eSports is much more than a fad; that much is clear. At the forefront of the growing phenomenon is Riot Games’ League of Legends (LoL). While it’s not the only game [title] in town, LoL is an unquestioned leader. Yet with rising levels of outside investment into Riot’s League Championship Series (LCS), there are several red flags which must be heeded. While some pundits have questioned if an investment bubble, of sorts, is imminent; the bigger picture is that unstructured investment, into team ownership, is potentially toxic. Therefore, it is critical to ensure protocols and governance for the ownership layer is cultivated sooner rather than later.
The big picture
Currently, Riot does not maintain a strongly defined ownership assembly across the League Championship Series (LCS). Possession of an LCS spot should entail unambiguous obligations to a wider group of owners. Today, changes in ownership are essentially enacted in vacuum regardless of their effect on the overall ecosystem. The notion of league wide buy-in at the ownership level is a key article of every single major professional sport; if LCS has intentions of scaling to the same level, it must feature the same. Otherwise, it will remain a tantalizing marketing play and narrowly segmented entertainment service.
Conversely, Riot’s proposal to implement a franchise model is not the solution it appears to be. Autocratic control of team ownership might put an end to today’s scattered landscape but also introduces a whole host of issues of its own. Instead, Riot must extend the discussion and approval process to include all team owners. LCS governance should resemble a committee as opposed to a dictatorship.
Owners must be encouraged to view their own interests within the context of a growing ecosystem. This is where the unique nature of competitive gaming plays a key role. The sale and purchase of team spots are not just individual business transactions; they also have a huge impact the competitive complexion of a still emergent scene.
Learning from sports
To better illustrate, several years ago the Green Bay Packers, a National Football League (NFL) team, sold shares to raise funds for a stadium renovation. As the only publicly traded franchise in all U.S. team sports, the Packers have a decided advantage over fellow teams. The only reason this option exists is a legacy ruling by the NFL, and no other teams are allowed to offer shares in public offerings. In comparison to the LCS, where there are zero restrictions on financial instruments associated with team funding, the NFL seems authoritarian. However, there is very real reason for the NFL’s brand of conformity: balanced quality of product.
“We can’t just decide on a whim that it works in basketball, let’s apply it one-to-one for e-sports,”
— Whalen Rozelle, director of e-sports at Riot Games
The symbiotic relationship between the business of competition and the health of a sport product is what makes a major professional sport go. The same appreciation for the very real affect that ownership (who owns what, how teams are funded, etc.) has on the quality of play must come to exist in eSports. Ownership changes must be proactively vetted and approved to prevent structural flaws. Currently there are no barriers for outside money triggering unsustainable levels of competitive inequality. While Riot is correct that copying directly from traditional sports won’t work, their tendency towards an all-or-nothing approach won’t cut it either.
Towards a solution
Vibrant, sustainable eSport ecosystems depend on a healthy guarantee that teams have similar overhead and objectives. Traditional sport franchises thrive on these stable ownership structures and business models; a reality that’s enabled values to skyrocket over the last 25 years, see figure 2. Otherwise, there would be an all-out assault on buying and selling teams.
The LCS doesn’t need the same “old boys club” mentality present in sports but does need reigns on who attains controlling interests of spots. Ownership changes must become part of a shared dialogue as opposed to the decision of a single organization or game developer. The purpose isn’t to prevent or complicate business decisions but to ensure a higher degree of overall integrity.
As a headlining eSport, League of Legends (LoL) has the opportunity to continue as a trailblazer. Yet, profit drivers for leagues like the LCS cannot and will not take hold within the current system. The brand of non-endemic sponsors, which teams increasingly desire, are looking for long-term partners, and need to know that eSport team properties are not subject to wild variances in ownership. Likewise, the potentially profit generating areas of broadcast and media rights will remain untouched without functioning protections for stability.
In order to address this scenario, frameworks must be prized over rules; since instituting the latter isn’t effective without a working level of organization. At present, Riot is in a unique position to create a layout which encourages healthy organization of ownership. Unfortunately, they seem more intent on either having little to no say or absolute veto power. What’s needed is a strongly defined ownership committee, to buoy the concept of league wide approval. Without such, the LCS runs the risk of being taken hostage by the whims of its own fast evolving marketplace.
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Alex Fletcher is founder & president at eSports Group, where he helps customers meet their eSports advisory & consulting needs. When Alex isn’t glued to a screen, he spends time with his wife, their two dogs, and pretends to learn Polish. Feel free to stalk him on Twitter – @FletchUnleashed