Riot releases details on NA LCS franchising with $10M flat-fee buy-in

In 2018, Riot Games intends to move the NA LCS into a franchising model. Provided by Riot Games

Riot Games, developer and publisher of League of Legends, has revealed details regarding its new franchising model for the North American League of Legends Championship Series (NA LCS). This includes an application process for teams, revenue sharing, a players' association and a retooling of the Challenger scene into the Academy League.

Bloomberg reports that franchises will cost a flat $10 million for existing NA LCS organizations, with newcomers required to pay an extra $3 million to compensate teams not selected to the group of 10 for the 2018 season. Franchises will have the option to pay this fee over time, with the potential for some of the cost to be waived based on the league hitting financial goals over the next few years.

The European LCS does not plan to move to a franchise model "at this point," Riot announced. The announcement cited a "uniquely diverse region" as a reason for the decision and mentioned that more information on the future of the EU LCS would come later this year.

To become a franchise team in the NA LCS, organizations will need to work through three steps outlined in Riot's news release. First, teams that want to franchise in the league will need to apply to do so. Riot will work with "expert third parties" to scope out details about teams and organizations. Second, Riot will review the teams and their proposals, which will include an "in-person presentation and Q&A, as well as some deeper dives into finances, credit checks, and background checks for the owners." Riot's criteria include having a "stable, professional, well-funded and committed" organization. Lastly, teams will be selected and announced in the fourth quarter of 2017 for the 2018 season.

Teams will no longer have to worry about relegation. Currently, the LCS works on a relegation system in which the bottom two teams at the end of the spring and summer split must fight for their spot via a promotion tournament, fending off up-and-coming teams from the Challenger Series. With the abolishment of the Challenger Series, the 10 teams that are franchised will be able to field an Academy League team, which Riot hopes will meet a variety of needs to pro teams, such as housing deeper rosters to encourage faster development of younger players.

"Removing the uncertainty around relegation will enable teams to be able to better plan for their future, and to make long term bets and investments in the league," Riot said in its release.

Removing relegation, however, might disincentivize teams from performing at peak levels knowing they can't be dropped to Challenger. To mitigate this, Riot will give financial incentives for good performance and will disqualify teams that finish ninth or 10th five times over an eight-split span (four years).

Revenue sharing is another major part of the evolution of the league. Last year, Riot started making moves with the media deals and digital goods surrounding teams, and it is looking to build on that by requiring teams to "share a portion of their league-driven revenues as well (including things like sponsorships and merch sales)."

"This aligns the interests of all parties (while still granting considerable opportunity for motivated owners and superstar players to earn outsized revenues), creating a strong and competitive ecosystem," the release states.

Additionally, Bloomberg reports that teams may use revenue sharing to pay for franchise fees to help offset some of the $10 million cost of securing a spot in the league.

Lastly, Riot will be creating the NA LCS Players' Association, giving "pros a seat at the table in league decisions," as well as access to resources such as lawyers, financial advisers and agents.

Although Riot will initially fund the association, it hopes that one day players will take over financial responsibilities and make it a fully independent players' union.