Last week's article by John Needham, president of Riot Games' esports business, titled "Adjustments to the League of Legends Esports Strategy," set the tone for the future of League of Legends. In the future, the independent investment attraction value that e-sports events have been emphasizing may be diluted.
In short, in the future, Riot Games will adopt Valorant esports VCT for League of Legends' LCK in Korea, LEC in Europe, and LCS in North America. Namely:
- All clubs will receive a fixed stipend, as well as a revenue share from the sale of in-game esports assets for League of Legends esports events.
- Riot Games has established a share-of-share global revenue pool (GRP) for this new co-op model. Among them, 50% of the GRP will be allocated to the first-level team, which can be understood as a basic share, 35% will be distributed in proportion to the league ranking and world performance of each team, and the remaining 15% will be distributed according to the influence and popularity of each club's contribution to players, competitions and their own brands.
- In addition to this, League of Legends Esports will also open more sponsorship categories, while allowing clubs to pay seat fees in installments and open third-party events.
John Needham did not disclose the size of this global revenue pool. However, he said that in order to expand the GRP base, Riot Games will add League of Legends esports game assets released in a single season.
In a way, this article is both a reply to the recent LCS strikes and LCK protests, as well as a consensus between Riot and the major leagues.
The capital market for e-sports events is cold. The original sponsorship-based business model of esports events can no longer provide the stability it deserves for events, clubs, and sponsors as before.
The first adjustment Riot Games made in response to this was to open up more sponsored categories.
图源：Riot Games
According to James Fudge's recent report, League of Legends esports is considering allowing clubs to accept beer, spirits, cannabidiol products (CBD), and government-sponsored categories in certain regions.
In the article "Adjustments to League of Legends Esports Strategy", John Needham also made it clear that more sponsorship categories will be opened in the future.
While there has been no official confirmation of James Fudge's news and the new sponsorship category as of now, open-source funding from the sponsorship category is already a sure thing for Riot Games.
It's also worth noting that the League of Legends project has been tightly controlled by copyright owners since 2013, but this phenomenon has begun to loosen up recently.
One proof of this, also from James Fudge's report, shows that League of Legends will be competing in the Saudi Arabian Esports World Cup — a decade of caution Riot Games has shown for itself to be about third-party events. Now, Riot Games has begun to allow some capital and third parties to build their influence through League of Legends.
The cooperation between Saudi NOEM City and League of Legends LEC has gone bankrupt Source: NEOM official website
In the article, John Needham also mentioned that League of Legends will adjust its policies and schedules in the future to give teams and players more opportunities to participate in other third-party events, which is what players have always wanted. The opening of third-party events can also help clubs alleviate a certain degree of revenue problems.
Of course, from John Needham's perspective, neither the opening of new sponsorship categories, third-party events, nor the flexible economics of allowing seat fee installments will be enough to ensure the long-term growth of League of Legends esports. The most important takeaway from this article is that Riot Games will soon be opening up an in-game revenue share of esports digital assets for esports clubs, known as the GRP Global Revenue Pool.
Sharing gaming revenue with clubs could mean one thing: in the future, the "investment value" of esports that completely overlaps with traditional sports will be diluted – even in League of Legends esports, which has proven itself to be the best in global esports over the past decade or so. Digital products related to the theme of esports are actually similar in nature to digital derivatives in traditional sports. It not only promotes and changes the consumption pattern and product form of sports, but also derives additional value from the IP of the event itself, and explores new development models.
Last year, Riot Games' Riot Games Forged the Future of Sports: Commercialization made it clear that "esports isn't as effective at attracting new players as it seems." According to the original context, John Needham's vision of the future relationship between esports and games should be "to use e-sports events as a catalyst to deepen the experience of game users with game-themed cultural and creative products such as 'Two Cities'." The emphasis is on mining the value of existing users, improving the user experience, not seeking to be big (Don't go broad), only seeking to be deep (Go Deep).
The League of Legends World Championship has been co-branded with LV Source: Riot Games
Esports events can be seen as large-scale marketing campaigns held by game manufacturers. The essence is to attract new users to the game itself and provide gamers with additional content supplemental services. Then, when an e-sports event gradually loses its function of attracting new users, and its independent investment attraction value is also diluted, the greater significance of the existence of e-sports events may return to serving the game itself and serving gamers.
In our opinion, "sharing League of Legends esports digital revenue" is not a foolproof solution - at least in the implementation process, there are too many details to consider and perfect.
The first thing to note is that you are sharing the "League of Legends Esports Digital Revenue" and not the "League of Legends Digital Revenue". To put it simply, Riot's GRP pool allocated to clubs is made up of revenue from "esports-themed skins and items" and does not include other in-game value-added services.
This leads to a problem: the premise of being able to distribute the revenue to the club is still that players "pay for the esports content". In fact, there is not much difference from "players buy offline event ticket packages and receive in-game items".
This does provide additional content for gamers who have already purchased in-game esports-related digital items. But there is a question mark over whether this strategy will allow gamers who are content with the usual digital content in the game, or who have no spending habits, to start "paying for esports". If the launch of new esports-themed digital content doesn't significantly attract more in-game spend, then this isn't significant in the long run.
This seems to be stuck in a cycle, and the key to unlocking that cycle may lie in Riot Games' ability to develop League of Legends in-game esports digital products.
In the article, John Needham mentions that there will be "an increase in the content of League of Legends esports game assets released in a single season". And even if the development of in-game digital products is theoretically limitless, that doesn't mean it doesn't come at a cost – just adding less engaging digital content doesn't increase the area under the consumer's budget curve, it just increases the cost of choice.
For example, the same skin can be directly tagged as esports and added to the GRP sharing pool, which is obviously not a simple and crude approach to achieve the effect of Riot Games' preset. What makes players "pay for esports" is more often the quality of the digital product itself, and of course it is not limited to the category of hero skins.
Our view is that for an in-game digital product, the emotional sustenance of players for the team and players should be its plus, and the quality of the product itself is the determining factor for most of its value. IG's champion skin is on sale, in addition to the feelings and the commemorative significance of the first crown of LPL, it itself is superior in terms of original painting, feel and design.
图源:LoL Sports
It's been many years since IG won the championship, and countless IG and non-IG fans are still chasing this series of skins, and the long-term value brought by content quality lies in this.
John Needham mentions long-term and sustainability many times in the article, so players will want to see Riot be creative in the process. For well-designed digital products, the esports label can add value and inspire purchases, and vice versa, a lack of sincerity — so it's time to put Riot's concept artists and planners to the test.
In addition, we believe that the immediate effect of John Needham's discussion of GRP is the two or three rules of the split rule: 35% of the GRP pool will be distributed proportionally based on each team's league position and World Championship performance, and 15% will be divided according to the impact contribution of each club.
Since the franchise system was implemented around the world, the achievements of League of Legends esports are obvious to all, but some problems have also been exposed: some teams that have won seats only do the bare minimum every year to fool around, because they only enter the league to sell their seats to make a difference, they don't have too many requirements for team performance, and they don't care about their own brands. Such an approach was not so easy to expose in the era when the capital boom had not yet receded, but it is very conspicuous today.
Overall, the GRP rules are very similar to Riot Games' Valorant Pro League. Previously, Feng Xiao, the head of Valorant Esports, told us that Valorant Esports uses a "partnership system", which assesses the club's capital structure, long-term cooperation intentions, and brand marketing capabilities, and the clubs that enter the club will receive a four-year non-tradable entry seat, as well as a series of support subsidies from Riot Games. Valorant 2022 sold $42 million in VCT World Championship skin packs, half of which went to participating teams. It can be regarded as a successful acceptance of results under this model.
This letter from John Needham may reveal some trends, some realities.
First of all, as mentioned above, the era of copyright owners dominating 100% of the resources of the top e-sports projects may be coming to an end, and under the law of e-sports development in the new era, more third-party participation may be the key factor to make the development of an e-sports project more long-lasting.
Second, the value of esports and its relationship to the game itself needs to be rethought. Should the two exist independently, and does esports really need to be clear when it comes to esports and gaming? In fact, John Needham has already given the answer in the article.
In addition, there is a reality that is not mentioned in the article, but it is extremely important: in fact, League of Legends esports is not to eliminate the limitations of a game or an e-sports event, nor is it aimed at a specific competitor, but just a stage that will be experienced if the life cycle of an e-sports IP is long enough and covers a long enough age.
Finally, let's take a longer-term view of the game League of Legends and its international esports program. There's no denying that its history is illustrious, its creativity has influenced the international esports landscape, and its existence today is still great in its own right.
And the reason why it seems a little embarrassed at this stage is because it has reached the age when it needs to be transformed.
Of course, the transformation does not mean that League of Legends esports is denying all its past and achievements, but -
Maybe it's time for a different way of living.