Riot Games upend the League of Legends Franchise Business Model

Riot Games upend the League of Legends Franchise Business Model

Riot Games, a video game publisher, and creator, is altering the financial model of the franchised League of Legends teams.

Riot Games, led by John Needham, President of Esports, recently published a blog post outlining significant changes intended to increase team revenue and lessen dependency on sponsorships during a difficult time for the industry. 

Reshaping the business model

The new model will emphasize sharing in-game digital purchase proceeds rather than sponsorship revenue sharing. This tactical change acknowledges the opportunity to profit from the many players and their interaction with in-game content. By utilizing this revenue stream, teams will have more control over their financial future and a more stable economic base.

Teams in essential regions, such as the LCS (North America), LEC (EMEA), and LCK (Korea), will be impacted by the changes. However, Riot Games and the LPL (China) are still in talks to see how their business plan might change. 

Also read: RIOT Games Implements New Eligibility Rule

According to Riot Games’ plan, a Global Revenue Pool (GRP) will be established to collect and distribute money from digital LoL Esports content to teams according to several criteria.

Global tier 1 teams will split equally 50% of the GRP revenue. 35% will be distributed into two pools, one for placement in international events and the other for regional league standings, based on competitive performance.

The remaining 15% of GRP earnings will be allocated to “Fandom Shares,” which are meant to compensate teams for “building strong fandoms” around their squad, players, and league. Riot gave no information about the standards by which fandom will be judged.

The proposed changes would also see teams receive a fixed stipend from Riot and earnings from the GRP. Riot said that even after “recovering its annual investment in LoL Esports,” it will continue contributing 50% of other direct revenues, including sponsorships and media rights. The changes come at the expense of “moving away” from sponsorship revenue sharing.

Increasing the teams’ revenue-sharing percentage

Needham revealed that Riot would raise the revenue share percentage that teams receive from digital LoL Esports content, though the new amount was not made public. Later in the year, he promised, there will be news about the release of digital products. He also mentioned that the content from the previous two seasons had “set new engagement and revenue records.”

According to the League of Legends developer, the modifications will put LoL Esports on a “path to long-term sustainability” and provide teams with more significant financial upside and more stable revenue. He maintained that the new model establishes aligned financial incentives rather than having esports organizations and the league compete for the same small amount of sponsorship money.

Riot Games’ audacious decision indicates their dedication to the stability and long-term success of the League of Legends esports scene. Teams will be better prepared to withstand changes in the industry and maintain their position as leaders in competition by increasing their revenue sources and decreasing their dependency on outside sponsorships. This tactical change generally signifies a critical turning point in the League of Legends franchise business model’s development. It guarantees a more stable future for both teams and the esports industry.

RELATED TOPICS: eSports, LOL, Riot Games
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