Given the factual existence of souls, it could be expected that blood sports may be more common, as spectators need no longer feel any hint of guilt over deaths in the arena, since the souls of the slain will reincarnate anyway, possibly stronger than before. If we suppose a specific nation where these bloodsports are particularly common, we could create a unique setup based on this.
Let's presuppose that bloodsports are the main defining feature of this nation, and that various bloodsport teams are run by powerful individuals. Let us also presuppose a supreme ruler, one which isn’t easily toppled in a coup. Given the presence of magic, this supreme ruler, the emperor, could be immortal in some way or other.
Since the team owners would be powerful and rich, and therefore power-hungry, they should stand to reap great benefits from participating with a team in the arena fighting. One could therefore expect the arena championship to be a method for determining the political power structure positioning.
We can then add an additional aspect of the arena championship, in that a supreme ruler could ensure his immortality by transferring his soul to a new body via an evil and ancient ritual. Such a ruler would be interested in getting the best body possible, and an arena championship would be the ideal way to find such a body. So, in order to ensure not only his immortality, but also the optimal vessel, he would host a championship, promising the position as his second-in-command to the senator who wins, and seizing the champion’s living body for himself either afterwards, or possibly as a part of the winner ceremony.
We should make the bloodsports teambased rather than revolving around individual champions, in order to allow the player the possibility to bring his companions, so as to avoid implementing a separate combat system for the game.This also means that although all the arena challenges are team-based, the overall winner of the championship must be a single individual, so it seems logical that after defeating the last challenge of the championship, the team members are usually forced to fight each other until a single champion is found, in order for the ruler to find his body/vessel.
Furthermore, in order to determine the absolute rather than relative strength of a senator’s gladiator team, the team should face arena challenges and foes with predictable strength rather than other gladiator teams., or at least more often. This allows us to focus the bloodsports mainly around arena challenges.
One could then possibly consider expanding the reincarnation motif through the monsters used in the arena fights. Given that arena fighting is then a frequent event, possibly even annual or biannual, it seems unfeasible that a given nation should keep breeding pits in order to supply the monsters for the fights (they wouldn't be able to keep up).
Likewise, expensive monster hunts would over time deplete this resource, and would additionally oppose the determined military stability of the empire. Instead, one could suppose that a given ruler instead uses dark magic to create undead or abominable monsters, or rather, supply apparatus to allow team owners to create their own. If such a setup is effectuated, and the ruler can control all such monsters if he so chooses, he (and the empire) have an almost inexhaustible resource, wherethrough he has assured perpetual power within the empire, whilst ensuring a way of keeping the masses entertained and thus occupied.
The apparatuses creating the abominations and undead used for the arena fights obviously require raw materials for the production. So, if we establish that any fighters meeting their end in the arena are used for the raw materials as punishment for their failure, we can expand upon this by deciding that the creation of a monster requires a small shard of a soul in order to remain half-living. So, any fighter who perishes in the arena is not reborn, his soul instead being recycled over and over to fuel the creation of new arena monsters. Reversely, if a monster is destroyed during an arena fight, its remains are simply reused in the apparatus to create new monsters. One could possibly also distinguish between empire citizens and captured slaves, so that citizens are allowed to participate in an arena fight, in order to win glory and money, and do not risk being used for monster construction if they should fail.
If the empire has had these arena championships for several centuries, this steady soul resource consumption could mean that at some point there aren’t enough souls to recycle. Since we are working with a fantasy setting, the beliefs could very well turn out to be true, and so, we could add the extra dimension of the empire beginning to experience troubles with high infant mortality rates due to this soul shortage.The general populace would perhaps not be aware of this connection between the apparatus and the increasing infant mortality, but the senators might, and would therefore be interested in discovering new cultures in order to replenish the soul pool. This could provide the reason for an otherwise isolationistic empire to begin looking outwards for fresh soul resources, and could thus be used as one of the fundamental setting conflicts of the game.