Sponsorship and Licensing in Esports: A Revenue Stream Worth Exploring
There are not a ton of revenue streams in esports right now, so how does one make money in esports?
While the answer to this question is steadily broadening, one area where esports companies and individuals have found success is in the licensing of their intellectual property. Look no further than the giants of esports like FaZe Clan or Ninja. A large portion of their revenue comes from licensing their logos and collaborating with other brands, or in the case of Ninja, licensing his logos and his likeness. Before we jump in, a bit of trademark basics.
What is a trademark?
Trademarks are typically words, phrases, logos, slogans, symbols, colors, and/or designs that identify the source of a particular product or service. We use the term “trademark” when referring to a physical product or good and the term “service mark” when referring to services. However, both trademarks and service marks are generally referred to as “trademarks.”
The purpose of trademark law is to help consumers easily identify products or services when making a purchasing decision. The thinking is if we prevent third parties from using another’s trademark, or a mark that is confusingly similar, then consumers can more easily differentiate between particular products or services within the marketplace and make better purchasing decisions. A secondary purpose of trademark law is to protect the trademark owner’s reputation with consumers. The idea is where someone has invested significant time and resources into creating a branded product or service that consumers like, the law should protect that investment. Trademark law does just that.
Some popular trademarks include Coca-Cola, Faze Clan, C9, and Call of Duty Warzone. However, that list only scratches the surface of registered trademarks. An estimated 7 million trademark applications were filed worldwide in 2016, and trademark filings in the U.S. have doubled since the mid-1990s.
The importance of securing federal registration of your mark.
One of the foundational steps when starting your esports company is to ensure that your branding is going to be usable long term by securing a federally registered trademark. I consider this to be as important as setting up the proper business entity and utilizing written contracts in each professional relationship that you or your company will be entering into.
Securing a registration for the trademark of your company at the earliest stage possible will be valuable in many ways. Conducting a trademark clearance search will let you know if the brand that you have come up with is even available. Time and time again I have witnessed companies form and start conducting business assuming that the brand name or logo they have chosen is available only to find out that another company has been operating under the same or similar name. This means that the company must pivot and change its name or remain infringing the mark of the original owner and running the risk of being sued which is an expensive headache that no one wants to deal with. Determining if the mark you desire is available is a crucial step in starting your business on a good legal footing. A brand rework is time-consuming, expensive, and will likely result in a loss of consumer awareness.
How do I use a trademark to protect my brand?
Registering your trademark on the principal register of the United States Patent and Trademark Office (USPTO) is the best way to protect your brand. Registering your trademark gives you a legal presumption that you have the right to use the trademark nationwide. This can prove to be a significant asset for a company’s portfolio of intellectual property and allows a company to protect its brand from being infringed by others.
However, the trademark registration process can take a year or longer from start to finish, so delaying this process is not advisable.
How do I use a trademark to leverage my brand?
When a brand has created value in the market, other brands and individuals will want to collaborate and leverage that brand’s market exposure to their advantage. For example, Red Bull and Ninja have an agreement together wherein they release merchandise such as the official Ninja/Red Bull headband. In that agreement, Red Bull has likely paid Ninja a sum of money and in exchange, Ninja allows them to release the merchandise bearing his logo. Ninja was likely both paid for the use of the logo as well as a portion of the sales of the merchandise. When a company is interested in investing money into a sponsorship deal, they are going to require the owner of the intellectual property to promise that they have all the rights to utilize that mark in the marketplace. Having a federally registered trademark ensures the sponsoring party that the company has the right to use the mark in the United States and its territories without infringing on any third-party trademark. Without that assurance, a sponsoring company is much less likely to engage in the sponsorship deal so make sure that all of your intellectual property ducks are in a row as early as possible!
Contact us if you have any questions about trademark law, we would love to help you!