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NA LCS is franchising. Here’s what that means

Revenue sharing, permanent partners and more.

Riot Games

Riot Games revealed its plans to franchise the North American League of Legends Championship Series Wednesday, following up on an initial announcement of intended franchising in 2016. Now we know more about the process and timeline: franchising is scheduled to be completed by the start of the 2018 season.

All NA LCS teams will be permanent partners of the league, which means the elimination of the promotion and relegation system. Riot will be reviewing applications from “committed, professional ownership groups” when choosing their permanent partners, and say they will be prioritizing organizations who support their players (including offering career and education opportunities after their playing careers).

Riot will be partnering with “expert third parties” to evaluate applications from prospective permanent partners, which would likely include current NA LCS organizations as well as new investment groups. After making sure financials are in order (a spot in the league will cost $10 million, with half paid up front), Riot will choose organizations that are “stable, professional, well-funded and committed to creating a rewarding environment for the pro players that work for them.” The partner teams are expected to be announced towards the end of 2017.

As for the loss of promotion and relegation, it’s no secret the threat of losing their LCS spot has hampered many teams’ ability to secure long-term sponsorships. Without long-term sponsorships, teams tend to prioritize short-term gains when building rosters. Riot hopes this change will help teams develop long-term talent and sustain financial growth.

Another way Riot hopes to improve talent development is a reboot of the Challenger Series. Instead of a league where smaller organizations compete for a spot in the LCS against academy teams, the Challenger Series will transform into a pure academy league. Teams will be able to develop prospects in this league, which will include more teams (one for each LCS team) and more games than the previous Challenger Series.

To combat potential motivational concerns with the elimination of promotion and relegation, Riot will also be implementing financial incentives depending on league standing. Consistently poor-performing teams will also be punished: if a team finishes in the bottom two of the standings five times over an eight-split span, their spot in the LCS will be revoked.

Revenue sharing will also be introduced to the NA LCS in 2018. It’s a crucial part of the financial model of every major American sports league. League-based revenues, like the 7-year, $300 million streaming deal announced last year and team-branded skins, will be shared across the league. Each team will also share a portion of their league-driven revenues (like sponsorships and merch sales), with the goal of strengthening the competitive atmosphere by providing additional financial support to teams with less rabid fanbases. Players will receive approximately one-third of the league’s revenue.

As for what this means for the futures of the current 10 NA LCS franchises, it’s pretty unclear. All Riot has said is the current teams won’t automatically have spots, and they’re looking for good, stable partners.

It stands to reason flagship teams like TSM, Cloud9 and CLG probably have a good shot of sticking around, as well as Team Liquid and Dignitas, who have basically been around since the beginning and now have giant investors behind them.

As for the new teams (Immortals, Echo Fox, Envy, Phoenix1 and FlyQuest), who knows? Each holds their respective strengths and weaknesses for keeping their NA LCS spot. It’s entirely possible the NA LCS ends up with the same 10 teams, or that new groups take previously occupied spots. We won’t know until at least October.