Yahoo Movies Is Riot spending less on professional League of Legends?
‘If revenue does not pick up enough, our budget will need to decrease by some amount.’
Three days ago, League of Legends owner Riot confirmed that it wouldn't be sending English commentators to the early stages of Worlds in South Korea. Instead, casters will be covering the games from Los Angeles, likely inside the NA LCS (North American League of Legends Championship Series) studio. Riot's official NA and EU interviewers, Ovilee May and Eefje "Sjokz" Depoortere, will be in attendance. But unlike previous years, US commentators won't be casting from inside South Korea until the finals.
The move has worried some fans.
Riot has struggled to secure a venue for the finals of Worlds this year. It's also condensed the competition's group stages into eight days, rather than the usual two weeks. A few months back, Riot held some of the group stages for MSI, a mid-season tournament between some of the world's best teams, inside the EU LCS Studio in Berlin, rather than a prestigious independent venue. Many, including longtime League interviewer Travis Gafford, felt the studio was too small, and lacked the spectacle that the competition deserved.
"It doesn't feel like an international event," he said during a travel vlog.
Viewers, unsurprisingly, started to wonder if Riot was cutting costs, possibly in response to the game's perceived drop-off in popularity.
The company responded on Reddit two days ago. Derrick "FearGorm" Asiedu, Head of Global Events for Riot Games, said the team had spent over $100 million annually for the last few years. It hasn't reduced its esports budget, but was experimenting with ways to cut costs throughout the season. That's because Riot wants to operate less like a startup, simply burning money to increase viewership, and more like a company that can run a profitable business. "Instead of just making esports happen and be awesome," he explained, "we also want to focus on making this a financially sustainable endeavor that can last decades or more."
"We want to to invest even more than what we do now in the future, but only if it makes sense for the business."
Riot hopes to increase revenue to offset its own investment. If that doesn't happen, though, the company will need to reduce its esports budget "by some amount," Asiedu said. "To be clear, the goal isn't to decrease our investment in esports: we want to to invest even more than what we do now in the future, but only if it makes sense for the business (and if revenue continues to increase)."
He acknowledged that fans were angry at Riot's decision to hold some of MSI at the EU LCS studio. "We don't want to do an MSI group stage that small again," he said. The company will use its studios, which are already well-equipped for broadcasting, for less crucial games. It has recognized, however, that higher-level competitions including MSI and Rift Rivals need a larger venue to reflect their importance. "We want to make sure [we're] smart about investing in areas you care about," he added. "Venue size is clearly one of them."
The company will try to increase revenue through sponsorships and "digital experiences," according to Asiedu. Critics are questioning, though, why Riot hasn't maximised these opportunities already. Other than the State Farm-sponsored analyst desk, the NA LCS has little in the way of traditional advertising or sponsorship. The Overwatch League, by comparison, has partnered with Toyota, T-Mobile and even Sour Patch Kids candy in its inaugural season.
Riot's experimental cost-cutting will concern NA LCS team owners that paid $10 million -- and for newcomers 100 Thieves, Clutch Gaming, Golden Guardians and OpTic Gaming, $13 million -- to join the franchising setup. The company is planning a similar franchising model for the EU LCS next year. After handing over so much cash, these organisations will be expecting Riot spend to more, not less, on the venues and broadcast production.
The lack of revenue could be the result of a failed deal with video streaming specialist BAMTech. In December 2016, Riot announced a "first-of-its-kind long-term commercialization partnership" with the company, which started as a Major League Baseball spin-off, that would run until 2023. BAMTech became the exclusive sponsorship and advertising sales agent for Riot, and promised to build a streaming app similar to MLB At-Bat for League. "As an innovator in digital sponsorship and media sales, BAMTech will help us unlock long-lasting and meaningful value for our digital sport as it matures," Riot said in a blog post at the time.
If the game is to survive long-term, Riot needs to keep fans happy and quickly figure out its monetization strategy.
As part of the deal, BAMTech paid Riot roughly $50 million each year. Disney, however, became BAMTech's majority shareholder in September 2017. Eight months later, Riot unveiled an "evolution" of the BAMTech partnership that would bring League to the ESPN+ subscription service. The terms of the new deal are unknown, but many suspect the money and promised investment is lower. There's some evidence to support that theory -- ESPN+ isn't a dedicated League app -- but the specifics around sales and advertising assistance is murky.
Riot still has a successful eSport and, unlike the Overwatch League, can offer plenty of veteran players and long-standing team rivals. Despite its slight decline, League of Legends is hugely popular and should be attractive to advertisers. If the game is to survive long-term, Riot needs to keep fans happy and quickly figure out its monetization strategy. Pushing competitive play into smaller arenas, and with cheaper commentary setups, will only encourage viewers to close their browser tab and watch a different video game on Twitch.
