regarded as a sport under the HSA, it is still in many ways different compared to other traditional sports. Therefore, an aspiring esports federation should not only think of meeting the HSA’s abovementioned criteria, but also bear in mind the following:

  • The particular games based on which an esports federation would organise competitions are subject to copyright and other rights protection of game publishers. Therefore, the esports federation should always agree appropriate licence agreements with the game publishers for the games in relation to which it organises competitions.
  • As a closely related issue, an esports federation should also carefully consider how to exploit the sports rights of the competitions it organises. First, the agreements with the game publishers should allow the desired exploitation of the rights. Second, given that esports is consumed and practiced differently in many ways and by different consumers and players compared to traditional sports, the agreements with broadcasters and sponsors should consider these differences in order to give the best possible exposure of the competitions and optimised revenue deriving from such exploitation.
  • Currently, there is not a single global governing body for esports (although more international associations are gaining a strong foothold as already mentioned). Therefore, there is no established international pyramid structure and no unified governance, regulatory and competition rules. So the esports federation as a competition organiser may decide about the rules of the competition it organises based on the criteria set forth by the HSA, of course always bearing in mind the game publishers’ rights, the players’ personal rights, as well as the potentially different agreements of stakeholders governing the exploitation of rights.
  • In the absence of unified transfer rules, players often come and go or, because of the relative uncertainty of games, players may quickly appear then disappear in the same manner. This may lead to contractual instability and cause discomfort both to the structure and organisation of competitions by the esports federation, as well as to member clubs and sponsors. Addressing this issue will likely be one of the key challenges the potential esports federation will face. Even if the status and transfer of players is regulated within Hungary, it is still difficult to deal with international transfers, especially with the lack of a unified international transfer window.

What’s next?

There can be no doubt that esports in Hungary, very much in the same way compared to other jurisdictions, provides a great opportunity to all stakeholders. At the same time, it does present many challenges.

Hungarian stakeholders will sooner or later start walking along the path and arrive at the final destination of having a duly established esports federation, which will govern the sport exclusively. However, the long road ahead hides many traps and some potentially unpleasant surprises. In order to avoid this, all steps made into the unknown should be carefully considered before actually being taken.

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