To Franchise or Not to Franchise: Rocket League’s Structure Decision

Source: Steam

In mid-October, it was reported that Psyonix was considering a switch to a franchise model for its competitive Rocket League esports series.  The San Diego-based game developer, which was acquired by Fortnite developer Epic Games back in May, initially released its signature Rocket League title in 2015 on PlayStation 4 and Steam (Windows only). Since then, the game has been met with near universal acclaim and has soared in popularity; with the title now available on every major gaming platform, Rocket League has reached more than 50 million players worldwide. Psyonix’s consideration of a change in the structure of Rocket League’s competitive landscape is unsurprising to many, particularly when one considers the numerous successful franchising implementations by other esports publishers. How Psyonix ultimately elects to structure such a change to competitive Rocket League, if it does so at all, has a variety of implications for the growth of the game going forward and illustrates the continuously evolving nature of professional esports.

Rocket League is a sports/racing game and is the spiritual successor to Psyonix’s Supersonic Acrobatic Rocket-Powered Battle-Cars, which was released on PlayStation 3 in 2008. The main game mode is essentially a rocket-car powered game of soccer, with the objective being to score more points than your opponent by smashing a ball through a goal using the momentum of your car. The game is easy to learn, thanks in large part to its foundation in the world’s most popular sport (matches even take place on a grassy pitch). This contrasts with titles that require a greater base level of understanding of gameplay mechanics and overall strategy. Other popular games in the competitive esports space, particularly multiplayer online battle arena (MOBAs) such as League of Legends (LoL) and Defense of the Ancients (Dota) 2, require a deep understanding of both macro strategy elements and ultra-precise, combination keyboard-and-mouse mechanics. Keeping track of where to be on a map at a certain point in the game, which champions abilities to use (and those your opponent may use), and what items should be bought at different stages of a game can act as a deterrent for new players and spectators. While this hasn’t stopped either LoL or Dota 2 from becoming some of the largest esports titles in the world, it’s hard to argue that Rocket League’s intuitive nature is not a boon for the game’s potential spectatorship. The high accessibility and resulting viewership potential of Rocket League is certainly a plus for the league’s attractiveness to prospective brand partners, who also view the stability offered by franchising as a major mitigation of risk.

The history of US esports franchises has been a short one. In 2017, three franchise leagues were announced, with competition starting the following year. In 2018, Activision Blizzard launched the Overwatch League (OWL) for its eponymous first-person shooter (FPS) multiplayer title, while Riot Games transitioned the North American League of Legends Championship Series (NA LCS) from a relegation system to a franchise model (now known as the League of Legends Championship Series, or LCS). Take-Two Interactive also started the NBA 2K League (NBA2KL), a joint venture with The National Basketball Association (NBA), on the basis of a franchise model. Prior to those changes, esports teams that operated in those leagues were largely self-organized entities that would recruit players and subsequently fields teams in leagues and tournaments on an adhoc basis by paying an entry fee. Winning or placing near the top would be rewarded with a share of the prize pool.

As viewership and the popularity of esports in general have increased, so have the opportunities for teams to monetize. Esports teams are now able to generate revenue in a variety of ways, including sponsorships, advertising, and merchandise. According to Newzoo, the global esports market is expected to grow to $1.8 billion by the end of 2022, with esports revenues expected to grow to $1.1 billion by the end of 2019 (26.7% year-on-year growth). Furthermore, 82% of 2019 revenue is expected to come from brand investments such as media rights, advertising, and sponsorships. This data illustrates that the esports industry is finally starting to turn its massive viewership numbers into dollars, with the monetization trend expected to continue at a rapid pace into the future. Franchise models are expected to contribute to this growth in monetization through the introduction of a variety of changes to traditional esports leagues that will encourage stability, sustained growth, and investment in the industry.

Growing esports leagues stands to gain a fair amount from a potential switch toward a franchising model; the hallmark of a franchise league is that there are permanent partner teams, or franchises, that compete against one another. In a promotion and relegation system, teams and players vary within the league based on performance. Dominant teams rise to the top after being promoted through victories, while weak performing teams are relegated downwards. The US National Football League (NFL) and the English Premier League (EPL) are examples of successful traditional sports leagues with franchise and merit-based league structures, respectively. While it’s impossible to definitively say if one league structure is inherently better than the other, it’s clear that the perception of stability and continuity offered to potential investors via franchise league structures can be a driver of increased investment, particularly for nascent leagues such as Rocket League. In merit-based systems, there is a constant threat that a team will lose one too many games, get relegated, and subsequently fall out of the spotlight. For businesses looking to partner with an esports team, relegation risk introduces the need for that business to understand and quantify that risk before making an investment, which can be particularly difficult for non-endemic brands looking to sponsor leagues or individual teams. The increased activity in non-endemic brand sponsorship after the launch of OWL and the announcement of the shift of the NA LCS league structure are indicative of a rising investment trend. After the start of OWL’s inaugural season in 2018, Activision announced partnerships with T-Mobile, Sour Patch Kids, and Toyota. In the same vein, the Riot Games and the LCS announced a partnership with State Farm in January 2018, shortly before the inaugural LCS Spring Split.

Publishers and developers can also benefit from the potentially large franchise fees that are paid by teams to become permanent franchises in a given league. In its first season under a franchise league structure, the LCS charged existing NA LCS teams $10 million apiece, with franchise fees being $3 million higher for new teams. Fee amounts were even greater for OWL, which charged 12 teams $20 million to become franchisees. Furthermore, ESPN reported that after receiving encouraging demand for league spots, Activision Blizzard later priced expansion slots for OWL between $30 and $60 million. The exact fees were dependent on a variety of factors but were perhaps most heavily influenced by ballooning valuations for organizations, such as Cloud9 and Immortals, that owned franchise slots in the league. Although the exact franchise fees that leagues will be able to charge member teams will vary, the potential size and uses of such a capital windfall should certainly be taken into consideration by league organizers considering such a structural change.

Given the initial positive feedback by many teams and leagues, the trend of franchising is expected to continue, with several new esports franchise leagues on the horizon. Activision Blizzard is transitioning the Call of Duty World League (CDWL) to a franchise model starting in 2020 and is expected to sell league spots for $25 million each. If organizations continue to be rewarded for charging high league franchise fees and enjoy increased investment by both endemic and non-endemic brands as a result of greater perceived stability, it’s reasonable to assume that franchise league structures will continue to gain traction. However, franchising also has its share of potential downsides. There are several valid criticisms of franchising that question the structure’s long-term effect on the competitive health of the league. It’s prudent for leagues considering a shift towards franchising to also take into consideration these potential downsides, which could have far-reaching effects and implications on the long-term viability of the league. These considerations will be touched on in greater detail in a subsequent article.

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