H2K Founder Reveals What it Takes to Run a League of Legends Franchise
Despite not making it into the LEC franchise this year, H2K founder Richard Wells continues to engage the community and discuss the behind-the-scenes operations and costs of operating in League of Legends.
Now he’s come forward in a new YouTube video discussing the financial burden on teams in the LEC. He provided an interesting look at how difficult it is for teams to turn a profit.
In the video Wells, who operated a team in the former EULCS from 2011 to 2018, discussed the individual costs a team incurs running a franchise in the current climate, revealing some somewhat surprising figures.
According to Wells, player salaries on average cost a team about 1.8 million Euros a year, while support staff takes up another 300 thousand Euros. Housing and legal fees are another 100 thousand for teams.
That’s approximately 2.2 million Euros, or a little over $2.4 million USD, in operating costs per year, an eye-raising price in an industry known for not making much more for orgs.
He noted that while teams like Liquid, Fnatic and G2 pull in big sponsorship deals to help alleviate most of these costs, smaller teams like Excel, Vitality and Golden Guardians often struggle to get by.
He also pointed out how those larger teams also generally have high staff and player salaries, leading to that initial 2.2 million often being much higher for these teams.
To give an example of what a mid-size team operates at, Wells popped open H2K’s books for their time in the league, revealing all the costs and income for the squad.
According to their books, the H2K League of Legends team only brought in 330 thousand Euros from sponsors, though it was 500 thousand before Riot took their share. In addition to another 330 thousand from Riot’s league-wide sponsorship deals after dividing that income up amongst the teams.
The team also made a rather sad 70,000 in digital revenue and merch sales, which is where sport’s teams generally make most of their non-media right income from.
That overall brings the team’s income a year to about 730 thousand Euros a year, well below the 2.2 million Euro operating cost they were running at, a huge deficit for any team or company to be running.
He also noted that a stipend by Riot was taken away at some point, cutting into H2K’s already low profits.
The team’s decision to run a bare-minimum team for most of 2018 makes significantly more sense now with that kind of operating cost.
While there is a lot of good information, it is important to take the direness of his words with a bit of a grain of salt. A lot of new sponsors have come in since franchising, and H2K’s lacking inclusion means his information could be outdated.
We’ll have to wait for teams to speak up on their costs or open their financial books up before we can get an accurate picture of what’s going on. Given esports’ young age and the still-developing puzzle of how to make money out of it, teams struggling right now shouldn’t come as a surprise.
The significant point will be in a few years when things have settled, and we have a couple of years of deals and revenue to look into for them.