League of Legends to introduce franchising

How the LCS system currently works

The LCS - short for "League of Legends Championship Series" -  is the premier league for this computer game in Europe and North America. The Challenger Series is something of a second tier, and with a relegation system in place, teams can either advance to the LCS or be demoted to a Challenger berth. The thinking behind this system is pretty obvious; it establishes a steady flow between more and less-talented teams and players. On the other hand, it can cause trouble for teams that are relegated - leading to the loss of sponsors and the critical critical income that go with them.

Financial issues have been ever-present for League of Legends owners in recent years. The game's surge in popularity brought rising salaries and the leagues have done very little to support their clubs. The owners are now demanding change. 

"RIOT wants partners who will continue to lose money with the expectation of making money in the long term, but offers no long-term commitment to any team," European and North American LCS owners wrote in an open letter sent to the developer of the game last November. 

They also called on RIOT  to pay at least $700,000 (622,000 euros) annually to each team in compensation for dedicating their resources to the leagues  - as well as player salaries, which are a minimum of $100.000 per player per year.

"Teams only fear relegation because it puts their business at risk. [In Challenger,] There are no offline matches, only low reach for sponsors and there is no "rescue fund" as for example in the German football leagues to compensate teams that get relegated," Alexandre "DrPuppet" Weber, coach of Aequlibritas eSports said. "Because of this, the organizations are pushing for the introduction of franchising, a system that can provide them with a steady income.

Franchising as the new league model

Franchising is the approach used by North American sports leagues such as the National Football League or the National Basketball Association. Currently, although the clubs pay a fee to enter most leagues, they can still be relegated. However, China's League of Legends Pro League (LPL) is planning to do away with relegation beginning next season. This will mean that any club that has a franchise will have a permanent spot in the league and not be subject to relegation, no matter how poorly they perform.

In Europe this concept is not on the table, at least not yet, but in North America franchising is seriously being considered for the next season.

The clubs are in an ongoing battle for sponsorship revenue, as long-term sponsorship deals are virtually non-existent. Apart from the biggest and strongest teams, none are really safe from relegation and thus only few companies are willing to offer their support for more than one or two seasons at a time.

If franchising were to be adopted, this could all change. Even the weakest team in the league would not be threatened with relegation and without this concern, could plan months and even years ahead, something that would help to stabilize the finances of a lot of clubs. The Challenger Series would then become similar toa farm system, also common in North American sports - like the American Hockey League to the National Hockey League, for example. Instead of its top teams getting promoted to the LCS, LCS clubs would simply sign the best players in the Challenger League.

Where is the competition in all of this?

Winning has never been a money-making proposition in the LCS - the costs of maintaining a team have always outweighed the prize pool by far. For the clubs, it has always been a battle for survival  - and against relegation. This has heaped financial pressure on the clubs, but it has also made things exciting for the fans, as they follow their favourite team's rise and fall.

"For me, the kick of having to fight your way to the top and the resulting storylines are a part of the sport," Weber said.

Playing in a league in which the standings don't make much of a difference would not provide much of an incentive to improve. This would also limit the number of clubs holding much influence to just a handful of organizations. The only way that a Challenger club would be able to complete would be by selling their best players to the highest bidder - while developing young talent from within - in other words, something akin to the business model used by Bundesliga club Freiburg for the past couple of decades. 

In terms of competition, relegation is critical. Organizations such as Misfits or FlyQuest would not exist in the current landscape of League of Legends had it not been for the relegation system. RIOT, the developers of the game, need to find a way to stabilize income through revenue-sharing across leagues and divisions. If they don't, the level of competition could suffer.

"In terms of investment, franchising is understandably the preferred format for organizations. Nonetheless I fear that it could influence competition since teams own "safe spots" in a way. [...] Removing relegation is not the right step, the right solution would be to improve the ecosystem."