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League of Legends esports still hasn’t turned a profit. That’s okay, says Riot.

(Washington Post illustration)
8 min

This coming weekend is usually reserved for a celebration in the world of esports. Fans of the game “League of Legends” converge from around the globe inside a stadium and watch the game’s best players battle for the world title. It’s an event that has filled NBA arenas and Beijing’s Olympic Stadium. But this year, the League of Legends World Championships will conclude without fans in Reykjavik, Iceland, a concession warranted by the covid-19 pandemic.

The pandemic, which has forced numerous esports leagues to pivot their plans for staging live competitions, has also led companies to reevaluate their approach to live events. But the head of esports at Riot Games, John Needham, says Riot plans to double down on hosting live events for “League of Legends” once it’s safe to do so.

For more than a decade, Riot has staged Super Bowl-caliber events with tens of thousands of fans packed inside stadiums and arenas across multiple continents. They have garnered global attention and acclaim, but there is one thing League of Legends Esports has yet to attract: a profit. That, to Needham, is just fine. In fact, he says he is not concerned with turning a profit from the esports league any time soon.

“We like to call ourselves the future of sport,” Needham said. “That’s what we think we’re building.”

Riot started hosting esports tournaments 10 years ago as a marketing tool for “League of Legends.” Over the past three or four years, Needham said the company has been attempting to build esports into its own dedicated business. However, Needham said the main focus is on ensuring the esports leagues’ teams are profitable, rather than lining Riot’s coffers.

“If I can’t make esports a great business for teams and our sponsors, then we’re not going to last long,” Needham said. “We’re very much thinking about, ‘How do we make the entire ecosystem profitable?’ ”

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That ecosystem comprises 117 teams across 12 regional circuits around the world for League of Legends Esports. Needham’s goal in “the midterm” is for Riot’s esports division to break even, with any potential profits going back into developing the league.

In the most basic sense, esports leagues act as a marketing tool to encourage people to play a competitive game. Professional tournaments showcase the best players in the world and — by renting out arenas for these spectacles — companies hope the matches will inspire fans to spend more time and money playing the game. For the makers and license holders of those games, esports events don’t necessarily return a profit themselves, but they can still add to the game’s revenue. For the teams that have paid millions in franchise fees to secure a spot in an esports league, the opportunities are more limited.

The profitability of esports on the whole has been a source of debate in recent years. Competitive gaming has attracted millions in outside investments based on the belief that it is the future of live sports. But there have been numerous logistical challenges for leagues making live esports competitions profitable, even before the covid-19 pandemic washed away nearly two years’ worth of planned events.

In 2019, Epic Games staged a Fortnite World Cup event in New York with a prize pool of $30 million. The Epic vs. Apple trial this year revealed that Epic Games “overestimated” how much money the company could make off esports in 2019 by $154 million.

Even the best esports teams don’t appear to make a lot of money from winning tournaments. Across esports leagues, franchises are stretching the definition of what it means to be a team. Instead of simply fielding a roster designed to compete in a given esport, these organizations are also contracting full-time influencers, launching training academies and even developing proprietary software to analyze in-game statistics. In a filing to the U.S. Securities and Exchange Commission, FaZe Clan, a gaming lifestyle and esports brand that is planning to go public with a $1 billion valuation, reported that esports and gaming account for approximately 7.8 percent of the company’s total revenue in 2020.

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The companies behind professional esports leagues, like Activision Blizzard and Riot Games, earn their revenue from the multimillion-dollar franchise fees that teams must pay to compete as well as the broadcasting rights these companies sell to platforms like Twitch and YouTube. Earlier this year, a Chinese streaming platform paid $310 million for a five-year deal to exclusively stream “League of Legends” matches in China. None of that revenue is tied directly to events with live audiences. Even if live events were to go away, leagues can still sell broadcast rights packages to online events.

Every esports league understands that gaming competitions in front of energized live audiences provide the best overall experience. However, there’s an open question regarding how big and how often these in-person tournaments should happen. During the pandemic, teams have largely been competing online, and there have been very few in-person events played over a local network. Leagues have been broadcasting matches without a live audience, which cuts the costs of producing the live event.

These leagues split the costs of hosting live events in different ways. Riot hosts a smaller number of marquee events, and the league pays for the arena, travel expenses and production. Last year, Activision Blizzard’s Overwatch League (OWL) teams were required to host at least two weekend events — meaning teams had to secure venues and practice facilities — but the pandemic upended those plans. After a year of competing online, Activision Blizzard laid off as many as 50 employees who oversaw in-person events for Call of Duty League (CDL) and Overwatch League in March 2021.

CDL and OWL did host a few smaller live events this year where possible — including the first matches in front of fans in China and two Call of Duty tournaments in Arlington, Texas, and Los Angeles. Several CDL players tested positive for the coronavirus after attending the event in Texas.

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In a statement, a spokesperson for Activision Blizzard Esports said live events will continue to be a focus for the league next year.

“Live events are an important part of both the Overwatch League and Call of Duty League strategies in 2022,” the statement reads. “While long planning timelines and continued uncertainty regarding travel and safety make this challenging, we want to bring back events as soon as it’s safe to do so and logistically feasible.”

For the past month, Riot Games has been hosting the League of Legends World Championship, a tournament where 22 professional teams across the globe compete in person to win part of a $2,225,000 prize pool. This year, DWG Kia, formerly known as Damwon Gaming, from Korea will face off with Edward Gaming from Riot’s China-based league for the title on Nov. 6. The tournament is the biggest annual event for what is the most popular PC game in the world; over 100 million people play “League of Legends” every month.

Next year, Riot plans to host Worlds in four North American cities. The company plans to name those locations at the end of November. Needham did say Riot selects which cities will host a tournament based on the number of people who play the game there. It will be the first time since 2016 that Worlds is hosted in North America, if all goes according to plan.

“We’re not in the driver’s seat on when fans will be able to come back to our events,” Needham said. “We are very anxious to bring an audience back. We will do that. But, we’re only going to do it when we know it’s going to be safe for everybody involved.”

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Riot is expanding its esports portfolio beyond “League of Legends” as well. Most recently, the company released “League of Legends: Wild Rift,” a version of the original game built specifically for mobile devices, in China last month. Needham said players there already expect mobile games to have an esports circuit attached to the title because they “want to see that higher level of competition.”

Riot wants to become “a 21st-century entertainment company that’s deeply rooted in games,” Needham said. On Saturday, the same day DWG Kia takes on Edward Gaming in the championship finals, Riot’s “League of Legends” animated series “Arcane” will debut on Netflix. The goal is to eventually reach a billion fans for “League,” which Needham admits could take generations.

Asked whether that means Riot Games will try to start appealing to the average person on the street who’s never played “League” or watched a match before, Needham said the focus of the esports league will remain on engaging current fans or winning over former players who are taking a break from the game.

“I’ll be honest. We don’t waste a lot of calories trying to convert nonleague players to watching League of Legends Esports,” Needham said. “Fundamental to the experience is knowing the game.”