The LCS Has an Incentive Problem

When Riot rolled out franchising, the pitch was financial stability. Teams would get baseline funding, the league would stop hemorrhaging, the ecosystem could plan long term. It worked, sort of. The teams did get stable. But stability isn't the same thing as health, and the side effect was worse than anyone wants to admit.

Franchising didn't openly remove the incentive to compete. The economics did, quietly.

Look at Dignitas. They sit at the bottom of the league every split, pay very low salaries, never recruit rookies, never put up a real fight. From a fan's perspective, that's miserable. From a business perspective, it's the dominant strategy. Spending less than Riot's franchise payout means you make money. Spending more means you lose money. So every team that isn't seriously contending for an international slot just minimizes spend and collects the check.

Cloud9 stays near the top because they spend a little more than the floor, but they still get walloped at international competition, because the entire league has been racing each other to the bottom for years.

Sponsorships will always be there. Any sport that gets viewers gets sponsors, and the LCS still gets viewers. The problem isn't that sponsorships are missing. It's that they pay less than they would in any other major league, because League of Legends viewers don't spend money the way other sports' audiences do.

The pattern that emerges: the only sponsorships that work even a little are peripherals, like Razer keyboards or gaming mice. Some fans do actually buy the gear. Insurance sponsorships are dead on arrival (Immortals had Progressive a few seasons back; nobody switched). Car brands like Lexus on 100 Thieves, or Cadillac on TSM in earlier years, only make sense as brand-awareness plays, the same way Toyota sponsors a marathon. Brand-awareness money is a different financial product, and there isn't enough of it to fund the league.

So if sponsorships are there but cheap, what brings in the real money? What is the thing players actually buy?

Skins.

The strangest part of this whole story is that Riot has already solved it. They built the working answer themselves, in their own next-door game.

Valorant ships team-branded esports skins in the in-game shop. Players who are fans of a team buy that team's skin. The transaction runs publisher → team → fan, and everyone gets a cut. Riot has proudly published that partnered VCT teams received over $1 million from skin-bundle sales last year. That's less than half of the total revenue from those bundles, but it's real money flowing directly to the teams. Riot keeps the majority. The teams get a revenue stream that actually scales with fan engagement, instead of being capped at whatever a sponsor will pay.

But somehow, in League, Riot has decided the in-game cosmetic well is off-limits for team branding. Same studio. Same building. Same proven mechanism, two doors down. Just not applied to the game that needs it.

Rainbow Six Siege does it on a slightly different model. The result is a league that is, by reputation, infamously affordable from a team perspective. Player salaries are largely funded by skin revenue, which keeps team operating costs in a range that actually makes sense. The teams aren't begging for sponsorships to survive. Right now, in mid-May, Rainbow Six's Salt Lake City Major has a couple thousand people in an arena. It's not Madison Square Garden, but it's not nothing, and the model behind it is sustainable.

The other half of the fix is harder, but just as necessary. Franchising has to go. Or more precisely, promotion and relegation have to come back. The LCS used to have them, before 2018. The Challenger Series was the feeder league, and bottom-of-LCS teams could be relegated out and replaced by Challenger winners. Franchising shut that pipeline.

What you want, what every league that's ever worked at any scale wants, is a way for popularity to compound. The NFL and the NBA can afford to franchise because they've already built fifty years of fandom. The Dallas Cowboys are the most popular team in the NFL because they're the most popular team in the NFL. Popularity feeds itself. When a new fan picks up the sport, they find the popular name first, become a fan of that name, tell their friends, and the snowball rolls. TSM had it in 2015. Cloud9 has some version of it now. But the snowball needs to be allowed to roll, and franchising freezes it.

The Premier League model, actual promotion and relegation, does the opposite. Teams that are bad and unpopular fall out of the top league. Teams that are good and growing get promoted up. You don't have to be the same eight teams forever. New rosters with new players get a real shot. Disguised Toast's DSG team is the best evidence inside League right now that fresh faces draw fresh fans. Tarik's recent showmatch outdrew the entire LCS season in a single event. The signal could not be louder.

And it's worth noting: Europe's LEC still uses the franchise model, but the European ecosystem doesn't have North America's tier-2 problem. Each European country has its own regional league, and those regional leagues are popular. The best teams from them get pulled up into the LEC. The pipeline is real, and the regional-league hype carries into tier 1.

North America has one tier-2 league for the entire continent. Nobody watches it. So there's no hype feeding up, and the LCS has to be inherently good on its own, which right now, it isn't. Bringing back promotion and relegation does part of the job, but North America also needs the regional-leagues feeder system to start running, or for the tier-2 to become something worth watching on its own terms.

None of this is free for Riot. Every team that paid the partnership fee to be in the franchised league is owed something if Riot walks the deal back. Riot has to either eat the payout or, in a worst-case version, shutter the league entirely. Shuttering is painful but possible. Eating the payout is also painful, but it's the price of admission to a healthy ecosystem.

The alternative is what we have now: a league that is slowly losing money for everyone in it, with no path to growth, no incentive to compete, and no reward for being popular. The current path ends with the league quietly dying, or being mercy-killed.

Riot has built the working model already, two doors down, in Valorant. The fix is to copy it, and then go further.