Unicorns of Love owner Jos Mallant has published a statement describing what he believes are the problems in the EU LCS going forward, including increased player salaries, limited revenue opportunities and the challenges to come if the EU LCS were to regionalize.
On the subject of player salaries, Mallant states that there has been an exponential increase in player salaries following their status change from contractors to employees. Including the costs of health insurance, unemployment benefits, social fees and compensation for tax, salaries quickly grew out of control for UoL and other organizations.
"Organisations simply invested tons of money to buy their rosters, just focussing on individual performance and putting rosters together as boy bands," Mallant said. "That’s with the hope that you can buy success and the return of investment will come one day. As a result the players salaries went out of proportion compared to the income of the organisations."
In terms of income, Mallant identifies three primary sources of revenue for organizations in the EU LCS: compensation from Riot Games, merchandising and sponsorships. According to Mallant, those sources of income combined "cannot compensate the costs of a normal operating organisation at the moment."
Mallant referenced a report by ESPN's Jacob Wolf that the EU LCS will be regionalized into four separate leagues that will feed into one premier league, stating that the changes would greatly impact the investment opportunities for all current organizations in the league.
"When the future plans for EU LCS as reported by ESPN are correct, this will for sure have several economic short time consequences and further create some possible long time effects," he said.
"For the current EU LCS teams it means new insecurities, new investments and a loss of value of existing investments. The real shocker for all current organisations and investors is the [realization] that RIOT can do these changes without any saying of the organisations. Although that’s the natural risk of investing into organisations playing in a non-franchised league the behaviour of RIOT in this matter will have a direct impact on the risk assessment of the new organisations and future investors. For the current investors it means that their ROI [return on investment] plans are obsolete and the whole investment has to be newly valued."
Ultimately, Mallant believes that the proposed changes to the EU LCS will result in organizations lowering their financial commitment towards LoL in the immediate future. So long as Riot does not provide a clear path towards what the EU LCS will eventually be, particularly in comparison to the NA LCS, the EU LCS will play second fiddle in terms of investment.
"The only logical step for current organisations and investors is to lower their financial commitment for LOL in the next year(s)," Mallant said. "At least as long there is no clear path how organisations come finally to a situation with positive results. The final outcome is that esports in EU will suffer badly, at least in the first years."
Mallant's statement on the EU LCS' future follows two separate letters published by H2K-Gaming that stated that the organization would leave the EU LCS unless Riot implemented a new financial and operating structure for the league.
Earlier today, Paris Saint-Germain announced that they would be leaving League of Legends over the uncertain future of the EU LCS after originally entering esports in 2016.
Preston Dozsa is a news editor for theScore esports. You can follow him on Twitter.