The franchised League Championship Series in North America is now in its second year, and established organizations like Team Liquid, TSM, and Cloud9 are dominating the 2019 Spring Split, while newer organizations such as Clutch Gaming and 100 Thieves are struggling to find success.
However, according to LCS commissioner Chris Greeley, some of these new organizations have been incredibly successful despite their on-Rift performance. Speaking at a panel at SXSW about the creation of the franchised LCS, Greeley referred to 100 Thieves as the “poster child” for a new organization.
This is high praise considering the competitive landscape of the league and the rigorous application process that took place in 2017. According to Greeley, 100 Thieves fulfilled many of Riot’s requirements for a franchising application.
And Greeley believes that 100 Thieves continues to deliver on its strengths today.
A Solid Foundation
During the franchising process, Riot sought four key things from potential applicants: a strong ownership profile, a brand strategy, an ability to monetize the brand, and independent financial resources to sustain operations for years without league support.
100 Thieves based its application around popular Call of Duty player and content creator Matthew “Nadeshot” Haag, which resonated well with Riot officials due to his strong brand recognition.
Greeley and his team reviewed numerous applications and ultimately aimed to select owners who would be long-term partners for the league. Money was not the primary concern at first, as the first 10 LCS slots were sold for just $10 million each, much lower compared to the starting rate of $20 million for the Overwatch League.
However, recent valuations have increased significantly. The second season of the Overwatch League saw expansion slots reportedly sell for $30 to $60 million, and the franchising model for Call of Duty will feature a $25 million buy-in.
Despite these figures, Riot believes its team valuations are appropriate.
The Numbers
When asked about Riot’s lower franchise fee compared to other leagues, Greeley explained that the price was intentionally set to attract the right partners. Riot didn’t want the price to scare partners away or create unrealistic expectations of control in the process. The decision to set the fee at $10 million was straightforward.
However, Greeley mentioned that Riot’s future expansion plans would likely involve additional slots priced between $25 and $40 million. The company is currently discussing expansion mechanics and timing with its owners, but expansion isn’t expected in the near future.
For now, Riot’s focus is on ensuring smooth operations for its league.
Not Just Profitable, But Sustainable
Riot’s definition of a successful league doesn’t solely revolve around immediate profitability. The lower franchise fee allows the LCS to prioritize sustainable processes for its teams and players. Revenue sharing is not meant to make everyone rich, but rather to encourage decisions that benefit the entire league.
One notable example is Riot’s approach to sponsorships. Unlike the Overwatch League, where league sponsors overshadow team sponsors, Riot wants its teams to take the lead. While Riot has the power to exclude certain product categories for league sponsorships, it has only done so for official team jerseys, which are obtained through a partnership with We Are Nations.
Riot relies on teams to provide expertise in certain areas, indicating that the company prefers not to invest resources in league building. This approach carries risks, as having too many teams competing for partners could weaken the group’s bargaining power. Additionally, the expertise of the owners brought in by Riot may be more suited to mature leagues in other sports. The value they can provide to an earlier-stage league like the LCS remains uncertain.
Growing the LCS at a rapid pace presents unique challenges, as there is no established blueprint for such growth. While 100 Thieves may be successful now, it’s difficult to predict how the league will perceive their success in the future.
However, the decisions made by Greeley and his owner-partners today will undoubtedly have a significant impact on the future of the league.
All photos via Riot Games.