H2K esports released a letter late last week slamming the set-up of the European LCS and Riot for the substantial losses they’re incurring.
The organisation outlines first and foremost that it’s an organisation based in the United States, but has been committed to the European region as a result of competing in League of Legends. The letter goes on to commend Riot for the organised structure of the League of Legends esports format, which sees the European League of Legends Championship Series sitting atop the European division format, with the European Challenger Series a division below.
Furthermore, the structure of the two divisions gives opportunities for grassroot organisations to progress through to the upper echelons of League of Legends play through the Challenger Series qualifiers, whereby spots are earned by consistent performance in domestic grassroots leagues.
The H2K letter reveals that the organisation incur over €1,000,000 (£920,000) in losses a year to operate a team in the EU LCS, whilst Riot rakes in substantial profit across the board. The letter reads “from a business perspective we consider it irrational to continue in a partner where our partner earns very substantial annual profits while, by contrast, we incur annual losses of over €1,000,000”. It goes on to lament the agreement between Riot and teams, stating “the financial agreement between Riot and the teams is unfortunately backward and upside down. The fact is that most League of Legends teams lose money”.
Later it goes on to state “As our partner, RIOT should provide financial stability for the teams. The teams in the EU LCS should not be expected to continue to subsidize a multi-billion dollar company. Accordingly, H2K ownership has made the decision that we will no longer financially subsidize RIOT and will not continue in the EU LCS beyond the 2017 season UNLESS RIOT creates a new financial and operating structure. RIOT must provide the EU LCS teams with the realistic opportunity to earn through subsidies and revenue sharing, minimum compensation of at least €850,000 per year”.
Effectively, the letter is a major gripe at the way the European LCS and CS work in comparison to the new North American LCS franchise system in the works from Riot. The revenue share agreement amongst others has caused even European esports organisations to apply for a North American slot under the franchising rules. Whilst there’s currently no news of Europe heading the same way, Riot has said that it’s looking to assess the European system and make changes.
Esports Insider says: It’s clear that from a business perspective it’s just not feasible for H2K anymore. They’ve been around the EU LCS for quite some time so it would be a shame to see them go. As we mentioned, Riot has suggested changes are coming; but will they be enough?