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NA LCS Franchising Compared to the NBA

By Sharon Coone
Jul 11th, 2017
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NA LCS Franchising Compared to the NBA

Jul 11th, 2017
FREE $20 RP Get a chance to win every week on the Blitz app

The North American LCS will be franchising in 2018. That means no more relegation, and a lot of structural changes to the league system. Let’s break down some of those changes in comparison to another major franchise system: the NBA

How Teams Join

Franchise systems turn team owners into permanent partners, meaning the same teams play every season. And because nobody leaves the league, it’s harder to join.

In the LCS, Riot will be choosing ten franchise teams through a strict application process. Organizations will send proposals on how they’ll handle their business, fr om branding to salaries to general management. After that, Riot will do some snooping into their credit and financial histories. And then this November, Riot will announce the franchise teams.

In the NBA, the current team owners can vote to add a new expansion team, but this happens very rarely. More teams in the league means more competition for talent and revenue. The last team to join was the Charlotte Bobcats back in 2004.

Cost of the spots

For teams already in the LCS, it’ll cost 10 million dollars to join the franchised league. New teams will have to pay Riot an extra 3 million on top of that. The cost is meant to bring in serious investors, but also to raise capital for the league.

When the Charlotte Bobcats (now called the Charlotte Hornets) joined the NBA, they paid a 300 million dollar fee. That money is split among the existing team owners, to make up for the downsides to expansion.

With NBA teams growing in value, the joining fee would probably be way higher today. The last NBA team to be purchased, The Hawks, went for $850 million. And for more popular teams, well, The Clippers back in 2014 were sold for 2 billion dollars.

How Teams Make Money

Franchises use revenue sharing to keep mega-popular teams from dominating and to help smaller teams stay competitive.

The LCS will use revenue sharing to split money between Riot, the teams, and players. Both Riot and teams will contribute some money to a revenue pool from media rights, sponsors, merch sales, and team-branded digital goods. 32.5% of the total league revenue will be allocated to teams -- half of that amount is split evenly to each team, and the other half will be used to reward teams who place higher, have more fans, and bring in the most viewers.

The NBA teams also contribute a chunk of their revenue to a shared pool. There’s no third party like Riot, so the 30 teams split around 50% of shared league revenue evenly across themselves.

How Players Make Money

NA LCS players will have a minimum salary of $75k, and players as a whole must receive 35% of the league revenue. So when all the combined player salaries make up less than 35% of total league revenue, they’ll receive the difference directly. If they make more than 35% of LCS revenue, they get to keep the extra.

Instead of minimum salaries, the NBA has salary caps that keep teams from paying huge prices on players, more evenly distributing talent and salaries. Each team has a cap for how much they can be spending on all of their players combined, and each player’s individual salary is capped based on their years of experience.

Similar to the LCS, though, combined player salaries also have to meet a certain percentage of league revenues. In this case, the players get around 50%, and if they don’t, team owners have to pay up the difference.

Rules and Representation

So who’s in charge of all this? Riot makes final decisions on LCS franchise rules, game rules, and more, but is planning on tri-party negotiations between them, teams, and players. Later this year, Riot is launching the Players Association, a group of representatives, elected by players, that will serve as their voice in league decisions.

Over in basketball, the NBA Board of Governors (made up of team owners and their representatives) make decisions on things like game rules, tournament formats, and expansion. The NBA also has a Players Association, a labor union that negotiates a Collective Bargaining Agreement with the team owners. This contract lasts for years, and it sets the rules for salary caps, trade rules, and more.

The NA LCS franchise is sure to evolve over the years. Like other sports, it’s probably going to see changes to the revenue sharing model, a system for adding teams, and stronger decision-making power for the Players Association.

And, of course, we’ll probably see lots of money. Last season, the NBA teams made around $5.9 billion in revenue. As the LCS franchise takes off, streaming-service BAMtech will be paying Riot $300 million for streaming rights over the next six years. That $50 million a year, along with bigger sponsorships and other media deals, will be a big start to the League of Legends franchise here in NA.

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