eSports

Riot Games presents new business model for LoL Esports

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In an update from Riot Games, the company announced plans to introduce a new business model for professional teams in LoL Esports scene.

Riot Games introduce new business model for LoL Esports

Image Credit: Riot Games

Riot Games to evolve LoL Esports and create more sustainability

Inspired by the financial success of the model implemented for the VCT (VALORANT Champions Tour), the publisher will be introducing a new business model for professional teams within the LoL Championship Series (LCS), League of Legends European Championship (LEC), and League of Legends Champions Korea (LCK), with plans to extend these changes to the LoL Pro League (LPL) as well.

The addition of in-game digital sales for fans worldwide will provide extra revenue streams for teams, as organizations are looking to generate sufficient revenues to cover the investments made to stay at the pinnacle of the competition.

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Image Credit: Riot Games

In the message from the President of Esports, John Needham, he acknowledged the challenges exacerbated by the post-COVID economic landscape and the overreliance on sponsorships:

“In the current LoL Esports partnership model, teams committed to pay ~$10M to participate in a league and receive 50% of certain revenues (not profits) generated by that league.”

He explained how most of the revenues have historically come from sponsorship and media rights. The issue that arose from the previous model was caused by abundant access to capital that allowed teams to spend in excess of the revenues they were generating directly and from Riot. Now that the capital is more limited, and revenue growth hasn’t increased proportionately to the costs, thus putting teams in a challenging position.

The introduction of in-game digital sales should help create more scalable opportunities, especially given the increase in engagement and viewership throughout the past years.

How the new partnership model will work

Teams from the LCK, LCS, and LEC will be offered a fixed stipend alongside revenues from digital content sales. Additionally, to help open up revenue streams for the entire Tier 1 ecosystem, Riot is creating a Global Revenue Pool (GRP) will be created, which will distribute funds through general, competitive, and fandom shares, with the goal of enhancing the competitive experience. Below is the planned distribution of the GRP, according to Riot Games:

  • General Shares: 50% of the GRP goes into General Shares and will be given to Tier 1 teams.
  • Competitive Shares: 35% of the GRP flows into the Competitive bucket and it will be based on competitive performance.
  • Fandom Shares: The remaining 15% of the GRP goes into Fandom Shares. This share rewards teams for developing strong fandom for their players, leagues, and team brands.

The company also added it will increase the esports revenue share percentages and increase the quantity of digital content in a given season. They also added that Riot will contribute 50% of other direct revenues (sponsorships, media, etc.) once Riot recovers its annual investment in LoL Esports.

After 14 years of LoL Esports, this is probably one of the most crucial changes coming for the LoL Esports scene. The diversification of revenue streams will help esports organizations achieve better sustainability and more financial stability to continue building the future of competitive gaming.

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