Riot's changes nudge League toward a more traditional model

There are turning points for every professional sports league. Sometimes it's the merger of two leagues such as the NFL and AFL in 1966, or the NBA and ABA 10 years later. Sometimes it's the impact of a player. When Wayne Gretzky was traded to the Los Angeles Kings in 1988, the NHL didn't have another team in the United States west of Minneapolis or south of Philadelphia. When Magic Johnson and Larry Bird entered the NBA in 1979, the NBA Finals, which would become their annual stage, was still televised on tape delay.

On Thursday, esports, and more specifically League of Legends, might have ushered in a turning point for an emerging league looking for the same credibility and stability as traditional sports.

Riot Games, which is the developer and publisher of League of Legends, announced a series of initiatives aimed at growing the game and moving it closer to a traditional sports model. While the jury is still out whether players and team owners take to the new model, Riot hopes these moves will inject more revenue into the entire ecosystem.

"To help us get there," the organization said in a news release, "we'll share [League of Legends] esports revenue streams and collaborate with our partners to develop new business models and actively shape the league. We want these partners to have permanent stakes, to be invested in a stable future and profit from the continued success of the sport."

The announcement came after a series of high-profile events - from two North American League of Legends Championship Series (NA LCS) teams, Renegades and Team Impulse, being kicked out of the league to a public dispute between Riot co-founder Marc Merrill and Team Solomid owner Andy Dinh - called into question the structure and practices of the company.

There are obviously many differences between esports and traditional sports, but talk to the owners of the 10 teams competing in the NA LCS and they'll tell you it starts at the top. Unlike traditional sports where individual teams make up the ownership group of leagues like the NFL and the NBA, owners of LCS teams in the leagues in North America, Europe, South Korea, China, Taiwan, and many more, have no ownership stake in the league.

Riot Games owns the game and there is currently no significant sharing of revenue streams as there is in other professional sports league where member clubs profit from broadcast rights, league merchandise and sponsorship sales. Teams make most of their money off of their own individual sponsorship deals and streaming revenue. And even those deals are hard to come by for many teams since the NA LCS forces the bottom three teams in a 10-team league to play in a relegation tournament, where two teams could not only be sent down to the Challenger Series but be forced to fold with the loss of revenue following such a move. It's a chance many sponsors don't want to take and serves as the biggest reason why sponsorship and player deals are largely year-to-year arrangements instead of long-term contracts.

It's an outdated model that has come under heavy criticism lately from team owners looking to grow along with the sport before being forced out due to shrinking revenues, increasing player salaries and the instability caused by a relegation system that's common abroad but foreign to North American professional sports leagues.

"We've had the privilege of talking to a number of different sports leagues across a variety of topics and one of the things that we learned is there is there is no singular path or singular outcome that works for everybody," Whalen Rozelle, co-director of esports at Riot Games, told ESPN. "What we were inspired by was the idea of a collective group that has shared interest in achieving victory together. We believe League of Legends as a sport can get to that point."

When Riot Games kicked out Renegades and Team Impulse, as well as Team Dragon Knights of the Challenger Series in May, telling owners they had 10 days to sell the team, many within the community were outraged by the drastic action that came without much in the way of publicly divulged proof of wrongdoing. The swift rulings without the opportunity for an appeals process also gave many prospective investors pause. After having their teams receive investments from athletes such as Shaquille O'Neal, Alex Rodriguez, Jimmy Rollins and Rick Fox as well as inquiries from teams such as the Miami Dolphins, the death penalties served as a black eye for a company in need of makeover.

"We learned there's a desire within the community for more transparency," Jarred Kennedy, director of esports and merchandise at Riot Games, told ESPN. "There's a concern with who's keeping Riot accountable. We acknowledge the need to build mechanisms so there can be more shared governance of what we do together. We think there are some things we can do with third-party arbitration in cases that are death-penalty situations. We want to reinforce the comfort level of the community that we're doing things in the best interest of the sports and the fans and the players."

Five years ago, Brandon Beck, co-founder of Riot Games, envisioned a future where events and production value matched that of traditional sports, and where major tournaments would be held at sold-out arenas in front of thousands of screaming fans. It seemed like a pipe dream at the time, but the truth was he didn't need five years. When the League of Legends Season 3 World Championship was held at Staples Center in Los Angeles in 2013, it sold out within an hour and had 32 million unique viewers online. That figure is higher than the number of people who tuned in to watch the BCS National Championship Game or Game 7 of the NBA Finals that year.

This year's world championships will once again be held at Staples Center next month, and after again selling out in a matter of minutes it became the most searched for event on StubHub, surpassing NFL and college football games.

Beck also envisioned a future where there would be rivalries among storied teams with strong fan bases and legendary players known for long careers with a team, just like in traditional sports. While we've seen that in some cases, the current economic model has made it impossible for teams to think past one year as they try to not get regulated or worse, fold. The majority of contracts in the NA LCS are year-to-year, as is the shelf life for some of the lower-tier teams. That's something that Riot Games plans to address following Thursday's announcement.

"The idea of a long-term partnership is a major step," Rozelle said. "That allows teams to think on a longer time frame, and as we build the future that will be highly unlikely without the teams thinking on the same time frame that we're thinking. You make different decisions when you're thinking in the short term and the long term. And the increased economic activity in the scene will ensure both security long term and give teams the confidence to sign players to longer term contracts."

Esports and League of Legends specifically isn't where it wants to be yet. Where that is exactly is even a mystery to Riot Games executives still amazed at how far they've come with a game they introduced to the public only seven years ago and now has over 100 million monthly players. The idea of selling out arenas and being watched by more people than the NBA Finals or Final Four was too far-fetched to even be a dream five years ago. But they know to get the next level they're going to need some help now.

"Our goal is to make this as professional an enterprise as any other major sports leagues," Kennedy said. "We know there are gaps and how we close those gaps is by working with the teams and players. We can't do that alone."