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One of the biggest problems of esports throughout the past decade has been a lack of financial security for players as well as teams. With esports viewership expected to cross 474 million in 2021 according to Newzoo’s latest Global Esports & Live Streaming Market Report, it will be on par with some of the biggest traditional sports. Franchising looks like an attractive solution for the industry. Some of the most viewed sports, including American Football, Cricket, and Hockey (ice and field), generate revenue for multiple stakeholders through established leagues. Esports is heading in the same direction.
What is A Franchise League in Esports?
Franchising in many popular esports leagues works very similarly to professional sports leagues. Each franchise (team) has its own territorial rights and usually covers large metropolitan areas. Alternatively, they cater to existing audiences of esports organizations. For example, the Dallas Fuel in the Overwatch League was formed by Team EnvyUS. The NBA and the NFL are two of the biggest examples of franchising in traditional sports.
Teams are usually independent corporate entities who buy a slot to compete, in exchange for a share of the revenue generated by the league. There is no promotion or relegation in franchised leagues, and expansions are made in these leagues to accommodate new teams at the start of seasons. Franchises can be separate entities and/or direct shareholders in esports leagues.
How Franchising Is The “Endgame” For The Biggest Esports Scenes
The esports industry has come a long way from its days of LAN parties and community events. There are mega-franchise esports leagues that help create a relatively stable ecosystem.
These leagues allow teams, livestream and video platforms, media outlets, hardware manufacturers, and other gaming organizations involved with the publisher to and allow players the opportunity to showcase their skills. The leagues also give existing teams a chance to generate local fan interest which opens up new revenue opportunities through local partnerships. The Overwatch League and Call of Duty League allow teams to establish home bases. Teams like Atlanta FaZe and Houston Outlaws appeal to the local audience, similar to how traditional sporting clubs are based in cities across the world.
The stability created on account of predetermined seasons and match schedules allows brands to commit to long term sponsorships. Professional players receive guaranteed salaries and a variety of other benefits. Through revenue sharing agreements with the league, esports organizations could potentially tap into a portion of the earnings via ticket sales, media rights fees, and more, in addition to tournament winnings, sponsorships and merchandising.
The creation of franchised leagues is expected to enable esports to close the monetization gap between itself and traditional sports leagues. In 2020, esports generated $947 million in annual revenue, according to Newzoo’s 2021 report on global esports and live streaming.
Platforms like Twitch and YouTube are among the biggest contributors to media rights fees that are being paid to publishers for the content. Tournaments are also being broadcast on primetime ESPN and other media outlets, which is easing esports into mainstream media and marketing it to traditional sports fans.
Popular Franchised Leagues in Esports
League of Legends Championship Series
League of Legends, which is a very popular MOBA, established its esports scene through a franchised league format. While a professional league for League of Legends is not new, Riot Games introduced the franchise-style format in 2017 in North America, along with the China-only League of Legends Pro League (LPL). By modeling the league close to the NBA with the introduction of franchise bidding, home/away venues, and merchandising, Riot created an ecosystem that allows for long-term revenue generation. The LCS format consists of multiple seasonal tournaments and a lock-in season, which leads up to the regional qualifiers and the Worlds event.
Although buying into the league’s first iteration cost teams between $10 Million to $13 Million, the NA LCS league received investments from high-profile investors, including non-endemic brands and personalities like NBA hall of famer Michael Jordan.
In addition to adding structure to its esports ecosystem, Riot Games also ensured that players benefited from franchising. A players’ union was formed for all participating professionals, and the yearly player salaries reportedly jumped by over 220% after the introduction of NA LCS.
The NA LCS’s success led to the formation of the EU LCS, which eventually rebranded to the European League from 2013 to 2018 with a franchise format. The League was rebranded yet again in 2019 to the LoL European Championship (LEC).
Overwatch League
The Overwatch League (OWL) tried to replicate the success of the League of Legends in 2018 via a franchise system, but tried to do so without an existing tier-one professional league.
Joining the league meant a $20 million investment from team owners. 12 teams joined the Overwatch League in its inaugural season including investors like NFL Los Angeles Rams owner Stan Kroenke, and NFL New England Patriots Owner Robert Kraft. Endemic esports organizations like Cloud9 and Immortals joined the OWL as well, and while the league did experience strong viewership initially, its popularity died down quickly.
Unlike League of Legends, which was already an established esports title at the time, Overwatch was launched in 2016, and it was trying to go big on esports within just two years of its release. Despite Activision-Blizzard’s large investments and a $90 million deal with Twitch for two years of streaming rights, the Overwatch League is largely seen as a failure with sustainable profits nowhere in sight.
One thing it did right was merchandising.
This played a big role in the initial success of the Overwatch League. From jerseys to posters, esports organizations had access to multiple revenue sources. Fans were also enticed to buy skins in-game to support Overwatch League. In addition to themed-skins with home and away colors for each participating franchise, the Overwatch League MVPs got exclusive skins that were sold to fans. All in-game OWL-themed skins that were sold directly contributed to the League and its development. A portion of the revenue generated through skin sales went to the respective franchisees.
Other Esports Leagues
Some of the other esports leagues that have adopted a franchised format include the Singer Esports Premier League which is being hosted by Sri Lankan esports organization Gamer.LK. It is adopting a mix of open-circuit and franchised format, by allowing any eligible player to compete in open qualifiers to be selected by the franchised teams.
The Halo Championship Series that is being planned by 343 Industries is also being shaped into a franchised model. Multiple esports organizations have already invested in the upcoming league including Cloud9, Team Envy, Fnatic, and more. It will adopt a more traditional format with esports organizations privately acquiring its players for its first season.
Franchising in Mobile Esports
Mobile Legends’ MPL is one of the biggest events in all of mobile esports. It is arguably the largest and most prestigious mobile games competition in Southeast Asia featuring the popular MOBA title Mobile Legends: Bang Bang. The event is divided into multiple rounds and it takes place in multiple regions including Malaysia/Singapore, the Philippines and Indonesia. Some of the best teams in the region have partnered with Moonton (the game’s developer who was recently acquired by ByteDance to make the event possible. The league is already in its 7th season and continues to see robust growth in viewership.
Among the features of the MPL model is a salary cap for players which provides an even playing ground for participating teams. This also helps keep the operational costs (and egos!) in check. The revenue-sharing model allows teams to get more than 50% of the league revenue pool before deductions and all marketing costs are borne by Moonton.
The league ensures financial security for players with a minimum salary in place and a minimum contract length available to all players. There are additional commercialization opportunities that help form revenue streams which include advertising, merchandising and other promotions.
Flashpoint CS:GO and ESL Pro League for CS:GO are also similar with teams partnering with the league to compete in the events. The ESL Pro League just completed its 14th Season and Flashpoint has seen three successful events so far.
Pros and Cons of Franchising in Esports
As of last year, some of the biggest esports titles have transformed many of their biggest competitions into franchise tournaments. All regional League of Legends leagues have a fixed list of competing teams while CS:GO’s ESL Pro League is also heading in the same direction with its semi-franchise tournament format. Some teams in the ESL Pro League are stakeholders in the events, and in exchange, they get protection from relegation. But is franchising the way to go for the esports industry?
Players: One of the biggest problems of traditional esports formats is that a majority of the players do not have financial stability. Through advertising, media rights, and other business deals, franchised teams have a steady flow of revenue generation. This leads to increased player salaries, bonuses and other benefits
However, a downside to franchising is that teams can be tempted to sign the most popular players instead of the best ones. With revenue generation opportunities being lucrative through merchandising and advertising, teams might be inclined to acquire players with the highest brand value instead of the best competitive players. If revenue generation systems are poorly crafted, it could lead to poor team selection and a focus on brand value over talent.
Overwatch League saw the signing of IDDQD and Dafran as players because of their brand value, even though both players retired from competitive esports. Chipsa was signed despite being known as a content creator and did not have professional experience comparable to other players in the league. In addition to player skill, their brand value becomes a deciding factor whether a player is picked up or not.
Locks Out Smaller Teams – The biggest problem of franchising is that smaller organizations do not get to compete because of the high buy-in costs. With limited teams added per year to leagues and team size limitations in place, it has become increasingly difficult for new players to get noticed. This has been remedied partially through academy teams being set up by franchises.
Academy teams can help established franchises sign new players, but the model does not offer the same amount of competition as open-ended tournaments. In open-formats, such as Dota 2’s Pro Circuit, a team without any major organizations can compete and take home all the glory.
Opinion: Is Franchising Necessary in Esports?
Having fleshed out franchise leagues that are built on the backbone of media rights, sponsorships, and even player contributions through mercchandising has become lucrative. Franchise leagues help build storylines, rivalries, and history.
Established esports organizations are also much more likely to invest in franchised leagues because of the steady and reliable revenue streams they offer in addition to structure, stability and the intrinsic value of holding a spot in it. Perhaps, this is the reason why the likes of Halo: Infinite, a title that is not even released yet, has already managed to secure partnerships with the likes of Sentinels, Cloud9, Fnatic, and Team Na’Vi to build the next era of the Halo Championship Series.
While major esports organizations and game publishers are pushing for more franchised leagues worldwide, there is a distinct lack of centralized organizations to oversee the welfare of players. Open tournaments are much more volatile, yet some of esports’ biggest moments were created with underdog teams beating the best of the best. Who can forget OG’s Cinderella Dota 2 run at The International 8 where they won over $10 Million by starting from the Open Qualifiers.
There is no silver bullet that is going to fit every single esports title or organization, but franchising when it fits like a hand to a glove is certainly proving to be one of the models that can make esports leagues run sustainably.
