The Professional Esports Association Creates A Cooperative Business Model For Esports Competition

Written By Joss Wood on September 12, 2016 - Last Updated on January 22, 2018

[toc]The announcement of another organization to manage esports competition is nothing new, but the Professional Esports Association (PEA) offers a different model for managing the business of esports.

The PEA Commissioner, Jason Katz explains:

“The PEA represents something new in eSports – an association of top teams running their own league and sharing the profits and the decision-making with the players. This has been the architecture of traditional major sports leagues for many decades, but it is a new evolution for eSports. This will allow us to finally build a stable, healthy, long-term environment for the players, the community, the media and the sponsors.”

  • The PEA press release can be found here.

Seven top US teams are founding members

The North American esports teams that have managed to agree on the structure of the PEA to become its founding members are:

  • Team SoloMid (TSM)
  • Cloud9
  • Team Liquid
  • Counter Logic Gaming
  • Immortals
  • NRG Esports
  • CompLexity Gaming

They will take part in a 10-week league playing CS:GO matches twice a week. The first season will guarantee a minimum of $500,000 in prize money, with $1 million guaranteed for season two.

League profits shared with teams and players

Part of the motivation for founding the PEA is to create a more equitable share of the financial rewards created by esports competition.

Andy Dinh, CEO of TSM stated:

“It’s time for leagues to share the rewards and strategic decisions with the players, and the best way for team organizations to do that is for us to do it ourselves. The PEA is a vehicle for us to work shoulder-to-shoulder with the players, doing what we all love.”

The PEA will distribute profits 50/50 to players and owners and “each caster will receive a share equal to a player.” Players will also receive other financial benefits including retirement and investment planning and health insurance.

Competition formats, playing rules and prize distribution structures will be decided by a Rules Committee which will include player representatives, and there will be a Grievance Committee also involving players, that will decide on any complaints.

“This marks the end of the ‘Wild West’ days of eSports,” said Jack Etienne, Cloud9 CEO. “The community and players want stability and dependability. Leagues come and go, teams join them and depart, but with the PEA, the teams are making a long-term commitment to be here, playing for the fans, for the indefinite future.”

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The WESA has similar aims

In May this year, the World Esports Association (WESA) was founded under the aegis of ESL.

The WESA’s mission makes it clear that it too wants to share the benefits with teams and players:

“WESA’s mission is to become the global benchmark for industry-wide standards through that framework, involved parties and activities of the Association. Starting with the ESL Pro League for Counter-Strike: Global Offensive, WESA will be the first organization in the history of esports that will bring those affected by its decision most, to the decision making table.

Transparency towards Teams and Players, as well as a continuous support to them are at the heart of the Association.”

At this point in the development of the esports industry, it is natural to see attempts to develop formal structures within which esports competitions take place.

Allied businesses such as esports betting operators need such formal structures, which can ensure game integrity and fairness in order for their own businesses to grow.

Mainstream broadcasters need to know which leagues and which games are going to attract the biggest audiences—there can’t be the equivalent of an esports Super Bowl without such organization.

However, like the internet boom of the 1990s, there will be many market entrants and only a few will succeed.

WESA and the PEA both present some attractive features, but both lack the direct involvement of the major games producers such as Riot Games and Blizzard Activision.

Critical differences between esports and traditional sports

Most observers drawing a distinction between esports and traditional sports focus on the difference between sitting at a computer and getting out on a sports field, but the more important differentiator is that there is no intellectual copyright on traditional sports whereas there is for esports.

There is no game developer behind tennis who can control the rules of the game and who must be paid—at least in some form—by a league organization that wants to organize sporting competitions.

League of Legends competitions could be killed instantly if Riot Games changed the terms and conditions of its software licenses. The game developers are in a position of absolute power over the development of public competitions that depend on their products.

Developer involvement critical to any formal governing organization

Splitting financial benefits 50/50 between teams and players sounds great in theory, but there isn’t any percentage in there for the game developers.

As the “wild west” environment changes, and some leagues emerge as the main competitions for esports professionals, game developers will begin to look for their share of the financial action.

It seems inevitable that the ultimate winner in the apparently free market competition for organizing esports must have the support of the major games developers. If the PEA aims to expand its model to the wider esports industry, it should look to bring in the game developers at an early stage.

The choice of Jason Katz as the first Commissioner will help; he used to be in charge of strategic initiatives at Riot Games.

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Joss Wood

Joss Wood holds an English degree from the University of Birmingham and also earned a master’s degree in organizational development from the University of Manchester. Joss has a special focus on the international online gambling market, though he also writes extensively on US regulated markets, sports betting, and esports betting.

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