Riot Games Denies It’s Slashing eSports Budget

Riot Games

Riot Games has denied accusations that the company is cutting its eSports budget, but does acknowledge the focus has turned from growing viewership to becoming a profitable endeavor. Derrick “FearGorm” Asiedu, Head of Global Events, Riot Games, said it’s the company’s preference “to invest even more than what we do now ($100 million annually), but only if it makes sense for the business and if revenues continue to increase”; if the company is unable to grow revenues enough to turn a profit, Asiedu said it will be forced to reduce its eSports budget “by some amount.” Advertising, sponsorships and “digital experiences” are expected to drive the bulk of the revenue increase.

Howie Long-Short: Riot Games made several recent decisions implying the company was reducing spending. The company announced the group stage of the League of Legends World Championships would be condensed from 2 weeks to 8 days and that English broadcasts of the event (taking place in S. Korea) would occur remotely (from a U.S. studio) through the semi-final round. I’m on board with the decision to condense group stage competition as that should provide meaningful cost savings and if Fox can get away with calling Russian World Cup games from a studio, I see no reason why American broadcasters need to be in S. Korea. Back in May, Riot held the group stage of a midseason tournament at its EU studio, a venue that failed to reflect event’s importance; the company has since said it would not do that again.

If you listen to Team Liquid owner Steve Arhancet, Riot Games shouldn’t have an issue boosting sponsorship revenue; Arhancet sees “an ecosystem where there’s substantial revenue still being earned within the space.” Newzoo projects $360 million will be spent on eSports sponsorships in ’18. While that figure reflects the potential upside for Riot Games, League of Legends currently maintains just one North American partner (State Farm); it’s fair to ask why the company hasn’t been more successful, in terms of signing partnerships for League of Legends, to date.

Riot Games is owned by Tencent (TCEHY). Company shares are down -10.5% (to $41.35) following recommendations made by China’s Ministry of Education to restrict the number of new video games, limit internet usage and explore an age-appropriate rating system for players; the Ministry blames video games and internet usage for the increase in reported cases of myopia amongst minors. Amidst heightened regulatory risk, it’s no surprise TCEHY reported a decrease in profits for the first time in 10+ years in Q2 ’18.

Fan Marino: The founding League of Legends franchises paid $10 million to join. It’s 4 newest franchises – 100 Thieves, Clutch Gaming (owned by Houston Rockets), Golden Guardians (owned by Golden State Warriors) and OpTic Gaming – paid a $13 million expansion fee. It’s certainly worth wondering if any/all would have made the commitment had they known Riot Games was talking about reducing its eSports budget.

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Author: John Wall Street

At the intersection of sports & finance.

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