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COVID-19: Arent Fox Sports Industry Newsletter

Arent Fox’s Sports industry group is part of the firm's COVID-19 Task Force, which is helping clients navigate new legal issues, regulatory challenges, and policy changes. Our newsletter highlights how the world of sports continues to adapt, how people in the industry are helping us stay safe, and legal analysis on key business issues.

Fantasy Sports and Gaming

Like every other industry at this time, fantasy sports is adapting to a new (hopefully temporary) reality. COVID-19 has significantly altered the constant stream of fantasy sports offerings, including daily fantasy sports contests, season-long drafts for the upcoming baseball season, and analysis of the upcoming NFL season. The sudden disruption in the daily sports routine affects over 60 million fantasy sports participants in the US, and its ramifications on marketing, fan engagement, and event management worldwide have been felt across the whole spectrum of companies that provide service to those 60 million Americans.

One of the many challenges facing the industry is navigating the CARES Act. Like many other groups, businesses in the fantasy arena are working to determine whether they can apply for funding available from the various programs established by the CARES Act. This is especially relevant both to mainstream platforms and their employees as well as companies working directly with non-traditional labor sources and standalone independent contractors.

The CARES Act provides funding for a variety of business enterprises including independent contractors, who are generally considered to be self-employed service providers. Evaluations of applicability and funding are made on a case-by-case basis. Arent Fox serves as a resource to the Fantasy Sports and Gaming communities with seasoned experts in the field as well as a robust Business Loan Task Force dedicated to staying abreast of COVID-19 developments. Earlier this month, Arent Fox hosted a webinar for members of the Fantasy Sports and Gaming Association to provide initial guidance on the CARES Act. The webinar was moderated by Arent Fox Partner Glenn Colton who, as a member of the FSGA’s Hall of Fame, is well known in the industry and to the association’s members.

COVID-19 Impacts on the Olympic Games

On March 24, 2020, the International Olympic Committee and the Japanese government announced that the 2020 Tokyo Olympic Games would be postponed from the summer of 2020. Six days later, the dates for the postponed Tokyo Games were set for July 23-August 8, 2021 (exactly a year later than the original dates). The Olympic Games have been canceled for World Wars, but never before postponed. To do so will be a massive undertaking, as all arrangements that had been made for the Games to begin in less than four months now will need to be re-done: current staff will need to be retained for another year, the 41 competition venues and 20,000 hotel rooms will need to be re-booked, volunteers will need to be re-hired and re-trained, etc.

The postponement will impact many of these organizations’ agreements. The IOC will have to resolve the impact of the postponement on its two primary sources of revenue: its worldwide broadcasting agreements and worldwide sponsorship agreements with its TOP (The Olympic Partner Program) partners. The Tokyo Organizing Committee’s local sponsorship agreements, ticketing arrangements, and a myriad of other agreements will have to be updated if not renegotiated. In turn, the International Federations and the National Olympic Committees who depend on funding from the IOC based on these sources will likely have their revenues delayed and/or reduced.

The postponement also means that the worldwide sports calendar will be impacted, as the new Tokyo 2020 Olympic Games (the plan is to retain that year in the name) is now slotted to occur in the summer of 2021 when the World Athletics Federation (track and field) and the International Swimming Federation (FINA) had planned their own world championships. The World Athletics Federation quickly agreed to move its championships, being held in Eugene, Oregon, to the summer of 2022. The World Aquatics Championships are scheduled to be held in 2021 in Fukuoka, Japan, but FINA is currently evaluating its options to reschedule this championship. All of these events also have broadcasting and sponsorship agreements, venue agreements, and numerous other arrangements all of which will need to be reworked to accommodate the postponements.

Olympic qualifiers and hopefuls will also be impacted by the postponement. 57% of all Olympic Games entries had been assigned although not necessarily to a particular athlete. Those already qualified will remain qualified albeit for Games that will be held a year later than the date for which these athletes had trained. Consequently, with the World Championships now being held in a normally “off” year, some athletes’ training schedules will be drastically altered.

Arent Fox is available to support clients on any of these issues as they evolve.

Enter the Esports Arena

As millions of Americans adhere to stay-at-home orders and engage in the world of online gaming, a high amount of player data is being shared on a daily basis. Esports represents competitive video gaming organized on a team or individual basis. The skill, age, professions, and background of the participating players varies greatly – even professional athletes who would typically be competing in live-action games – are filling the ranks of esports players in online games such as Call of Duty, Dota 2, Fortnite, and NBA 2K. Esports is providing a welcome outlet to many people as the world responds to the implications of COVID-19 and is also serving as an expanded content and revenue stream in the absence of traditional sports broadcasts. At the same time, the data that players share online with companies, platforms, and other participants opens the door to privacy considerations.

The implications of increased data sharing are broad. Data may include personal data such as usernames, location information (e.g., an IP address, MAC address, geolocation data for mobile devices), personal data, as well as usage volume, usernames, and other web and traffic activity. Depending on the type of data, as well as how and where that data is processed, stored, or managed, businesses participating in the esports arena may have additional responsibilities to esport players. For example, a platform hosting an esport tournament may need to obtain players’ consent to use personal data and ensure compliance with a variety of regulations. Depending on the jurisdictions where players are located, these regulations may include the California Consumer Privacy Act (CCPA), New York’s Stop Hacks and Improve Electronic Data Security (SHIELD) Act, the European Union’s General Data Protection Regulation (GDPR), or the “Cookie Directives.” In addition, esports platforms will need to monitor evolving standards throughout the world that will affect esports players and industries.

As communities continue to engage and enjoy the benefits of teamwork, competition, and social interaction through online gaming, Arent Fox remains available to support the esports participants with legal expertise and guidance. The opportunity to connect with others provides a welcome moment to ensure ongoing data protection in the esports world.

Helping You Stay Safe

Throughout the COVID-19 crisis, our clients are providing support to critical groups. Here are a few examples of companies that have done their part to provide support to those on the frontlines.

The Joe and Clara Tsai Foundation

Joe Tsai, the owner of the Brooklyn Nets and Brooklyn’s Barclays Center, and his wife Clara Tsai, in coordination with The Joe and Clara Tsai Foundation, contributed personal protective equipment (PPE) items to the State of New York in the form of protective masks and goggles. The couple and the Foundation directly facilitated the transport and distribution of this critical PPE to New York in addition to a donation of thousands of necessary ventilators in an effort to combat the effects of COVID-19. The PPE donations will help protect patients and healthcare workers at this crucial juncture.

In addition, Barclays Center and Levy Restaurants, the arena’s food and beverage partner, donated 13,500 pounds of food to City Harvest, New York City’s largest food bank. Finally, Joe Tsai was one of the first NBA owners to guarantee to pay for arena workers after the NBA suspended its regular season by extending Barclays Centers’ hourly employees wages through at least May 2020, which is the date on which they would have been earned if the Brooklyn Nets regular-season games and non-Nets events at Barclays Center had continued as originally scheduled.

Under Armour

Under Armour, Inc. recently unveiled a plan to manufacture and provide over half a million face masks, as well as thousands of other pieces of equipment, for health care providers. This includes an innovative new surgical mask made of a single piece of fabric that does not require sewing. The company estimates it can manufacture 100,000 masks a week. Under Armour is currently supporting university, regional, and other health care organizations through its initiative. It is using its existing capabilities to explore additional options for medical professionals as well as continuing to “seek ways to be of service across the country.”

The Under Armour team is also now exploring 3-D printing N95 and N80 masks for medical professionals. Beyond this effort, Under Armour has lent support to various groups, including Feeding America and Good Sports Inc.

Tampa Bay Rays

The Tampa Bay Rays and the Tampa Bay Rowdies, have pledged to provide one million meals to people in need. The effort is part of a virtual food drive initiated with their long-standing partner Feeding Tampa Bay, and it pairs both direct contributions and matching funds to reach a goal of nearly three million meals donated during the campaign.

In addition, through their non-profit foundations, the Rays Baseball Foundation and Rowdies Soccer Fund, the two teams established The COVID-19 Relief Fund in response to the crisis, which is a grant program that has allocated $1,000,000 to nonprofit organizations in the Tampa Bay area dedicated to hunger relief, shelter, or health and wellness. Food insecurity is one of the many concerns on the rise in the Tampa Bay area, as well as across the country, due to COVID-19. The Rays’s contribution will help reduce the impact of the pandemic throughout the region and lend support to families and individuals, including at-risk groups such as the elderly, immuno-compromised individuals, or those facing economic hardship.

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