The Downsides of Esports Franchising: Player Development and Relegation

by Fabio

Franchising has become a common and important part of the esports industry. For instance, League of Legends, Overwatch and Call of Duty all boast franchised leagues as their primary esports tournaments. This certainly brings about lots of advantages, but there are some downsides to franchising as well.

What Is Franchising

In traditional sports, franchising is a common business model for the biggest leagues. Teams enter into contracts with tournament organizers. The teams guarantee that they’ll be playing at their events. In return, they are given a share of the league’s revenue. This gives a huge financial boost to teams and increases the value of the tournament. Sponsors are much more likely to engage if they know which teams will be competing in the months to come.

Usually, joining a franchise requires huge buy-in sums. Overwatch League, for instance, demanded seven-figure payments. Some league slots were even set at more than $15 million, which is an enormous sum for any esports team. 

Advantages of Franchising

This model is appealing for a variety of reasons. For one, teams and organizers haven’t fully figured out how to monetize events just yet. Teams in particular highly depend on sponsorship money, which isn’t always easy to get. Sponsors won’t be interested in signing year-long contracts with your team when you can’t guarantee that you’ll still be competing in the top leagues in the far future. 

In open circuits, this is a huge problem. Of course the likes of Team Liquid or OG have enough esports legacy and a giant fan base to secure deals. But for smaller and newer teams, financial security has been difficult to achieve. Signing up to a franchised league shows sponsors that your team will still be relevant and visible for quite some time. They’ll feel much more comfortable with signing multi-year sponsorship deals. In that regard, franchising proves to be hugely beneficial.

But franchised leagues have quite a few issues. If addressed incorrectly, these can be detrimental to the quality of the league. Most importantly, franchises can harm the overall health of an esports ecosystem. Particularly the player development pipeline proves to be a huge issue.

Local LAN events are usually the starting-point for fresh esports talent
Local LAN events are usually the starting-point for fresh esports talent

Player Development Pipeline

How does talent get to the top of esports? The answer is quite simple: Opportunities. 

Aspiring players have to start low and gradually fight their way through amateur and semi-professional competitions, until they or their team are noteworthy enough to be picked up by a professional organization. This process, referred to as the player development pipeline, only works well when there is a clear path to the highest leagues. Most crucially, the teams need to receive support along the way. If professional play only becomes financially viable for the very best of teams, there won’t be enough players willing (or able) to put in the time. In franchises, this pipeline isn’t always there.

Overwatch League, for instance, has a weak support structure for upcoming talent. OWL is closed up, meaning that talent can only move into the league if the teams decide to draft new players. Those players can only be found via the Contenders league, where semi-professional teams can compete. Because there is no relegation, the teams there can only hope to gain exposure or profit from either selling players or winning prize money.

Unfortunately, the backing from the league organizers isn’t nearly large enough to justify such an undertaking. That is why you won’t see many organizations actually invest into an Overwatch Contenders squad. Even the OWL teams, which are allowed to field academy rosters there, are disinterested. Low viewing numbers and comparatively small prize purses make this second division unattractive. 

So right below the top of Overwatch esports, the player development pipeline already breaks apart. In comparison, open circuits like in Dota 2 allow for many more mid-sized events. As an organization and as a player, you won’t have to be a part of the Top 20 in order to live off or your esports work. 

Relegation

In a franchised league, there usually is no relegation, which makes total sense. If a team pays huge sums of money to be a fixed part of the tournament, the organizers can’t throw them out. No team would ever accept a contract with such a clause. So the teams stay fixed.

This has one major implication for such tournaments. The stakes aren’t merely as high as with regular events. The losing teams aren’t ever in any real danger. Their broadcasting time is all but secured, the sponsors are satisfied and the teams can truthfully promise to be back for the next season. While this is a major advantage with regards to financial security, the lack of pressure to perform creates weaker storylines.

Imagine your favorite team on the brink of relegation. In the last match, they face one of the best teams of the league and in a surprise victory, they save themselves from exiting the the event. Now imagine losing that feeling entirely because there is never any risk in franchised leagues. There is no real way to know whether this form of security impacts the performance of players and teams. Certainly, they’ll still be hungry for trophies. But will they really care whether they end up last or second-to-last?

Competition Between Organizers

But not only the teams lose the pressure to perform, the organizers are similarly impacted in the franchise model. If there is only one major league, there is no real incentive for the organizers to push the boundaries. As long as people care for the game and the teams, they will flock to the streams and the offline events. Just as teams feel no pressure, organizers won’t feel the need to reinvent anything.

Contrast this with CSGO, which boasts an entirely open tournament circuit. Virtually every company can get the license to host Counter Strike events. While this has led to some horrible tournaments in the past, it generally helps in the bigger picture. When ESL Pro League was the only big league in the game, they had an easy path to larger viewership. But slowly, event circuits like ECS, ELEAGUE, BLAST Pro Series and Flashpoint built up a sizeable portfolio of CSGO action outside of ESL competitions. Especially with the introduction of the latter few, ESL were forced to completely overhaul their broadcast and league structure in an effort to retain the highest viewerships.

Their stream has never been this professional before. The corona pandemic has forced all events into the online realm, but ESL have previously moved their flagship league into a studio environment. There, the teams could fight on offline soil. This marks a huge improvement and was probably sped up by the increased pressure from other leagues.

The CSGO Majors are entirely open. If you've got the skill, you can participate!
The CSGO Majors are entirely open. If you’ve got the skill, you can participate! (via SteelSeries)

Exclusivity Rules

Lastly, franchising does enormous damage to open event circuits. In CSGO, for instance, the biggest events are entirely open to the public. If, in theory, a team of new players were so talented that they could take on the biggest teams, they could simply do that. For the biggest CSGO events, the Major tournaments, there is always an open qualification process. Any good team, no matter the organizational backing, will be able to advance through those stages and into the upper echelons. In that regard, the Counter Strike pro scene is a meritocracy, where teams and players are judged entirely based on their proficiency within the game.

But not with franchising. In Overwatch League, for instance, there is a set number of teams. No other team will ever have the option of signing, unless the league provides more slots. There isn’t any qualification and previous sign-ups to the league have had a Million-Dollar price tag. If you’re a talented player, your future in the game entirely depends on the franchised teams picking you up. 

Is There a Middle Option?

Recently, a few semi-exclusive leagues have spawned in the Counter Strike realm. Flashpoint League has implemented a similar structure and invited a few founding members. Four teams were able to qualify via an open bracket. The league then offered them compensation and support if they weren’t backed by an organization. While the teams are now very much bound to take part in Flashpoint-sanctioned events, they are still free to compete elsewhere in their spare time. 

But there are also examples for leagues trying to find an approach that offers both financial partnerships and an open structure. For instance, ESL Pro League has brought some “partner teams” on board. They’ll benefit from revenue share, but are basically strapped tight to ESL’s tournament circuit and are obliged to participate in a set number of events per year. Still, they can attend other events and leagues if their schedule allows this. The rest of the teams in EPL are not part of any revenue share agreement and can be relegated from the league.

In reality, ESL tried to go ahead with an actual exclusivity clause in their contracts. But the game’s developers, Valve, were quick to step in. They issued a formal warning for all organizers. The CSGO circuit has to remain remain open and no teams can be exclusively bound to one tournament circuit, else the respective organizers will lose their license to host events.

So there isn’t one definitive answer on the value of franchising. It always depends on the way that organizers implement the system. If they care about player development, they’ll find a way to create an adequate support structure. If not, and if third parties aren’t allowed to step in and help out, the stream of new players will dry up and these leagues will eventually fail. 

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