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An exclusive league - the future of Counter-Strike?

HTC esports invites Tomi "lurppis" Kovanen to take a look at the case for an exclusive league in Counter-Strike

AUG 17, 2017

League of Legends has the League of Legends Championship Series (LCS), Blizzard’s Overwatch now has the Overwatch League, and at least ESL and PEA have previously attempted to start an exclusive league for Counter-Strike: Global Offensive. But why is an exclusive league in some parties’ best interest? Why does Counter-Strike not have one yet? Will an exclusive league take over the scene in the near-future? Let us look at the case from all angles to get the answers.

Superior economics for the league, payday for team owners and investors

The reason an exclusive league is in the best interests of investors is two-fold. One, running the biggest league with the best teams gives you full control over the all-important broadcasting rights, and access to all the advertising dollars that run the Counter-Strike ecosystem – in other words, it will give you full control of the revenues. Two – and this might be the more important factor – running an exclusive league guarantees you do not run the risk of someone else becoming the biggest game in town. Much like the nuclear programs that largely exist to keep other nations at bay due to balance of terror, many of today’s event organizers might theoretically be happy to come to an agreement to continue as is. But it is not what the investors want, because it decreases the potential return on their capital.

An exclusive league would effectively kill off most of the other tournament organizers in their current form, though many would continue operating as diminished versions of themselves, while the exclusive league would gobble up the majority of fan interest. A revenue sharing system, akin to those from North American sports leagues, would secure participating teams steady revenue streams, and thus transform today’s many money-losing, potentially overpaid teams into solid businesses. It would give the investors a chance to negotiate for their share of the revenue, and thus ensure that the math works by limiting salaries based on league revenue. Today, for most teams, the math does not work – though it isn’t stopping investors.

The goal is gaining ownership of one of the rare spots in what would be a sustainable business model for potentially one of the future’s largest leagues. A fair assumption is that whoever owns the qualifying organizations at the time of an exclusive league being put together, would own the spot as well – thus making the for-now money-losing bets understandable. Despite the teams themselves generally losing money, the values of sports teams (whether estimates by Forbes or looked at through transactions) have skyrocketed in the past decades. The return on investment is therefore often made through capital appreciation at exit, instead of annual cash flows – making a sports team a riskier investment.

If you buy an NBA team, you are one of the 30 people with a seat at the table. But under today’s model in Counter-Strike, buying the best team and paying them the highest salary could still end with them leaving at the end of their contract period – with the players departing with at least some of the league spots. Compared to sports teams, that is the big issue investors are grappling with. Recent financing rounds have reportedly valued some of North America’s larger organizations in the low-to-mid eight figures. But the real potential lies within an exclusive league, as a permanent league spot could multiple the valuation of a qualifying Counter-Strike team overnight

Game publishers hold all the power

Notably, both LCS and Overwatch League are hosted by the respective games’ publishers – Riot Games and Blizzard, respectively. It is an important distinction, because while independent organizations can fail (and so far have) if they cannot attract the best players for their league, Valve theoretically has the power to shut down all tournaments for their games, should they want to pursue an exclusive league of their own. Luckily – in this regard – Valve have always been a hands-off-type publisher, who have largely stayed out of the community, mainly contributing by supporting their major events with stickers, prize money and in-game advertising. It is beyond unlikely that Valve would step in to host a league given their approach thus far with Counter-Strike, but if the game were to grow to the point where revenue sharing could give the game publisher tens or hundreds of millions a year, would they really stay out? Probably not, but they are more likely to partner for piece of the pie, than to run the show themselves.

At the same time, it is unlikely that ESL and PEA pushed for their respective leagues without some level of approval from Valve – and the Bellevue-based firm likely would be more comfortable as a silent partner anyway, raking in revenue without direct association. It is unclear what Valve’s stance to an exclusive league might be, and whether they prefer the current Tennis-like open circuit system to the sports leagues of North America. But make no mistake, Valve are certainly aware of the possibility of such a league spawning in the coming years. And Valve’s involvement is either a risk or an opportunity, depending on your view, to keep in mind.

Potential impact on the scene

Traditional sports require infrastructure investments that simply have no chance of being made without deep-pocketed owners chipping in. Those do not exist in esports; there is no need for a stadium that seats tens of thousands, an expensive practice facility, or a huge support staff. What makes esports so accessible and will help make video games the next century’s most popular form of entertainment over traditional sports, is why the business models should be different – games are played on a server instead of a physical location, and will mainly be viewed online. Still, the differences alone are not enough to keep the idea of an exclusive league at bay.

There are potential material negative impacts on the scene from an exclusive league to consider, too. An exclusive league likely would not be larger than the American sports leagues that house 30 or so teams, meaning a mere 150 players would participate at any given time. Substitutes do not work in Counter-Strike the way they do in sports for a number of reasons (down to the second-timings in tactics, inability to see your teammates and opponents, multi-map pool, etc.), are not needed as there is no fatigue, and are likely to never truly be embraced. Furthermore, Counter-Strike teams are often package-deals, meaning the only way to break into the league might be to replace an entire team – talk about a heightened entry barrier compared to today, when youngsters can make the leap within two years of starting the game. What would happen to everyone left outside, if the other event organizers would also cut back?

If we assume an even remotely similar structure to the sports leagues, there may not be enough time or interest for the 30 or so teams to participate in (many) other events, thus making it likely that viewers will keep abandoning second-tier events to focus on the exclusive league. If there is not enough viewer interest, the second-tier events will not generate enough revenue to justify high prize pools, or be popular enough for teams to pay good salaries to the teams left outside of the league. Without a clear path for youngsters into the pros – one of the great perks of today’s open circuit – and significantly lower earning potential outside of the league, the flood of new players may slowly start coming to an end. Without new players, you will gradually lose fans, leading to the game’s decline – an inevitability no one wants to see in the next decade.

Conclusion

Smart businessmen will continue to push for an exclusive league to maximize their earning potential, but do so at the risk of killing the cow before it even starts producing cold hard cash. Riot’s League of Legends Championship Series might seem like a solid model to copy for Counter-Strike, but it lacks the security of permanent spots. Weakest teams are relegated at the end of the season, removing most of the upside for investors. But the format still comes with many of the risks and potential downsides outlined earlier. In addition, an exclusive league could effectively kill most other tournament organizers, the teams left outside of the league, and with that, slowly the future of Counter-Strike. Or, it could make our game even better – but only if the competition were somehow maintained from the grassroots levels to the second-tier.

It is unclear if there is a way to make an exclusive Counter-Strike league work for all parties. The current system faces ever-increasing pressure because the math does not currently work for most teams, and it is hard to see the players taking a pay-cut in the future to get their owners in the black, should they ever change their opinions on Counter-Strike’s future. An exclusive league would alleviate much of the pressure at the top, but at a significant cost to everyone left outside. There are other ways to increase revenue – including premium streams that would cost viewers money – but organizations are hesitant to change what (for them) is not broken. While currently not a popular topic, the possibility of an exclusive league taking over Counter-Strike is arguably the most important debate for the game’s future in the coming years.


Photo Credit: Adela Sznajder / DreamHack