Funding issues in the LCS – financial risks and their possible impact
Money has recently been a huge topic in both the NA and EU LCS and the League of Legends scene in general. Starting with the Korean Exodus last season, followed by the Svenskeren drama and the infamous “5 POINT 5 FUCKING K” meme and now continuing with reports of the most successful European organization in League of Legends being unable to compete with salaries in the North American LCS. It was well known that North American teams had more exposure than their European counterparts in general, but this incident still raised some eyebrows, considering the success that Fnatic had recently compared to North American organizations. On Reddit, user /u/TrashyFanFic used this as an occasion to ask LCS team owners to discuss where their revenue comes from. Robert “Chachi” Stemmler, COO of NME, answered this question surprisingly open and afterwards also discussed the matter with interested redditors in a very transparent way.
Only 4 Teams in the NA LCS reap profits
He stated that NME’s revenue generated by their League team originated entirely from Riot’s subsidy and that this sum did only cover about half of the team’s expenses. Chachi added that no sponsors were interested to invest into a League of Legends team without any well-known players and that it was in fact easier to receive sponsorships for their teams in other games. He also pointed out that the bottom six organizations in the NA LCS will not be able to cover their expenses. In summary, it can be stated that more than half of the teams in the highest professional league in North America suffer a financial loss. Additionally, according to the announcements of Gravity and Team Impulse there still are two spots to be sold in the North American LCS. After seeing those numbers it seems hard to believe that investing in a League of Legends team is worth the effort for upcoming organizations or investors.
Investments in LCS teams as a marketing move
However, Chachi added that the League scene is still attractive for investors and organizations because of the huge exposure League of Legends offers. This is also the reason that he does not consider the fact that they did not sell their LCS spot for 1,200,000$ a mistake, because NME wants to evolve as a brand in eSports in general. While this might sound like a good thing overall, it raises another problem. That means that investing in a League of Legends team is just a financial investment in order to receive more attention for the brand for more than half of the teams in the LCS right now. To make it more clear: Owning a professional team in the most played game in the world is merely a marketing move for teams like NME at the moment, which is honestly alarming. Considering that there is more money in the League scene than in any other eSports scene, while bottom-tier LCS teams are not even remotely close to reap profits, indicates that the distribution of money might be unjust. When organizations with serious ambitions in the entire eSports scene only use the LCS as a marketing tool, the competitiveness of the entire league seems endangered. Especially when taking all the risks for the players into account.
Possible impact on the competitiveness of the scene
Considering the financial risks for both organizations and players, it should be obvious that many talented players will hesitate when offered the opportunity to play competitively. They could often easily earn the same amount of money by streaming, with significantly less pressure and obligations as well. The fact that only the most successful teams are able to gain profits should also inhibit many new organizations or investors from investing into the scene, which in turn restrains the growth in competitiveness in the game as a whole.
Difficulties in improving the current situation
There are various reasons for this problem. The scene is still growing and sponsors, investors and organizations from other areas are only just beginning to understand the potential of eSports as a business. Additionally, there are still certain issues with the public image of eSports. However, these problems will probably have to solve themselves naturally over time, by increasing media coverage and general attention and growing professionalism in the scene. But teams not being able to receive sponsorships while playing in the LCS could also be tied to Riot’s strict policy on and control over sponsorships, since it seems to be easier in other games. Of course, it can be argued that Riot being suspicious about sponsors like Alphadraft also has a bright side, but nevertheless it could prevent aspiring teams from receiving potential sponsorships.
Aside from that the salaries that Riot pays to the players, though very helpful, are just not enough for new and inexperienced teams. Of course eSports organizations should be able to be self-sufficient, but this does not seem to work without a serious investor or a solvent owner behind the team. As it is commonly known in the scene, Riot pays the organizations 12,500$ per player per split and an additional payment if the team places 4th or better in the playoffs:
- 50,000$ for first place
- 25,000$ for second place
- 15,000$ for third place
- 10,000$ for fourth place
This, combined with Riot’s “Minimum Player Compensation”, presumably results in a salary for players of bottom-tier teams adding up to sums around 25,000$ per year. To be fair, usually the organizations provide housing and cover living expenses for the players. However, this sum is about a bit less than the average income of the full-time working population in the United States in 2014 according to the Census Bureau. Considering the high-pressure environment of competitive gaming as well as the fact that professional players are nearly permanently exposed to the public, this does not seem like a good deal at all. Additionally, pro players also usually invest significantly more time than an average full-time worker into their jobs. Playing and practicing on weekends and holidays, travelling and other activities are just part of the business, while also not providing a huge boost for future careers. While streaming and sponsors usually are a common way to increase player salaries, it is hard to generate that revenue as a player of a bottom-tier or new team. As already mentioned, it is hard for new and lower ranking LCS teams to find sponsors, but it is also hard to prevail in a scene where various streamers with an already existing fanbase run the market for aspiring players. Especially when pro players cannot keep up with the amount of streaming hours because of practicing and other obligations.
This should by no means be understood as a rant about Riot not giving enough money to the organizations, because obviously Riot cares and the players can live from their salary. But it is not a bold statement to say that the scene could grow a lot more if the organizations could make profits or at least pay better salaries to their players and other members of the staff. Also Riot spending more money on the competitive scene seems to be the only available way to improve the situation of new teams and players at the moment. When reducing the risks involved for both players and organizations, more organizations and players will be willing to take the risk. This will inevitably lead to more competition, growing professionalism and more interest in the scene in general.
We as a community can also help to improve the situation. By being fans, supporters and enthusiasts. By promoting the game and the teams we care about.