E-Sports Ownership: Home Field Advantage?
Earlier this week, German football club Schalke 04 purchased the European League Championship Series (LCS) spot from the former Team Elements. Ownership changes and slot sales is a relatively common happening in both the NA and EU LCS over the past few years, but this one felt especially noticeable. It isn’t Team Immortals buying Team 8’s NA LCS spot and putting together a win-now roster; it’s not a purchase that comes out of tumultuous ownership, like the well-established eSports organization EnVyUs stepping into the NA LCS after Renegades were forced to sell their spot by Riot Games. Schalke 04 stepping into the EU LCS feels different, because it represents an ownership group who has over a century of experience on how to profit off of sports, and they are signaling that such an opportunity is viable in eSports.
Make no mistake: Schalke is incredibly successful at generating profit off of their teams. Forbes, which maintains a list of football club valuations, lists Schalke as the 14th most valuable club in the world, at a value of $655m USD, with an annual revenue of $264m. They already have a wide variety of teams under their umbrella; while their Bundesliga team may be the focal point, the Schalke uniform can be seen in women’s football, basketball, handball, track and field, and even table tennis. So it is not entirely surprising that they would be an early institutional adopter of eSports.
What is surprising, and what may be a harbinger of change, is what the organization has repeated in their official releases. With the EU LCS already playing their regular season games in Riot’s studio in Berlin, Schalke has suggested that their team should be able to play some of their regular season games at Veltins-Stadium, FC Schalke’s arena. This highlights the huge divide between eSports ownership and ownership of a traditional team. In traditional team sports ownership, there is an inherent tie between the team and a certain geography. Being able to host your team at your own stadium is one of the most substantial generators of revenue for sports owners. The New York Yankees, who are consistently in the top 5 most valuable sports franchises in the world, and currently have a valuation of $3.2b, generated $259m from gate receipts alone in 2015. Add in to that vendor contracts and sales in the venue, additional sponsorship and advertising opportunities in the venue, and the ability to foster a truly local following, and you have a revenue stream currently untouched by eSports owners.
Even if having home games makes financial sense for the owners, there are numerous feasibility concerns. If we look solely at Riot’s LCS, there are many issues of control that would have to be changed. Riot has done largely a great job being both the developer of the game, and simultaneously running a sports league. During the growth stage of the industry, having a single steady hand is necessary, so it makes sense for Riot to keep everything in house. The question becomes, is the current status quo a permanent solution, or are Riot willing to cede certain control elements in order to take the two LCSs to the next level?
One fact that points towards different locations being feasible is the upcoming format change to the LCS. Announced in December of last year, the summer split will look very different in both EU and NA, with simultaneous matches becoming the new normal. Because of this change, we already have a situation where there will be LCS matches happening in different “venues”, albeit both occurring in studios owned by Riot. But that may very well be the first step towards allowing more changes in the future. With the new schedule, every LCS team will only play one series per week, with EU teams playing best-of-twos, and NA teams playing best-of-threes. Under this scenario, it isn’t far-fetched to think that Riot may allow Schalke’s “home” best-of-two’s to be broadcast from Schalke, or an NA team who wishes to establish a regional presence owning or renting a broadcast space for their home matches. While NA teams have largely settled around Riot’s studios due to the LCS matches, such a move towards regionality may see teams preferring to relocate and develop more direct ties to their fanbase. Back in Season 3, Team Curse was based in Las Vegas and would fly to Riot Studios to play their matches; it’s possible that the chance to ticket their own matches in a venue on the Las Vegas strip would be reason enough to move back.
This is likely a question that Riot will have to answer sooner rather than later, as it is no doubt on the minds of current and potential owners. It would mark a huge step towards eSports ownership being a revenue generator in the vein of traditional sports, with ticket sales and in-person merchandise sales adding bursts of revenue to a stream currently largely based on sponsorships, Riot funds, and internet ad revenue. It’s an exciting time for League of Legends, and Schalke 04 may be the first domino to fall in moving us towards a better fan experience.
