Twenty years ago, esports players mostly lived off of prize money, or a low-paying salary if lucky. It also wasn’t worth the time to register your teams (or clans as they were known then) in a company database. Increased revenues for teams through sponsorships, publisher stipends, etc., meant players could command more wages, greater player value, and more movement between teams. All of these necessitate the need for binding players to teams through contracts and the ability to buyout teams and players.

Today there is a fully-fledged market for players and talent, even if the underlying regulations are still far from optimal—especially in newer games, or those where the publisher imposes little control.

As we enter 2020, The Esports Observer spoke with several industry insiders, including those from top professional team organizations, to unravel some of the mysteries, secrets, and shortcomings of the current esports transfer market.

“Pending Riot Approval”

Needless to say, the level of sophistication of the player markets differs dramatically between games. League of Legends (LoL), which is entirely regulated by its publisher Riot Games, is touted as one of the most refined; largely because it has a set of global rules, and many basic checks and balances found in a traditional sports league.

There are minimum contract standards imposed on teams, including an off-season period. Players are barred from persuading others to transfer from one team to another (i.e. tampering/poaching), and there are clear transfer windows.

In LoL, there is also a fixed time between the end of a team’s competitive season, where negotiations are now possible. Nov. 19th, 2019, marked the beginning of the most recent free agency period; a manic 24-72 hours where the majority of players are brought on board, and teams are finalized for the next year.

When these announcements are placed on social media, it’s usually with a disclaimer “pending Riot approval.” Similar to the NFL or most sports leagues, all players and rosters need to be confirmed for eligibility. Once this is done, they are added to a publicly viewable Global Contract Database.

The Overwatch League, also regulated by its publisher Blizzard Entertainment, has a similar cycle, with the most recent signing window opening on Sept. 30, 2019, the free agency period beginning Oct. 7, with all teams given the deadline of November to have a minimum of eight players under contract. An article posted on the official league site stated that the average OWL player earned $114K USD in 2019, with a median player salary of $80K.

In both games, a team will typically run their own background check on a new player (i.e. for a criminal record), but because esports players always play under a fixed online account, both team and publisher can also check the player’s history for instances of cheating, or other unethical behavior such as account sharing or boosting.

Only the game publisher will ever be fully aware of a player’s in-game history. One insider recalled a story where an Overwatch League player was flagged for aim-botting (using cheating software to improve weapon accuracy), but when Blizzard Entertainment reviewed their gameplay, they determined his high accuracy was entirely natural.

None of our insiders could recall an instance where a player was outright rejected, and in fact, the “pending Riot approval” tag is included precisely because the team already knows the player is secure.

How Are Players Sought After?

Esports teams will reach out to others during the season, but how and when depends on the length of a player’s contract. While every team has its own method, some of the teams we spoke to said initial talks are usually done coach to coach, or general manager to general manager (GM). Explicit offers, even in principle, are usually not made during the year, but teams can and will discuss potential opportunities for later seasons.

A good team GM will constantly be thinking about roster changes, even during a season, but competent managers won’t actually cross that line and risk disrupting the performance of their players and coaches. The esports industry is also notorious for its media leaks—so those privy to negotiations are kept to a minimum.

The majority of decisions are made, of course, after the team has had a chance to personally speak to a prospective player in their respective off-season, once given clearance to do so by a GM i.e. the contract holder.

Several insiders expressed that the major teams in more established esports, such as League of Legends, Dota 2, and Counter-Strike: Global Offensive, are struggling with the big-name players who’ve been under contract for several years. It’s no secret that the esports fandom is still very much attached to players or an organization’s history, rather than the brand itself. For legacy players, the salary expectations are sky-high, and few outside teams are willing to take those costs.

The lack of in-depth statistics on players factors into this: it’s hard to demonstrate objectively who’s genuinely a good player, and when it’s time for a competitor to move on. Compare this to basketball, and Kobe Bryant’s final years with the Lakers—his skills had declined, but he still helped to fill the STAPLES Center regularly. While it may not make as much economic sense right now to keep a player after their prime, monetization and endorsement deals are on the rise, and those we spoke to believe the tail end of a player’s career will increase in value.

What Determines a Player’s Market Value?

There are standard measures of a player’s value: current and future salaries (and multiples thereof), how long the contract lasts, and how much similar transactions are across various regions. Some of the League of Legends team representatives, for example, said they know how high other teams bids were within their relevant league, as well as neighboring leagues.

When it comes to games with an open market, such as Counter-Strike: Global Offensive (CS:GO), there really isn’t a precedent to base a player or team’s value on. Once again, those we spoke to expressed a need for more robust data; with some stating that the transfer fees were completely arbitrary.

The top-down, international focus of the CS:GO scene also creates problems. Right now there are 10-15 exceptionally good teams across the globe, meaning if a player wants to exclusively play for a top-tier team in the U.S., their options are extremely limited.

Full-Roster Buyouts

There are examples of teams being bought en masse in League of Legends, usually when a new team owner purchases a slot in the league from another. We spoke to a couple of team executives who had completed such transactions, who came to their offers based on the small number of franchise sales so far, the comparable cost of starting a team from scratch, or similar transactions in adjacent industries.

CS:GO is also a game where entire teams are traded with far more frequency. While this is a side-effect of not having a transfer window, there is also a huge macro metagame currently taking place behind the scenes. In the past six months, no less than seven organizations have either entered CS:GO for the first time, re-entered the game, or completely switched out their rosters with more experienced players.

This is being done to ensure participation in one of three new league systems beginning next year: the ESL Pro Tour, the BLAST Premier Series (which has already confirmed 12 teams), and a yet-to-be-announced U.S. league, B-Side. While not explicitly franchised competitions, the consensus is that failing to participate in any of these competitions will heavily disadvantage team organizations for the next two years.

In general, Counter-Strike players have a lot more leverage in terms of where they can go, even though the lack of formal structures means few top-professionals are earning close to what a top League of Legends player would. One source told us that the rush around the new leagues even has several players signed to new teams on nothing more than letters of intent.

Do Transfer Fees Provide Any Meaningful Revenue?

Like soccer or baseball, there are feeder organizations, which specifically create academy/developmental players, or even whole teams, and generate revenue through their transfers. Those teams are unlikely to ever compete in a Valve Major or top international competition, but that isn’t their business model. The more well-known organizations only consider the resulting revenue of a transfer in how they will buy other players, improve performance, etc.

Overwatch presents a unique situation within esports. South Korean players account for 60% of the active player base in the Overwatch League (OWL), but no company from the country is a franchise holder.

The Esports Observer has spoken to South Korean team owners in the past who acknowledged that training and transferring Overwatch players to the league creates a significant source of revenue, but this also happens in League of Legends to an extent, at the amateur and tier-two level. China, in particular, was cited as a region that is becoming quite aggressive in acquiring South Korean players early and developing them over time.

Potential for Improvement

Despite starting as a grassroots industry, academy leagues and development systems are still finding their way into esports. The European League of Legends regions have an interconnected system of 13 regional leagues, while China combines 16 academy teams from the main league with nine independent organizations. Officials for both regions cite the success of these systems, while it’s no secret that the North American and Korean counterparts are struggling.

In CS:GO, while anti-player-tampering has come down to good conduct rather than actual regulations, the rumors around B-Side include a heavier focus on formal structures. Those from CS:GO teams we spoke to all cited a noted rise in player agents, which are helping them to understand their obligations.

The subject of player representation is an article in itself. In brief, there was a consensus that boutiques will have an advantage in the long run over major agencies; who are having to sign close to 100 players to remain profitable while being able to provide a full service for the majority. The lack of standard protocols between teams and agents, and a near absence of player unions, remains a contributing factor.