H2K Gaming is seeking structural and monetary changes to the European League Championship Series or it may withdraw from the league, the team told ESPN.
H2K expressed concerns about the lack of information provided around the future of the ELCS by league organizer and game developer Riot Games. It believes the lack of transparency has impacted interest from outside investors and current players who have considered participating in the European league compared to its North American counterpart.
"The biggest change for us, since we're operating in Europe, is the degrading of Europe in terms of both reality and public reality," H2K Gaming co-chairman and co-owner Richard Lippe told ESPN. "During 2017, all of the hype surrounding franchising in North America and the unwillingness for Riot's [European branch] to talk about any plans regarding Europe has created an uncertain environment in the European League Championship Series."
In June, Riot Games announced that the North American League Championship Series model would move to a franchise model with no relegation in 2018. The terms for that league include a $10-13 million buy-in with the promise of revenue sharing options at 32.5 percent for teams and 35 percent for players.
Revenue sharing terms for Europe have not been clearly communicated to the European teams, H2K said. The team said it expected revenue sharing from the $300 million broadcasting deal that Riot Games made with BAMTech in December. H2K claim that Riot has not thoroughly discussed how it plans to subsidize teams in Europe, making several organizations, including H2K, continue operating at a loss. When asked for comment, Riot Games did not respond.
"From our point of view, the economics of League of Legends is upside down and backward," Lippe said. "We will have lost $2.5 million at the end of this year in operations of League of Legends and we've created a significant brand -- at least we believe that -- and we are deriving sponsorship revenues, but nevertheless, we will have invested and lost $2.5 million on an operational basis."
H2K believes the terms and higher salaries of the North American league will attract top European players to move to that region. Participating North American League Championship Series partners will have academy teams, allowing new jobs for two teams and opportunity for new players to join the region.
"You're going to have a strong region, with significant money, draining talent from Europe," Lippe predicted. "You're going to have a situation in which Europe is going to be in a secondary position. It doesn't have to be that way, there's nothing that says that Riot can't create the equivalent for Europe without franchising. Riot could choose to give long-term licenses to the teams in Europe. Riot could provide significant financial support to the teams in Europe. Riot could eliminate relegation, which we expect to occur."
The North American franchising announcement generated massive interest from investors outside of esports, including multimillion- and billion-dollar families, sports owners and more, sources told ESPN. The league has received more than 100 applicants for the league, according to a report from theScore Esports.
In addition, four of the European League Championship Series teams -- G2 Esports, Fnatic, Splyce and Misfits -- applied for the North American league in July, sources said, as a result of unhappiness and uncertainty around the future of their own region.
The European League Championship Series has seen a decline in viewership since the enactment of format and stream changes beginning in December 2015. Riot Games changed the format for both leagues, North America and Europe, and later split the livestreams for both regions to have individual channels, rather than living on the Riot Games channel. The result saw a decline in viewership, according to analysis by theScore Esports.
The monetary worth of a European League Championship Series slot has declined in comparison to its North American counterparts as well. In December, Milwaukee Bucks co-owner Wesley Edens purchased Cloud9 Challenger's North American League Championship Series spot for a reported $1.8 million. Inversely, Mysterious Monkeys and Ninjas in Pyjamas purchased the slots of Fnatic Academy and Misfits Academy in May for the range of $400,000 to $500,000, sources said.
"It's the uncertainty of putting money into a team that for one split with the risk of relegation," H2K CEO Susan Tully told ESPN. "You look at Mysterious Monkeys and Ninjas in Pyjamas and they were relegated, and look at what's going on. From an evaluation situation, we sit here with the other teams in the European league with a lot of uncertainty about how to go about valuing your slot when people don't know what the future of Europe is."
Disney, the parent company of ESPN, is a majority shareholder in BAMTech.