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Understanding Nintendo's Licensed Tournament Guidelines

By Harris Peskin · Fri, Mar 1, 2024 9:30 PM

Understanding Nintendo’s Licensed Tournament Guidelines

By Harris Peskin1

Community TournamentLicensed Tournament
Granted a default license under the Community Tournament Guidelines
Must apply for a formal license through the Licensed Tournament Application
Hosted by individuals operating not-for-profit
Hosted by entities or individuals operating without profit restriction (except as set forth in the guidelines)
Guidelines must be followed without exception
Exceptions may be granted at Nintendo’s discretion

Nintendo announced the new Community Tournament Guidelines and released the Licensed Tournament Guidelines alongside the Licensed Tournament Application, effective November 15, 2023. Collectively these documents govern tournament organizers featuring Nintendo games, granting a general license to some, and requiring others to apply. This article will break down the major components of Nintendo’s licensing application, a process that must be undertaken by any company operating a Nintendo tournament, or individual acting in a for-profit capacity.2We note at the outset that the Community Tournament and Licensed Tournament Guidelines are nearly identical, with the exception of a prohibition on for-profit Community Tournaments. Our position is that this prohibition shape interpretation of the Licensed Tournament Guidelines.

ESG Law is also happy to provide the community with ESG’s free and easy to navigate financial disclosure form. Financial disclosure is required by any applicant who has not been granted an exception to Nintendo’s default requirements, as discussed below. In addition to the disclosure form, our article covers who must apply for a license, and the restrictions on monetization for licensed tournaments (including the content monetization cap, permissible prizes, prize cap, participant admission fees, participant cap, and spectator admission fees). Finally, we outline permissible uses of the Nintendo IP and the ban on modified software.

Sample Disclosure Form Link

DISCLOSURE: The advice provided in this article and the sample disclosure form is not legal or accounting advice. We recommend each individual consult with accounting and legal professionals before posting any disclosure. Our form represents a generalized approach and should not be considered specific to your needs.

I Want To Host A Tournament, Do I Need To Apply For A License?

Whether you need to apply for a license depends on whether you are personally organizing a tournament and, if so, whether you are doing it for profit. Nintendo has released separate guidelines for “Community Tournaments'' and “Licensed Tournaments”.

Community Tournaments are those operated on a non-profit basis by individuals.3 Nintendo defines a for-profit tournament as one where the organizer: (i) directly receives money not used exclusively to cover the costs of hosting the tournament, or (ii) advertises for the benefit of a third party. If your tournament does either of these things, or you run the tournament through a legal entity, you are not automatically granted a Community License. Instead, you will need to apply for a formal license.

Conversely, legal entities, individuals outsourcing the operation of a tournament to an entity, or persons that seek exceptions to the Community Tournament Guidelines must apply to become a Licensed Tournament. If an operator wishes to receive revenues from the tournament in any way other than by paying off expenses associated with the tournament, the operator will need to apply for a license. Formal licenses are granted at Nintendo’s discretion. The following analysis is limited to Licensed Tournament Applications. We recommend that operators seek counsel on applying for exceptions to the default guideline provisions as these provisions severely restrict the viability of operating a profitable tournament.

Top Ten Most Notable Default Provisions of Nintendo License Application4

We have ranked the top ten most notable provisions of Nintendo’s default licensing scheme. Please note that while the following restrictions will apply by default, properly structured applications may have success in applying for exceptions to the licensing default rules. We discuss each provision and its implications on tournament operators below.

  • Financial Disclosures. Tournament Operators must publicly disclose their costs associated with running a tournament series.

  • Sponsorship Restrictions. Tournament Operators may not receive any goods, services, or money from third parties in the form of a sponsorship. A Licensed Tournament may not promote any entity, products, or services.

  • Commercial Revenue Generation. Tournament Operators may not generate commercial revenue except through:

    • An entry fee no greater than $20 per person collected from participants.

    • A spectator fee at in-person tournaments only, no greater than $15 per person, revenue generated in this way may go towards organizing costs only.

    • The monetization of videos and still images, only where participants have given consent to the posting of the content. Monetization through this method is capped at $10,000 in a 12-month period.

  • Participant Cap. Online tournaments are capped at 300 participants and in-person tournaments are capped at 200 participants.

  • Modified Software. Tournament Operators may not permit the use of any modified versions of Nintendo games or modified software.

  • Prize Cap. No prize may exceed a market value of $5,000 (USD) in total. The total value of cash prizes may not exceed $10,000 in a 12 month period.

  • Tournament Occurrence Cap. A formal license will cover up to 10 repetitions of the same tournament in a calendar year.

  • Restriction on Gambling and Alcohol. Organizers may not permit gambling or the consumption of alcohol or drugs at a licensed tournament.

  • Tournament Name. A tournament name may not include any Nintendo IP, including the featured game title, or the word “esports.”

  • Ruleset Summary. In your application you must provide a summary of the ruleset, including the proposed format and rules related to character selection.

Financial Disclosures

In support of the community, the attorneys at ESG Law have created a form for tracking Nintendo’s requested accounting information that is attached here, free to use for all tournament organizers. This form will be valuable to tournament organizers and the community as ensuring that all expenses are properly disclosed can be an incredibly nebulous task. If you have additional questions feel free to reach out to contact@esglaw.com to set up a free consultation.

We separately note that Nintendo’s application states “applicants must disclose costs of hosting the event promptly, including entry fees, admission fees” etc…” Nintendo should clarify whether it intends to require applicants to disclose revenues related to tournaments as well; entry fees and admission fees are typically categorized as revenues.

Sponsorship Restrictions

Nintendo heavily restricts monetization and sponsorships, a vast departure from the industry standards set by companies such as Riot Games and Activision Blizzard.5 Absent exception, an organizer may not under any circumstances take goods, services, or cash, in the form of a sponsorship for their licensed tournament absent an exception. Additionally, no third party may promote any entity, goods, or services at a licensed tournament.

This broad guideline seems to state that even venues with third party signage could be inadvertently violating the provision. While we are unsure that Nintendo would ultimately enforce this provision, the broad wording of the guideline makes it difficult for tournament organizers to effectively plan their events.

Industry Comparison

CompanySponsorships Permitted?Sponsorship Cap?Prohibited Sponsor List?
Nintendo
No
N/A
N/A
Riot (Tier 3 Tournament Rules)
Yes
Yes ($10,000 per tournament $100,000 yearly)
Yes
Activision Blizzard
Yes
No
Yes
Epic (Fortnite Event License)
Yes
No
Yes
EA (Apex Legends Community Tournament Guidelines)
Yes
No
Yes
Sources6

Commercial Revenue Generation

Absent an exception, Nintendo affords 3 methods of commercial revenue generation permissible under the Licensed Tournament Guidelines, the guidelines specify permissible uses for each revenue source.

  1. Monetization of content: Organizers may monetize the posting of videos, still images, and other similar content, featuring Nintendo games,7 related to the licensed tournament, on personal accounts. However, the organizer must receive permission to do so from all participants, and the total revenue received from the posting of this content is capped at $10,000 within any rolling 12-month period. We recommend all tournament organizers require participants to sign over a likeness release, this can be attached to any tournament sign up sheet including by attachment on websites like start.gg.
  2. Participant Entry Fee: Organizers may charge a $20 entry fee for participants at both online and in-person tournaments.
  3. Spectator Admission Fee: Organizers may charge a $15 admission fee for spectators at in-person events only. Any revenue collected this way must go towards organizing costs. In practice, the spectator revenue may not exceed organizing costs. Organizing costs might include things like payment to a tournament organizer or costs affiliated with putting together the tournament (including wages, equipment etc… as discussed further below).
  4. Exceptions: The Licensed Tournament Guidelines contemplates exceptions. If an exception to monetize your tournament is granted it will have certain restrictions stipulated in your formal license agreement from Nintendo.

Unfortunately, this section of the guidelines is ambiguous. First, for the monetization of content, Nintendo places the $10,000 restriction on “these activities.” The restriction could be limited to (i) the typical monetization methods of the content (such as posting on social media, YouTube, etc), (ii) the monetization of the name, image, and likeness in its entirety, or (iii) the monetization of any tournament under the guidelines. Nintendo should provide additional clarity on its intent.

The limitation on participant entry fees is also unclear. These guidelines cover Licensed Tournaments which, as distinguished from the Community Tournaments, have no express restriction on operation as a for-profit venture.8 If Licensed Tournaments may operate for-profit, then Nintendo’s statement that “entry fees collected from participants MAY be used for covering the costs of organizing the tournament,” functions as a suggestion rather than a requirement. We distinguish this from the prohibition on for-profit operation of community tournaments, where funds received must only go towards the operation of a tournament. This ambiguity highlights a core problem with the guidelines and requires clarification from Nintendo.

What Can I Cover as an “Organizing Cost”?

While the revenue generation methods are incredibly restrictive Nintendo does not define “organizing costs.” Therefore, an organizer could potentially justify using participant entry fees, and spectator admission fees to cover costs such as tournament organizer salaries, catering (assuming such catering complies with the sponsorship prohibition), venue, equipment, transportation, flyers, other promotional material, and much more. Ultimately, we need to see how Nintendo enforces its requirement to form a clearer picture regarding what Nintendo views as a permissible operating cost.

Comparing Across the Industry

The restrictions placed on monetization and sponsorships represent a hardline stance rarely seen with other large developers. For example, Riot Games places no upper limit on how much revenue an organization granted a Tier 2 License can generate through advertisement.9 Riot’s tournament restrictions have no explicit participant cap for any public license.10

Participant Cap

Nintendo caps online tournaments at 300 participants, and in-person tournaments at 200 participants. Organizers seeking to host larger events may apply for an exception or should seek clarity from Nintendo on whether a single tournament can be divided into blocks. Such an interpretation would claim that one Tournament hosted by an Organizer can exceed the cap, as long as the total number of Participants participating per day does not exceed the relevant threshold.11 There is support for this interpretation in the Community Tournament FAQ but not the Licensed Tournament Guidelines. The Community Tournament FAQ states that in a Tournament organized by an Organizer:

“if there are 100 Participants in Block A, 150 Participants in Block B, and 80 Participants in Block C, hosting Block A and Block B tournaments on the same day [would not be permissible under the guidelines as] the total number of Participants in a day will exceed 200. However, these guidelines permit hosting Block A and B tournaments on different days since the total number of Participants in a day will not exceed 200 on either day. Hosting Block A and Block C tournaments on the same day is permitted under these guidelines because the total number of Participants in a day would not exceed 200.”12

Even assuming that this recommendation applies to Licensed Tournament Guidelines with equal force there still exists ambiguity regarding structure. Nintendo offers no guidelines on whether two blocks played on separate days would be considered part of the same tournament, for purposes of determining whether a licensee has exceeded the 10 tournament cap (discussed below). To better aid the argument that separate blocks would not represent separate tournaments, we recommend structuring the tournament such that all placements are not completed, and all payouts are not earned, until a series of blocks has been completed.

Modified Software

Nintendo does not permit the use of modified software, or modified or pirated versions of Nintendo games in Licensed Tournaments. While this language is broad the actions taken by Nintendo against tournament operators over the last few years13 makes it clear that the purpose of this guideline is to restrict the use of software like Slippi.

Prize Cap

The Licensed Tournament Guidelines place a prize cap of $5,000 per tournament and no more than $10,000 offered per organizer per rolling 12-month period across multiple tournaments. Nintendo should clarify whether the cap applies to single prize offerings to participants, or to all participants in the aggregate.

What Prizes are Permitted?

Organizers may offer goods, services, or cash as a prize. The market value of any goods and will be counted towards the prize cap. Nintendo restricts the offering of various forms of services and goods.

Tournament Occurrence Cap

A formal license permits an organizer by default to host up to 10 repetitions of the same tournament in a calendar year. For many organizers hosting weekly locals, this is a cumbersome restriction. However, since Nintendo has failed to clarify exactly what constitutes a completed tournament, there may be a few strategic ways to navigate this. We recommend locals looking to avoid this restriction consult with an attorney to discuss applying for an exception or otherwise.

Restriction on Gambling and Alcohol

Nintendo restricts any gambling activity and the consumption of alcohol or drugs at licensed tournaments. Nintendo has not clarified what constitutes being “at licensed tournaments.” A LAN bar hosting a weekly local could be in compliance by partitioning off a portion of the bar, or a room, and by restricting alcohol into the tournament area. Because Nintendo has not attempted to enforce this restriction as of the date of this article, we can only speculate as to whether this restriction would be satisfactory to them.

It is also worth noting that Nintendo will be granting formal licenses entirely at their discretion, they could choose to deny organizers hosting events at venues that serve alcohol. If Nintendo is trying to maintain a PG image, such an action would not be inconsistent with that approach.

Tournament Name

Use of the Nintendo IP and Tournament Branding

Your tournament name may not include any Nintendo IP, including the name of the game to be played, or the word “Esports”. Organizers may reference the name of the featured Nintendo game in promotional and informational material for the tournament solely to indicate what game is being played. Any further use of Nintendo Trademarks or IP, including character images, logos, and other art, within any tournament activity, is strictly prohibited. You are permitted to use gameplay footage and screenshots for announcement materials for games officially launched and are permitted to screen gameplay footage at in-person Licensed Tournament venues and, although it is not explicitly stated, it is assumed that tournament organizers can broadcast the tournament, so long as the monetization rules surrounding posted content are followed.

For organizers, this restriction is fairly straightforward. However, it would help if Nintendo clarified all permissible ways an organizer can “indicate which game is being played” since the restrictions don’t specify exactly what Nintendo is looking for. For example, Epic Games has similar restrictions for Fortnite Community Tournaments, however, they provide clear visual guidance through a Style Guide regarding permissible ways the Fortnite IP can be used.14

Ruleset Summary

Tournament Organizers must provide a summary of their tournament ruleset, and format, in the Licensed Tournament Application. Formatting options in the application are limited, so it could be tedious for tournaments with a complicated ruleset. Nintendo suggests that the summary might include information regarding bracket, ladder, single/double elimination, etc., and any rules relating to character or stage selection.

This section is fairly straightforward, however, organizers should ensure that their description of both the format and applicable rules, is detailed enough such that it sufficiently informs Nintendo about the event.


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