In 2018, the American franchising model for traditional sports found its way into both the Overwatch League and North American League of Legends Championship Series , selling franchise slots to participants for large sums of money.

The first year of franchising in the NA LCS resulted in teams paying $10-$13M USD franchising fees, and spots for OWL’s inaugural season reportedly went for $20M. The Americanized format by the leagues also attracted the attention of traditional sports leaders from the United States who wanted a piece of the action in part because they were more familiar with the practice of franchising and revenue sharing.

While many professional esports circuits use individual tournaments, similar to the format that professional golf or tennis follow, others have followed a system of relegation and promotion that is popular in international soccer leagues. In those leagues, in order to promote immediate competition, the worst performing teams in a season are relegated to a lesser league. At the same time, the top teams from an affiliated lower league are promoted to the higher league.

[perfectpullquote align=”right” cite=”” link=”” color=”” class=”” size=””]In relegation systems, teams often make short-term strategic decisions based on simply trying to avoid being relegated. [/perfectpullquote]

The idea of franchising for OWL and the NA LCS was brought about in part to create a sense of stability. By incorporating concepts like revenue sharing and creating special benefits for pro players such as a players’ union and salary minimums, the leagues looked to create something that was new with a strong foundation.

In relegation systems, teams often make short-term strategic decisions based on simply trying to avoid being relegated. However, having the security that a franchise model provides allows teams in a league to make moves that are geared for more long-term success, even though those moves often don’t yield any short-term benefits.

As both leagues gear up for their second season, The Esports Observer takes a look at how 2018 played out for each league as they attempted to mimic the model that has been so lucrative for established leagues in traditional sports like MLB, the NBA, and the NFL.

Overwatch League

Credit: Blizzard

Activision Blizzard’s Overwatch League was starting from scratch in 2018, but that didn’t keep it from reportedly asking for a hefty sum of money to join. With the promise of geolocated teams, home/away games, and a model akin to traditional sports, OWL attracted suitors with experience and investment in top professional leagues such as NFL Los Angeles Rams owner Stan Kroenke, MLB New York Mets COO Jeff Wilpon, and NFL New England Patriots Owner Robert Kraft.

The league mixed those traditional sports ownership groups with franchises owned by some of esports’ most established organizations like Cloud9 , Team Envy , and Immortals . In addition to geolocation, Activision Blizzard took the league international by adding teams in China and London.

Along with attracting high-profile ownership, the league solidified notable partnerships and inked deals with a wide range of sponsors. In terms of endemic deals, OWL added HP Omen and Intel in two-year deals that were reportedly worth $17M and $10M, respectively. Meanwhile, the league added non-endemic sponsorships with T-Mobile, Sour Patch Kids, and Toyota, among others.

Despite the youth of Overwatch esports, Activision Blizzard’s commitment, and the perception of a stable structure that comes with a franchising model helped the league leverage a streaming rights deal with Twitch worth at least $90M over two years. In addition, Twitter signed a multiyear deal to develop and distribute OWL content, and just before the inaugural playoffs, Blizzard Entertainment signed a multiyear deal with Disney to broadcast OWL coverage on linear television.

The multi-year nature of many of OWL’s deals suggests that the stability that comes from a franchised format could be more than just perception, despite the league’s youth.

[perfectpullquote align=”right” cite=”” link=”” color=”” class=”” size=””]In December, the league leveraged its success from the inaugural season, and its familiar structure to ink a deal with traditional sports licensing giant Fanatics.[/perfectpullquote]

The success of OWL’s first season had the league immediately geared toward expansion, and in the off season, it added eight teams. Though the cost for an expansion slot wasn’t disclosed publicly, it was reported to be between $35-60M, up from the reported $20M for the league’s founding teams.

Outside of sponsorship deals and expansion, the league also benefited from merchandising for its teams as well. With the league boasting 12 freshly branded esports franchises in its first season, fans were enticed to purchase jerseys and shirts for the London Spitfire , even if they already had apparel for the team’s parent organization Cloud9. In addition, the concept of revenue sharing presented another form of stability for OWL franchise owners.

Related Article: Road Games, Increased Prize Pool Coming to Overwatch League Season Two

Following early successes and demand from fans, the league allowed its franchises to produce limited amounts of their own merchandise with specific rules to keep things fair for all teams. The goal was to allow teams to cater to their geolocated fan base without hurting the revenue sharing system that it had already created.

In December, the league leveraged its success from the inaugural season, and its familiar structure to ink a deal with traditional sports licensing giant Fanatics, which works with most of the major professional sports leagues in the U.S.

Overwatch fans can also buy in-game character costumes (known as skins) for each OWL franchise. These items are bought using a specific in-game league token, which players can either buy or earn by watching OWL games on Twitch. A portion of skin sales goes to the corresponding league franchise.

North American League of Legends Championship Series

Credit: Riot Games

Riot Games’ premiere North American professional league isn’t new like the Overwatch League, but last year, the NA LCS decided to make some big changes to its system by introducing a franchise-style format. It was the second competition in Riot Games’ global esports circuit to do so—with China’s League of Legends Pro League (LPL) having shifted to a structure closely modeled on the NBA, complete with franchise bidding, individual home/away venues for teams, and league controlled merchandise.

By transitioning from a promotion-relegation format, Riot attempted to increase the stabilization of its league and looked long-term by adding revenue sharing and creating a union for professional players as well.

Instead of keeping the price for franchises secret or using a bidding process, Riot took applications from prospective NA LCS teams and announced that those accepted would pay $10M or $13M depending on if they had previously competed in the league or not.

Similar to OWL, the move toward a structure presented revenue sharing and a sense of long-term stability attracted ownership interests from traditional sports. Golden State Warriors owner Joe Lacob and the Houston Rockets each earned teams, the Golden Guardians and Clutch City Gaming, respectively. Meanwhile, Cleveland Cavaliers owner Dan Gilbert took a different approach to NA LCS ownership by investing in 100 Thieves, which landed a spot in the league.

Related Article: NA LCS Players Association Executive Director Reflects on First Year of Activity

Since then other interested investors from the realm of traditional sports have begun to invest in team organizations that have a stake in the NA LCS including NBA hall of famer and Charlotte Hornets owner Michael Jordan. Earlier this year, Jordan joined a traditional sports who’s who of investors at Team Liquid’s ownership group aXiomatic which includes Magic Johnson, Peter Gruber, Ted Leonsis, and Jeff Vinik. That being said, Team Liquid also competes in other titles like Counter-Strike: Global Offensive and Dota 2.

[perfectpullquote align=”right” cite=”” link=”” color=”” class=”” size=””]While Riot attempted to strategically structure its team template for the long term, it also looked to improve player quality of life.[/perfectpullquote]

However, with all of the traditional sports additions, numerous notable endemic organizations were rejected from the league including Dignitas, Immortals, and Team Envy.

As the league increased its mainstream clout with a few more well-known owners and embraced its restructure, it also added numerous deals throughout its first year as a franchised league. For the Summer Split, the NA LCS added sandwich chain Jersey Mike’s Subs, and in May, the league entered into a multi-year non-exclusive deal to stream NA LCS action on ESPN’s subscription streaming service ESPN+. Following the first full season of being franchised, Riot added two-year-old esports merchandising company We Are Nations, to produce game day jerseys for all ten teams—a common practice of traditional sports leagues, and something unseen in the history of the NA LCS.

While Riot attempted to strategically structure its team template for the long term, it also looked to improve player quality of life. As a part of the league’s restructure, a players’ union was created to help give players a voice, and the benefits were immediate. With the European LoL Championship Series not yet converted to a franchising system, the NA LCS’ moves saw player salaries jump 220% year-over-year, according to OpTic Gaming‘s General Manager Romain Bigeard.

Before all was said and done in the first franchised year of NA LCS action, Riot was pleased enough with the results to expand the practice overseas in the EU LCS as it rebranded the European league. In March, Riot announced that it would also restructure the EU LCS to a franchise format. Upon announcing the new teams for its European league, Riot even went so far as to rebrand the league, naming it the LoL European Championship (LEC), for a fresh look. The Turkish Champions League (TCL) has also introduced a similar partnership system.

While reviewing a league format change just one year into its existence isn’t optimal, particularly when it is in theory geared toward a long-term outlook, the deals and participation both the NA LCS and OWL garnered are telling. High-profile non-endemic investors from traditional sports often have the capital to engage in investments that have more short-term risks with an eye for long-term success. Meanwhile, solidifying numerous multi-year partnerships that have significant dollar amounts attached shows that both the NA LCS and OWL are committed to creating leagues that are built to last—not just stay afloat.