# The Esports Franchise Model Explained: Overwatch League, LCS, and Beyond

  

## Introduction

Esports started as a grassroots movement: players gathered in LAN cafés, tournaments popped up at gaming conventions, and teams formed organically. But as the industry grew into a multi-billion-dollar market, a **structured system** was needed to make it sustainable for teams, publishers, and investors.

Enter the **franchise model**—an approach inspired by traditional sports leagues like the NFL, NBA, and Premier League. In this article, we’ll break down:

* What the franchise model is and why it emerged.
* How it works in esports (focusing on Overwatch League and the LCS).
* The benefits and challenges of franchising.
* Revenue sharing and team economics.
* Future trends in franchised esports.

  

## What Is the Esports Franchise Model?

### From open circuits to closed leagues

Early esports operated on an **open tournament system**: any team could qualify for major events by competing in lower-tier competitions. This was exciting for fans but risky for teams and investors—no guaranteed league participation meant **unstable revenue streams** and **short-term contracts**.

The **franchise model** introduces stability by creating a **closed league with permanent slots (franchises)**. Teams buy into the league for a **large upfront fee** and gain guaranteed participation every season, regardless of performance (no relegation).

### Core principles

* **Permanent slots** – No relegation, teams are locked into the league.
* **Revenue sharing** – League revenue (media rights, sponsorships, merchandise) is shared with teams.
* **Standardized rules** – Player contracts, salary minimums, competitive structure.
* **Publisher-driven** – The game publisher (Blizzard for Overwatch, Riot for LCS) owns and operates the league.

  

## Why Did Esports Adopt the Franchise Model?

Esports publishers wanted:

* **Stability for investors** – Long-term security encourages sponsors and brands to invest heavily.
* **Player welfare** – Salary minimums and standardized contracts reduce exploitation.
* **Consistent storylines** – Fans follow permanent teams rather than constantly shifting rosters.
* **Regional identity** – Franchised leagues often assign **geographic branding** (like city-based teams) to replicate traditional sports loyalty.

  

## Overwatch League (OWL): The First Big Experiment

Launched in **2018**, OWL was Blizzard’s ambitious attempt to create the **NFL of esports**.

### Key features:

* **City-based franchises** – Teams represent cities like *New York Excelsior* and *London Spitfire*.
* **Buy-in fee** – Initial franchise slots cost **\$20 million** (later expansions up to \$30–40 million).
* **Home-and-away matches** – Aimed to bring esports closer to traditional sports with local events.
* **Revenue sharing** – League sponsorship, broadcast rights, and merchandise sales were shared among teams.

### Successes and struggles

* **Success:** OWL created a structured, professional environment that attracted investors like NFL owners, sports stars, and VC firms.
* **Challenges:**

* High franchise costs strained smaller orgs.
* Viewer numbers declined after early hype.
* The pandemic disrupted in-person events.
* Recent reports suggest teams are seeking buyouts due to revenue challenges.

### Fun Fact

London Spitfire, owned by **Cloud9**, won the inaugural OWL championship in 2018—putting a North American-owned team on top in a global league.

  

## League of Legends Championship Series (LCS): Riot’s Model

The **LCS** (North America) franchised in **2018**, following the success of Riot’s League of Legends ecosystem.

### Key features:

* **Buy-in fee** – Teams paid **\$10 million** to join (or \$13 million for new orgs).
* **Partner system** – Teams became long-term partners with Riot Games.
* **Revenue sharing** – Riot distributes revenue from:

* League sponsorships
* Media rights deals
* In-game digital sales (team-branded skins and icons)
* **Player salary requirements** – Minimum salaries (\$75,000 in NA), plus benefits.

### Differences from OWL

* LCS avoided city-based branding and focused on **team identities** (e.g., TSM, Team Liquid, Cloud9).
* Riot has a **global ecosystem** (LCK, LEC, LPL, etc.) feeding into Worlds, creating more competitive relevance than OWL.

### Fun Fact

LCS franchising coincided with **streaming deals** like the one with Twitch, and later YouTube, giving Riot guaranteed revenue while teams benefited from stability.

  

## How Do Teams Make Money in the Franchise Model?

Franchising gives teams access to **multiple revenue streams**, such as:

* **Revenue sharing** – A percentage of league-wide revenue (media rights, sponsorship deals, merchandise).
* **Merchandise sales** – Physical and digital, often boosted by in-game items (skins, emotes).
* **Local events** – City-based teams like in OWL can monetize live events and fan meetups.
* **Sponsorships** – Stability makes it easier to secure big brands like BMW, Red Bull, Nike.
* **Content creation** – Teams leverage guaranteed exposure to grow streaming channels and influencer content.

  

## Benefits of Franchising

* **Investor confidence** – No relegation risk makes long-term planning easier.
* **Player stability** – Minimum salaries and contracts improve careers.
* **Professional infrastructure** – Improved training facilities, coaching staff, and player support.
* **Brand building** – Permanent teams can develop strong fan identities.

  

## Criticisms and Challenges

* **High entry cost** – \$10–\$40 million excludes grassroots orgs and reduces diversity.
* **Lack of relegation** – Critics argue it reduces competitive drama and fan excitement.
* **Revenue struggles** – OWL faced declining viewership, making ROI uncertain for investors.
* **Publisher control** – Unlike traditional sports governed by associations, esports leagues are fully controlled by the game publisher—creating dependency.

  

## Franchise vs Open Circuit: Key Differences

| Aspect | Franchise Model | Open Circuit System |
| --------------------- | --------------------- | -------------------------- |
| **Team slots** | Fixed | Open qualification |
| **Investor risk** | Low (no relegation) | High (can miss big events) |
| **Competitive drama** | Lower (no relegation) | Higher |
| **Cost to enter** | High (\$10M–\$40M+) | Lower |
| **Publisher role** | Total control | Partial control |

  

## Future of Franchising in Esports

### Trends to watch:

1. **Hybrid models** – Some leagues may mix franchising with open tournaments for grassroots inclusion.
2. **Lower franchise costs** – Publishers might reduce fees to attract new investors.
3. **Revenue innovation** – Expect more **digital monetization**, like in-game team skins and NFT collectibles.
4. **Regional leagues merging** – To consolidate viewership and reduce costs.

### Fun Fact

Valorant, Riot’s newer shooter, introduced a **partnership system** similar to franchising but without massive upfront fees—designed to avoid OWL’s mistakes.

  

## Useful Links

* [Riot Games LCS Partner Program](https://lolesports.com/)
* [Overwatch League Official Site](https://overwatchleague.com/)
* [Esports Earnings for OWL and LCS](https://www.esportsearnings.com/)
* [The Story of OWL Franchising](https://www.dexerto.com/)

  

## Conclusion

The esports franchise model has transformed competitive gaming from a volatile, tournament-based system into a structured ecosystem modeled after traditional sports. It offers stability for investors, better conditions for players, and predictable revenue for publishers.

However, it comes at a cost: **high buy-ins**, potential **viewer fatigue**, and **publisher dominance** create challenges for sustainability. Future franchising efforts will likely experiment with **hybrid systems**, **lower fees**, and **more fan-driven monetization**.

Franchising in esports is still evolving, and whether it becomes the standard or one of many models depends on balancing financial sustainability with the grassroots spirit that made esports thrive in the first place.