Franchising in esport: It’s not a fit for everyone

The esport juggernaut that is League of Legends kicked off the year 2021 this weekend with the LEC Spring Split. Starting off it’s third year as franchised esport competition, the LEC contributes to LoLs position as the most important esports title in the West. 

In the grand scheme of esport development, franchised esport leagues are a relatively new and young development in still continuously evolving industry. Yet it seems that for many outside and inside the industry they are being hailed as the MVP or future of esports. And it’s appeal for investors and many big brands is clear: Franchised sport leagues are the norm in the USA, and by operating esports more like “regular” sports leagues, it becomes more of an intelligible investment. This move towards franchised leagues within esports is not undisputed though, and many fans see it as the end of esport and gaming as we know it.

Riot games is far from the only publisher that is franchising their esport titles. Other publishers like Blizzard,are specifically designing their games and the competition from the get-go to be a franchise. And even though Valve has been very hands off, as is their style when it comes to this development, third party tournament organizers such as ESL have been moving into a semi-franchise tournament style within CS:GO as well.

The revenue model in esports has changed much from its humble beginning more than 20 years ago, where teams were self-organized groups that paid a fee to enter a tournament, and maybe win some prize money. Of course, prize money still plays a big role in the mythology, and in the pride of esport culture, with the Internationals prize pool reaching new incredible heights year after year.

But for the revenue model of teams and organizations, prize money plays very little to no role. Professional esport teams today make, by some estimates, up to 80% of their revenue from sponsorships and advertising, the rest being split on broadcasting rights, ticket sales, merch, and the new kid on the block: fundraising.

People and organizations that are in favour of franchising, point out that it not only helps with steady and reliable revenue streams, but franchising has also added to investment, and added to the professionalisation of organizations in terms of business structure, stability and value. 

If teams can bring up the money to buy into such a league - and the buy-in usually is substantial - the advantage for the team is clear: Guaranteed exposure and attention for the team, no matter their actual performance. There is no risk for the team to fade into obscurity and financial ruin after one badly played season.

This continuity and guaranteed exposure is obviously a big selling point for sponsorships and investors that are interested in the longevity of their investments. It is  helping organizations to get the necessary leverage in negotiations to pull ahead and build lasting, profitable relationships.

But franchising is not the only way to go for teams and games in esports. Companies like Epic games for example, have focussed more on individual players than teams in their competition, making a move towards a franchise model very unlikely. Other esports just do not have the necessary fanbase to support franchising, and many organizations neither have the desire nor the necessary financial resources to join a franchised league.

This is not necessarily a bad thing for organizations. Nor is the lack of franchised league a sign of a bad investment for advertisers and sponsors.

The size of the esport does not matter per se, if the teams and organizations know how to define their value accurately. I have seen organizations with talent and teams in very niche-games, achieving fantastic ROIs for their sponsors again and again.

Being datasavy, and understanding the - often - very dedicated, very engaged and very specific audience, allows targeting in a way that is simply impossible with bigger franchised leagues. 

It is paramount for esports organizations and teams to communicate with brands on a level that brands understand and to report the relevant KPIs, in order to sell themselves the best way possible. Understanding the audiences that are engaged with their content, and the potential value that creates for brands is the most important step in that.

Focussing on their individual talent and their reach and personality, rather than the pure competitive performance is another way for teams to show that they are a solid investment, independent from their current performance in the tournament circuit.

Both franchised leagues and not franchised leagues have their advantages, and proponents.

Franchised leagues give stability, continuity and constant exposure to teams and sponsors, that open circuit tournaments cannot, by design and intend. Both options are good, from a sponsorship standpoint, if the investment is done correctly.

I am under the impression that the defining factor on which form you prefer, comes down to which side of the atlantic you are on. 

Franchised sports leagues are the norm in the USA, with all their major regular sports being franchised sports leagues, like the NBA and NFL. Therefore most US based economic magazines, like Forbes, and US based investors and teams are generally more welcoming to this development. 

While in Europe our major sports leagues are more open circuit, with Football and Handball leagues having relegation systems, allowing for -in theory- even the smallest clubs to rise into the highest leagues, while incumbent top teams can lose it all, with one or two bad seasons. The theoretical insecurity and excitement that comes with this is part of sports culture. While in reality, dominating teams have been in their position for decades, and will probably be still at the top for decades to come.

 I don’t believe that esport needs a one size fits all solution. What it needs is a continuous professionalisation in business structures, reporting and understanding of their audience and relevant KPIs, irrespective of whether the league is franchised or not.