Video game developer Riot Games has announced a new business model for League of Legends (LoL) esports franchises, with a new global revenue pool (GRP) to distribute all revenue from digital LoL esports.
The previous system required LoL esports teams to pay roughly US$10 million to enter a league. In addition, only teams that took part in international events were given a share of the revenue generated by digital content sales related to those competitions, meaning just 20 to 30 teams earned digital revenue each season.
While declaring that the ‘imminent demise of esports has been overstated’, Riot Games said the change in model would ensure teams are less reliant on sponsorship income. Numerous esports franchises have struggled to ensure steady revenue levels coming out of the pandemic, in part due to unfavourable economic conditions.
The game developer itself has also been impacted financially, having announced in January that it would reduce its workforce by 11 per cent.
As for other direct revenues such as media rights and sponsorship, Riot said it would contribute a share of 50 per cent to teams once the game developer ‘recover its annual investment in LoL esports’.
“This model shifts the revenue-sharing mechanism away from sponsorship sales as the primary revenue source and focuses on digital content sales, which are generally more resilient to economic downturns and have a higher ceiling than sponsorship, which is capped by inventory, categories, and market penetration,” said John Needham, president of esports at Riot Games.
“Another benefit of sharing digital revenue is that the teams and leagues can truly join forces to maximise sales for everyone’s benefit. This has proven difficult for sponsorship sales since the leagues and teams operate their own sponsorship businesses, and supporting each other’s businesses typically results in conflicting terms or rights.
“With digital content, we reduce those conflicts and can work together as a unified force to grow the overall pie.”
Riot also said it would work with the China-based League of Legends Pro League (LPL) to evolve the current business model used by the competition.
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