Earlier today, Capcom released a community license for tournaments that plan to run Street Fighter V. You can review the license agreement yourself on the Capcom Pro Tour’s website here.

I’ve received lots of questions about this, so here’s my attempt to explain it. I’ll get to the specifics below, but first, here are the highlights:

1. All tournament organizers regardless of size have to get a license from Capcom, either by satisfying and agreeing to this community license or by getting a separate “esports” license
2. To qualify for a community license, total event prize pools and revenue from sponsors must be under thresholds that many existing events will likely go over
3. TOs can’t charge spectator fees or sell merchandise based on SFV names, logos, and art
4. Capcom gets the right to use stream footage and any photos or videos from the tournament
5. TOs can use an asset pack from Capcom to advertise the event, as long as they abide by Capcom’s style guide
6. This only applies to TOs in North America, Central America, and South America (EDIT: Capcom also put up an identical license applying to Europe, the Middle East, and Africa, so this all applies there as well)

BRIEF LEGAL BACKGROUND

First, let’s talk briefly about why TOs need to care about this. Copyright grants four main exclusive rights: to distribute, to reproduce, to publicly perform or display, and to modify the copyrighted work. Let’s walk through how these rights come into play in tournaments.

In order to run a standard modern video game tournament, you make a bunch of copies of the game available to play and watch (which implicates the public performance right), you set up a big screen where attendees can watch marquee matches (which implicates the reproduction and public performance rights), you broadcast a stream and upload VODs that have overlays and commentators added on them (which implicates all four rights), and so on. I’m skimming over some of the backstories behind these examples for the sake of brevity, but suffice to say that if the copyright owner in a video game wants to shut down a tournament, they don’t lack ways to do it. Basically, video game rights holders are the rulers of their little copyright fiefdoms, and the rest of us who want to play and work within their borders have little choice but to abide by their rules.

Capcom’s community license agreement says in all caps (which may seem weird but is actually standard in contract drafting), “IF YOU DO NOT AGREE TO THIS AGREEMENT, DO NOT USE THE STREET FIGHTER V SERIES (THE “GAME”) FOR ORGANIZING OR HOSTING A TOURNAMENT.” And tournament organizers are obligated to comply. Well, that or risk a lawsuit that Capcom is almost certain to win.

By the way, Capcom isn’t breaking new ground with this. Lots of game rights holders in lots of esports scenes have put out license agreements very much like this too.

So ok, say a TO wants to have SFV at their event. What do they need to do? In short, they need to either satisfy the requirements in this community license or, if they can’t, they need to sign a separate agreement that Capcom calls an esports license. Let’s take the community license first.

COMMUNITY EVENTS

To count as a community event, a tournament has to meet the following criteria:

1. For individual events, have a prize pool smaller than $2,000 and sponsorship revenue less than $5,000
2. For any TO in a 12-month period, have total prize pools less than $10,000 and total sponsorship revenue less than $20,000
3. If it has a prize pool, announce in advance what the pool is or at least say how it will be calculated (ie, say what the entry fee will be in advance)
4. Don’t sell merchandise based on SFV’s intellectual property
5. Don’t “charge any fee to spectators to participate in an Event” (which is a little ambiguous, but which I think bars charging spectators to attend)

Who does this apply to? For an individual event, the $2,000 prize pool restriction comes up for any tournament with 200+ entrants at $10 entry fee, 134+ entrants at $15, or 100+ entrants at $20. CEO 2021 had 453 SFV entrants at $10, Combo Breaker 2022 will surely have at least that many, and whenever the next Evo happens it will surely have many more. Pre-covid, events like Frosty Faustings, Texas Showdown, East Coast Throwdown, Winter Brawl, NorCal Regionals, and more exceeded or got close to that threshold. I suspect that all those events likely ran afoul of the $5,000 sponsorship limitation.

For TOs running multiple events, like Big E (Winter Brawl, NEC, Summer Jam, and more) and Dreamhack (Anaheim, Dallas, Montreal, etc), even where they don’t meet the $2,000 limit for one event, they may meet the $10,000 prize pool limit or $20,000 sponsorship revenue limit across the span of a year. These yearly requirements may also be a problem for popular weeklies like NLBC.

And how does Matcherino figure into this? Does it count as sponsorship revenue or as prize pool money? If it’s sponsorship, a lot more events may be implicated. If it’s prize pool, does it break the rules because the totals can’t be announced in advance? I’m not sure.

In addition, just about every major and regional as well as even some locals have spectator fees in some form. If I’m right in my reading that Capcom’s rules ban spectator fees in general, then not many events in our community will be considered community events.

Aside from these requirements, the license mandates that attendees sign waivers allowing pictures and recordings to be taken of them and that TOs give these rights to Capcom. Whether attendees realize this or not, the first is already common, so this is not a big change on that front. But it may be frustrating for a TO who pays for a good event photographer to give the rights to the resulting pictures to Capcom for free, and it may be a burden for small TOs to get such an agreement for attendees to sign. The license also requires that TOs allow footage from their tournament streams to be used by Capcom for its own purposes. Again, this may be frustrating for TOs who go to the expense of hiring a stream production team without receiving financial assistance from Capcom.

Lastly, it’s important to note that Capcom doesn’t necessarily need to abide by the terms of this license even for TOs who meet the stated criteria. As the agreement says, “Capcom may, in its sole discretion, terminate this Agreement and/or Your licenses hereunder at any time, for any reason or without reason, by posting a notice on our website or by contacting you individually.” It’s also important to note that this is pretty standard for blanket licenses like this, the theory being that in the event a TO does something unforeseen that Capcom didn’t think to include in this agreement, Capcom still wants a way out. So I don’t think this is nefarious or anything, but still, abiding by the requirements doesn’t guarantee a TO that they’ll be able to rely on this license.

ESPORTS EVENTS

What will licenses look like for events that don’t satisfy the above criteria and are therefore classified as esports events? Short answer: I don’t know. I haven’t seen any recent licensing agreements between Capcom and any events it considers to be esports, so I can’t speak directly on this.

However, from my previous work with TO and broadcaster clients in both the FGC and other esports, I can say that these non-community licenses have usually required substantial payments to the rights holder, up to the five and occasionally even six-figure range. I want to be clear that that’s not always the case; I’ve seen even very large rights holders come to agreements with TOs and broadcasters with no licensing fees. But even in those cases, there are often other requirements like giving the rights holder some power over venue choice, layout decisions, event date, third party sponsorship choices, and more that can have major financial impacts even aside from licensing fees.

It’s also totally possible that Capcom has different licenses in mind for different events; nothing in the law or this community license agreement says that Capcom has to treat all esports events the same. Maybe an event that has just barely too big a prize pot to be a community event gets a relatively laid-back license that doesn’t make many major demands. Maybe the two or three largest events get a license that costs them a huge amount of money. I can’t say for sure of course, but that’s a common way of handling things like this.

In any case, while I don’t know what an esports event license from Capcom would entail, my guess is that it would come with burdens that FGC tournament organizers have rarely had to consider before.

WHY DO THIS?

You may wonder what Capcom’s goal is with all this. I can’t say for sure, but having worked on similar stuff in the past, my guess is that they’re going for a few things.

One of their goals may be to protect their rights. Copyrights don’t disappear if you don’t defend them, but there are some situations where rights holders can lose some rights or have their rights weakened, so to avoid those outcomes, it’s a common legal practice to make clear that you’re being active about who gets to make what uses with your copyrighted works. In this case, requiring every TO to get a license makes it very clear that Capcom is being proactive with its rights.

Of course, another objective may be merely financial. Capcom will be gaining the rights to use community event photos, videos, and stream footage for its own marketing and potentially other marketing material, major licensing fees, and other benefits from bigger events.

In addition, bringing every TO into its orbit may allow Capcom to exercise additional control. And that’s not necessarily a bad thing. The community license requires that TOs enforce a code of conduct listed in the agreement that I think could be beneficial. When a TO bans a player, Capcom wants to know about it, which could make it more difficult for jerks who get banned by one TO to go be jerks at another TO’s event instead because Capcom could create a list of more of the jerks. Capcom could do many other things with this list of TOs as well, everything from nice stuff like giving them TO-specific builds of the game (which might not be likely but actually has happened in other esports) and helping advertise their events and streams to, I don’t know, let’s just say not so nice stuff.

But Capcom might not only be motivated by its own legal and business concerns here. Previously, everyone who’s run a tournament or done a stream for SFV without a license has been infringing Capcom’s rights. Capcom hasn’t been busting folks for that, but the possibility has always been there. With this licensing structure, some TOs and streamers now have an easy, obvious path to gaining some degree of recognition and legal safety, even while earning at least a bit of money. I think Capcom could have taken a better path to accomplish that, but if that’s part of their calculus here, I’m glad for the attempt.

MY TAKE

Look, I’m an attorney working in esports and video games who understands the legal and business issues involved here, as well as a passionate fighting game fan who wants to attend tournaments and has lots of friends who run events big and small, as well as (full disclosure) a tournament commentator who’s been paid by Capcom and other game companies for my work. I’ve drafted similar documents for clients in the past and I’ve also been frustrated at how some copyright owners exercise their rights. So, I get it, but also, I want it to be better.

Capcom is within its rights to do this, and much of the agreement is fairly standard in terms of its legal language. To my mind, the biggest issue with this license isn’t the fact of its existence or the legal terms it requires, it’s the amount of money Capcom has designated as separating community events from esports events.

For a comparison, esports game rights holders like Blizzard and Riot have had similar licensing structures for years. How do they handle the limits for what counts as a community event?

Blizzard says that an event can be considered a community event if the prize pool is under $10,000 per event and under $50,000 per 12 months; above that, organizers need to talk with Blizzard directly. Riot sets the limit for community events at $10,000 per event and has a separate third category in between community organizers and pro leagues with a limit of $50,000 per event. Granted, these rights holders’ scenes are accustomed to larger prize pots than the FGC, but the disparity between those numbers and $2,000 is still far too wide to me.

If Capcom does require bigger events to pay licensing fees, my fervent hope is that it won’t price those fees high enough to cause issues for TOs. If they do, the most obvious out for TOs is to simply decide not to run SFV at their events, which would suck for the players who don’t get to play, the viewers who don’t get to watch, the TOs who don’t get the venue fees of players who would have attended for SFV, and even Capcom itself who will have shot itself in the foot and caused a wholly unnecessary rupture in the scene. TOs could probably survive without the SFV scene. I’m not sure the SFV scene could survive without TOs.

In general, I’m wary of video game rights holders taking on too much power from the communities and industries that spring up around their games. My take on the history of esports is that it’s been full of passionate communities who do the work to create an industry that then gets co-opted by rights holders once it’s economically valuable. If that’s what’s going on here, I’m against it.

But Capcom hasn’t been nearly as predatory and controlling as rights holders like Blizzard and Riot. Its Capcom Pro Tour has long worked with existing community events and broadcasters and provided significant pot bonuses that have helped bring more players and viewers to events. If there are problems in its initial implementation of these licensing structures, I hope it will remain open-minded and make changes to solve them.

I also hope it understands that although its license may be similar to Blizzard and Riot, the scene for its games is very different. The FGC is a multi-game community in which no one rights holder can exercise total control of events, players, or any other aspect of the ecosystem. What would happen if one of the rights holders tried to overplay its hand? I hope we won’t need to find out.

 

 

David Graham is a digital entertainment and ecommerce attorney with a specialization in esports and video games.

This article is released under a Creative Commons Attribution CC BY License, meaning it can be shared, redistributed, or modified by anyone for any reason as long as any such use includes attribution to David Philip Graham of DPG at Law as well as links to the original article here and to dpgatlaw.com.