Over the last several months, the tension between Riot Games and the owners of the teams playing in the League of Legends Championship Series has been steadily rising due to the fact that team revenues are consistently lower than the costs of running an LCS team. In the letter, addressed to the leaders of Riot Games and the company’s eSports division, Marc Merrill, Whalen Roselle, Jarred Kennedy, Jason Yeh, and Brandon Beck, the teams outlined the problems they see, the things Riot proposes to fix these problems, and the teams’ demands.
As seen by the LCS owners, the problems with the current state of the LCS mostly boil down to the problem of relegation and compensation. With the bulk of teams’ income coming from sponsorships, it is a daily struggle to find worthwhile sponsors to help offset the running costs of a team, which could reach $1M a year, according to Christopher “MonteCristo” Mykkles. Why are sponsors vary of long-term sponsorship deals? Quite simple, relegation can render the agreement mostly worthless if the team has a particularly bad Split and gets moved to the Challenger Series.
There is an argument to be made about the competitive advantages of relegation; however, at least in the case of the North America region, the fact of the matter is that it is not in the culture to have the danger of relegation. Until the whole thing gets abolished, no truly big sponsors will enter the scene, being vary of having their investment turn to dust. NRG eSports, for example, invested heavily into their LCS team, but failed to make it in the LCS. All that money, wasted just like that. That is a worrying state of things.
To be honest, the arrival of big name non-endemic brands is no longer a question of if. It’s a question of when. Especially with Blizzard Entertainment announcing the Overwatch League with teams tied to geographical locations and permanent spots in the league. If Riot Games does not follow suit in some manner, Overwatch will just take the whole pie and eat it. If, however, Riot creates a similar environment in their own game, they might be able to profit from the whole thing.
As stated in the letter, from the talks with representatives of Riot Games, the owners got the impression that Riot Games do not plan to eliminate relegation in the immediate future for NA, only getting it done after Charter Membership commences in 2018. Even when that happens, Riot Games isn’t sure that the current NA teams are the teams they want as Charter members in the first place. While it is fair to be doubtful about giving permanent spots to teams which are at the bottom of the standings, such argument can hardly be made in the case of teams like TSM, CLG, C9, or Team Liquid, with the recent addition of Immortals.
While making plans about Charter Membership and carrying them out is Riot’s prerogative as the owners of the LCS, not giving any information to the teams which have been playing in the League for years, often operating at a loss, and had a huge part to play in its growing popularity, is unfair. As pointed out by MonteCristo, Riot Games is probably waiting to get professional sports teams interested in getting into the LCS, they might be considering having a bidding war for Charter spots in the League. As things stand now, with teams operating at a loss, there is no way that even giants like TSM or C9 can hope to outbid a non-endemic organisation. Their only chance is to sell their controlling interest to someone extremely rich. Riot’s refusal to provide the criteria for the selection of Charter Teams is one of the big problems outlined in the letter.
Speaking of the financial side of the whole problem, the part 2.a. under Riot’s Proposals to Date, which states, “Riot wants partners who will continue to lose money with the expectation of making money in the long-term, but offers no long-term commitment to any Team. The Teams have been advised that operating a business at a loss is our choice,” is just bad. What would happen if the Teams refused to play? Operating at a loss is the team’s choice after all. They could just choose to not operate. That would be a PR nightmare for both the teams and Riot. Still, a last-resort option like this might be on the table if Riot doesn’t compromise.
Speaking of compromises, the Teams outlined their proposal for a minimally acceptable compromise for 2017. First, teams would like a “moratorium on relegation in 2017.” Also, the teams want to receive the information about Charter Membership by December 1, 2016. Second, concerning team compensation, the letter had this to say: “The Teams cannot accept the proposition that they should silently suffer another year of losses. Given that the Teams’ purpose now is to promote the LCS without any meaningful revenue sharing or commitment on future Charter Memberships, Riot should fairly compensate the teams for their participation in LCS, dedication team-funded resources for promotional activities and use of the Teams’ IP ant an annual rate of $700K/€700K. The NA Teams will guarantee their players a minimum salary of 100K.” Okay, that is a lot of money, BUT. Most of it would go to players, not the team’s pockets. If Riot wants to have a professional league, its teams shouldn’t be expected to play because of their good hearts. If Riot won’t give teams permanent spots in the league to allow them to make money to stay afloat that way, they should pay the teams for the service they provide. Team owners aren’t good samaritans, Riot Games aren’t either.
Both sides of the battle have decent points in some cases, however, the fact of the matter is that Riot Games are constantly presenting themselves as a company, which does a lot for their eSports League. As a price the LoL scene has to pay for it, there are almost no international events, everything in the pro scene is ultimately controlled by Riot Games. They have the power to forbid you from participating in their Leagues without providing the proof for their reasons publically, or allowing the owner to appeal the decision. While the things Riot Games are doing currently were worth the ultimate control four years ago, they are no longer, which is the whole reason for this conflict. Many fans are saying that the owners are just greedy. Consider this, would a greedy owner run a team at a loss for year? Would he pledge to pay his employees most of the $700k he wants to get? I don’t think so. Do you know what greed looks like? Expecting the people who has played in your league for 4 years to keep playing at a loss, when it’s possible that you will leave them by the wayside when a cooler kid, who’s name is New York Knicks comes along.
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