H2K CEO Susan Tully criticized Riot's practice of relegating low ranked LCS teams who cannot defend their spot in promotion tournaments to the Challenger Series in a Reddit AMA Monday.
The debate on the current system was reignited this week, in part thanks to a relegation match between NRG Esports and Echo Fox for a spot in the NA LCS. With both organizations representing major, recent investments in esports, NRG's relegation to the Challenger Series left some fans debating whether the LCS should move to a franchising system more similar to many North American sports leagues.
"It is important for the eSports ecosystem to have financial stability and a relegation system detracts from that. Without stability there will be less money in the industry which harms not only the organizations but more importantly the players and the fans," she wrote.
"It takes a huge personal effort as well as substantial financial commitments to make a team successful. Its just not fair that this can be wiped away because a team has a bad split, for whatever reason. All teams, including the New York Yankees have down cycles. Those down cycles should not cost the team a spot in the league."
In a response to /u/lotionanthemage who asked about Riot's unique position as sole owner of the sport, she called out Riot for exerting too much control over League of Legend's business development rather than letting an ecosystem grow naturally, in addition to criticizing their arbitration policy.
"I believe that eSports have a tremendous viewership and therefore tremendous potential. As you have correctly identified, a big problem is that the game is owned by the game developer," she wrote. "We strongly support neutral arbitration for any dispute. We believe the teams will have to play a big role in shaping future policy."
According to Tully, the relationship between Riot and LCS teams is further imbalanced by Riot making money off gamers attracted to League by their favorite teams while the teams can only make money off of sponsorships and merchandising. She says that a revenue sharing model would help newer teams grow and be healthier for the sport.
"The game developers get substantially all of the revenue and we bear substantially all of the expenses," she said in response to /u/Bynjee. "Older brands, with significant brand notoriety, have been able to monetize with sponsorships and sale of merchandise. The big challenge is to now persuade the developers to provide meaningful revenue sharing. Without it, the business model does not work."
Despite Tully's criticisms, H2K have no fear of relegation as they prepare to face off against Fnatic on Aug. 14 in the quarterfinals of the EU LCS summer playoffs.
Sasha Erfanian wonders what Tully intends to do about the occupation of Riverrun. Follow him on Twitter.