Due to the current LCS sponsorship ecosystem, Phoenix1 co-owner Michael Moore told the hosts of the Shotcallers podcast that his organization is projected to lose $500,000 after just one split in the NA LCS.
Phoenix1 entered the LCS after buying Team Impulse's NA LCS spot and were considered to be one of the weaker teams going into the summer split. While P1 managed to prove their doubters wrong with a strong end to the split — which included a win over first-place Team SoloMid — Moore says the reputation haunted them when it came to sponsors.
"When you're a new team, people aren't really sure about you, you don't really have a lot of name recognition for your players necessarily," Moore said on the podcast, echoing statements made by Enemy co-owner Robert "Chachi" Stemmler. "With the current relegation system sponsors are worried 'okay, you probably have a really good shot of nothing being around next split, next year. Sponsors are pretty hesitant in those situations.'"
According to Moore, Phoenix1 was not able to secure any monetary sponsorships going into the summer split. He says that while the team got a few product sponsorships — with companies sending them peripherals like computer mice and keyboards ‚ but not much else. Phoenix1's player jerseys feature logos for CyberPowerPC, Logitech, Zowie, DX Racer and Soylent.
Moore went on to say that because sponsors are so hesitant to invest in teams that could end up being relegated, that the only source of revenue his team had for the split was the stipend Riot provides teams to pay players their minimum required compensation.
"As a lot of people around the scene have pointed out, costs have definitely gone up in the past year, the past couple of years," Moore said. "I don't think anyone has really given much context specifically about what those numbers actually look like. I can say, given how much the Riot stipend is, it just covers the one split — June, July August — but it needs to carry us through the rest of the off-season until next split.
"Based on our projected budget and how things have already gone so far, we're projected to probably lose $500,000 on this split alone."
Moore claimed that Phoenix1's player salaries are "conservative" when compared to the larger teams in the league, though none of the NA LCS teams have made their player salaries public.
While these salaries certainly increase operating costs, Moore says that one of the monetary issues that hasn't been discussed as much in the wake of Riot president Marc "Tryndamere" Merrill's controversial comments about LCS team revenues is the rising cost of purchasing a spot in the league. He says that the rumors of teams paying $1-2 million dollars may lead people to assume that the costs are high because profits are as well, but also says that that isn't the case.
"If people are willing to spend that much money to become part of this there must be a reason," Moore said. "And people assume, I think that reason is that there's profit to made right now. But I think currently the reason they're valued so highly is because of projected value. People thinking "I'll invest some money now, operate for a while, maybe in the red, but hopefully in the future there will be value there, there will be revenue, this will be more profits.'"
And while his experience so far hasn't quite lived up to those rumors, Moore said he does have hope for change. Following TSM owner Andy "Reginald" Dinh leading the charge with further criticism of Riot's treatment of teams participating in the LCS and supporting organizations using the #LCSForever hashtag, Moore said that change can come, it will just take time.
"We all feel these pressures, and I think there needs to be a shift," he said. "LCS slots and the value is mostly centered around projected value, and there needs to be a shift from losing money and expecting value to be there in the future and there's a tipping point where the business starts being profitable. I don't think that shift is just going to happen overnight, we need to start taking steps towards a more sustainable ecosystem."
Daniel Rosen is a news editor for theScore esports. You can follow him on Twitter.