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Turnaround for Riot?

The new business model Riot Games is bringing to LoL esports

It’s not news to anyone that League of Legneds is one of the most popular competitive multiplayer games in the industry today. But there’s more to it than that.

League of Legends is also one of the leading markets available for eSports betting. That’s why every little change in this sector easily catches the attention of enthusiasts following the game and its competitive sector. The latest introduction of Riot Games’s new business model regarding LoL esports is one of them. But what is it all about, exactly?

Riot Games has published a strategy that will bring change to the state of League. According to John Needham, president of esports at Riot Games, the business model for LoL will now be following the path set by the Valorant Champions Tour, which focuses on another major competitive game from Riot.

The new model was mainly designed to help provide a more predictable stream of revenue and long-term sustainability for LoL esports. This model is planned to be implemented across various pro regions including the LCK, LCS, and LEC, to better reflect the evolving reality of the esports industry. Riot Games is also having discussions with the LPL on how to develop and use its new business approach.

The essence of the new model

The new LoL business model is quite similar to what VCT fans have already seen and experienced. It involves a “financial upside driven by in-game virtual items that reflect the support of LoL esports enthusiasts around the world.” The purpose is to generate enough revenue to cover the costs of Riot Games, its teams, and its stakeholders who have investments in the esports ecosystem, while also ensuring an enduring career for gamers to play professionally. 

In a blog post, Needham also touched on the topic of how much Riot has spent on LoL esports annually since its inception. According to Needham, the amount has reached hundreds of millions of dollars. In addition, he brought forward the current business model of LoL, which requires teams to commit to paying about 10 million to take part in a league while only getting back 50% of certain revenues generated by the league. The biggest part of this revenue block comes from sponsorships and media rights. 

Riot shared the intent behind the new model, which can help to fill the existing gaps through the following solutions.

  • Align incentives between the league and the teams.
  • Give the teams a long-term place in the league so that they can sign multi-year contracts for pro players and more reliable sponsorships. 
  • Bring to the teams a new way to share in the league’s financial success.  

Under the new model, teams in the LEC, LCK, and LCS will now share in revenue from digital content sales and will be paid a fixed stipend. This will significantly shift the revenue-sharing system away from sponsorship sales as the main source of revenue. 

Riot’s new business approach will also bring changes to how LoL esports appropriates and distributes digital revenue through the global revenue pool, or GRP, with its team partners. It offers to allocate the revenue to the teams in three primary ways:

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REYKJAVIK, ICELAND – OCTOBER 27: T1’s Lee “Faker” Sang-hyeok poses at the League of Legends World Championship Semifinals Stage Features Day on October 27, 2021 in Reykjavik, Iceland. (Photo by Colin Young-Wolff/Riot Games)
  • Fandom Shares: It takes 15% shares of the GRP and rewards teams for developing strong fandom for their leagues, team brands and players.
  • Competitive Shares: The Competitive bucket takes 35% of the GRP. These shares are allocated depending on competitive performance and are divided into two main stipends: one based on international event placements and the other based on standings in regional leagues.
  • General Shares: It involves 50% of the GRP and is granted to teams in Tier 1.

With the previous business model, only teams that competed at global events such as the annual World Championship or Mid-Season Invitational tournaments could have a share of the digital content sales that were related to those events. This means that only about 20–30 teams could take part in digital revenue in each season. The GRP will help to stretch the revenue stream to more teams in the LoL ecosystem.

This is a huge change for all teams within LoL esports as it can massively turn the wheels of the industry, which for some have feared to be on the downside. With the new business approach, Riot Games is trying its best to support the esports scene it’s developing.

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