The Future of the LCS: Franchising versus Relegation
The world’s largest esports league, the LCS, might be in for a major change—a change that isn’t sitting well with many fans.
From the beginning, the LCS, Riot Games’ flagship League of Legends tournament, has followed a promotion and relegation system similar to most European soccer leagues. Every season, the bottom teams face off against the top two teams in the Challenger league to avoid demotion.
However, Riot is reportedly considering franchising the LCS, which would grant permanent slots to certain teams and eliminate relegation altogether. While this move may disappoint fans who enjoy the thrill of amateur teams challenging the professionals, it’s important to recognize the problems created by the relegation model, including inflated player wages, competitive disparity, and an economic bubble.
The Economics of LCS Teams
Although fans may not typically worry about how much a team earns, they do care about the wellbeing of the players. A team’s financial success directly impacts its ability to pay players and increase salaries. The relegation model simply wasn’t sustainable for LCS owners and their players.
Consider the costs of maintaining a team for a year, which includes a five-man roster, a coach, a gaming house, sports psychologist, gym membership, team chef, and support staff. A team’s expenses can easily reach a million dollars or more. So how can a team turn a profit with such high expenses?
Riot provides funds for each team to pay a minimum of $12,500 per split to players and coaches. While this helps cover some costs, it’s not enough. In fact, Riot’s contribution only amounts to approximately 15% of the average team’s expenses. The rest of the money must come from sponsorships.
The Problems with the Relegation Model
Unlike traditional sports leagues that offer revenue sharing through broadcasting rights and sponsorships, the LCS teams have no ownership stake in the league. Broadcasting rights are the primary source of revenue for most sports teams, and in the case of the English Premier League, they make up around 60% of total revenue.
However, LCS teams heavily rely on sponsorship revenues due to the lack of other revenue streams like ticket sales or concessions. This creates a catch-22 situation: as a team performs worse, sponsorship revenue decreases, which in turn leads to lower matchday revenue. It becomes increasingly challenging for new teams to build a solid fanbase and attract sponsors, making it difficult to cover expenses and field a competitive team.
The Case for Change
The financial disparities caused by the relegation model are similar to what the Premier League faced before implementing Financial Fair Play regulations. Without a cap on spending or measures to prevent relegation, teams at the bottom of the table spend a higher percentage of their revenue on wages, leading to massive wage inflation.
Franchising the NA LCS is Riot’s response to these issues and the instability threatening teams. Franchising provides stability and security for teams, allowing them to focus on building their brand and attracting sponsors. While there may be some short-term challenges, the hope is that franchising will become the new norm in the industry and replace the problematic relegation model.
Overall, the shift towards franchising holds promise for the LCS and its teams. It offers a solution to the financial struggles faced under the relegation system and paves the way for a healthier and more sustainable esports ecosystem.
esports, LCS, League of Legends, franchising, relegation, sponsorship, player wages