This week brought rumors of a $500 million deal between ESPN and Riot Games to broadcast League of Legends Championship Series (LCS); followed by both sides going on record denying the talks. While both Riot and ESPN have gone on record denying the talks and the original story contains some general reporting faux paus, the rumors raise some interesting questions about the dynamics of eSports ecosystems. Simply put, if ESPN, or any other media outlet, decides to purchase exclusive broadcast rights, how would the inflow of revenue affect the overall health and viability of the competitive scene?
Where does the money flow?
In professional sports, leagues function as an alliance for the interests of member teams. Revenues from the sale of league rights flow back into the coffers of its clubs through apportioned revenue distribution. In the case of the rumored ESPN deal, the $500 million would represent a massive influx for Riot, and majority owner Tencent, but would not flow impartially to the LCS teams who compose the backbone of the eSport product. A look at the general flow of money in eSports ecosystems, the LCS and otherwise, illustrates exactly why (see diagram below):
The assumption that sale of broadcast rights would be a net plus for the entire ecosystem doesn’t quite prove sound, upon close examination. The absence of structured, e.g. legally agreed upon and collectively bargained, revenue sharing between tournament organizers and game publishers behind various leagues, and the teams, which compose them, does not bode well for equitable distribution of, what could turn out to be, significant sums of money.
The question isn’t if funds will make their way to teams, and their players, because they will. Instead, as eSports evolves out of current role as marketing channel for game publishers and line of business for tournament organizers, into a standalone ecosystem, how the revenue pie is divided becomes incredibly crucial. Without precedent of revenue sharing, and given the nascent state of most eSports team organizations, plus lack of player unionization, the balance of power is a major issue for sustainability.
What about the teams?
Obviously, team organizations in eSports can and do generate revenue. After all, it costs money to compete at the highest levels in competitive video games. And recently, for teams in the LCS, the entry of private investment has increased the value of teams. According to, Andrey “Reynad” Yanyuk, owner of a competitive organization eyeing entrance into Riot’s eSports league, “To buy an LCS spot plus a roster and everything was going to cost me $1.5 million.”
This is no small sum, but keep in mind that eSports is bigger than just the LCS. The overwhelming majority of gaming organizations do not have an LCS spot, which puts onus on being able to monetize through other channels. Yet, a close look at the general structure of eSports teams reveals gaps in revenue generation opportunities (see diagram below).
Unlike traditional sports, where teams benefit greatly from media revenues, ticketing, talent sale, and other mature commercial opportunities, eSports runs primarily on sponsorship fuel. Why is this relevant? Well, these teams are currently walled off from a rising tide of revenue which will stem from the media rights marketplace, over the next 12 to 24 months. A startling fact, considering the role that teams and players play, as the lifeblood of competitive video games, which, along with fans and enthusiasts, is the very core of the eSports phenomenon.
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