eSports and Salary Transparency

By Jacob Toman

Over the last few weeks there has been quite a stir in the Esports community, more specifically the League of Legends Esports community. A current team owner from an up & coming Esports organization announced he would be making his players’ salaries visible to the public. This was an attempt to increase transparency and awareness of player compensation within the LoL Esports world.

The original announcement caused a stir on various forms of social media, as well as online message boards (the proverbial digital water coolers of internet gamers). Other current Esports owners have chimed in with their thoughts on the topic, as well as former pro esports players, and talk show hosts.

 

The issue of transparency is multifaceted due to the parties involved. Investors, owners, players, fans, and game developers all have different levels of interest in this topic. When these different voices are considered the issue becomes quite complex. One of these complexities is that the team releasing its salaries, team Ember, is a newly formed challenger team. They are not a team currently on the Riot-approved professional series circuit, but are rather vying for a spot in that circuit in the upcoming months and promotional spring split. In other words, this would be like a triple A baseball team proudly announcing their roster salaries for players. They aren’t in the majors yet and there is relatively little risk in releasing these numbers.

Currently the LoL Esports landscape looks like this:

Riot has 100% ownership of the professional circuit of players, teams, and events that it sponsors, but it wasn't always this way for professional events (see season 1-2 circa 2010-2012). While Riot has always controlled the largest tournament (the world championship), they haven't always had as tight a grip on the tournament scene as they now do. Their rules changed to make competitive professional teams that were compensated by Riot (think of it as team subsidies: monies put forward by Riot to ensure there is a minimum salary for competing in the professional league of legends scene) play and appear in only Riot-sanctioned and Riot-approved events.

This current position gives Riot almost all of the bargaining power with professional teams and players. To their credit, Riot supports their own game better than anyone else currently in the industry. This is evidenced in their commitment to growing LoL as a global Esport. Riot attracts more viewers and uses bigger venues globally than other dedicated leagues and Esports competition businesses. So far the only "catch" the Riot’s control of the pro scene has been the exclusive rights Riot has to teams participating in their professional season (in North America this is known as the League Championship Series or NALCS). This excludes participating teams from competing in other tournaments other than official Riot events. All in all it’s not a bad deal, nor one that's uncommon (MLB, NBA, NFL, and NHL all have similar exclusive type rights built into their collective bargaining agreements between the league and the players union. Unless otherwise specifically negotiated, you can't play for multiple teams or multiple competition contracts). This is what Riot has thus far enforced through their terms of contract with NALCS teams.

 

What does this have to do with the current dialogue of player salaries and transparency?

It's relatively simple to find out what Riot gives as a supplement to teams each season. What information is nigh impossible to find is what particular teams are paying to their individual players beyond the Riot-subsidized minimum salary. Knowledge is power. At the moment, because players’ salaries and contracts are not public record, owners have massive advantages when recruiting and negotiating with future roster prospects and current players seeking extensions.

Market value is a fairly simple concept in North American business. A player, item, or employee is worth precisely what a person is willing to pay. If I buy a banana at the store for $1 and then immediately see the next customer paying 50c I'm going to have some questions for the store as to why the price changed for bananas so quickly. If however I have no knowledge of the person behind me getting the less expensive banana I have no qualm or complaint, and lack the ability to gauge whether or not I'm getting a good value.

Understanding the market value of a commodity or service lies within comparison. Without sufficient knowledge of a comparable deal, there is no way to establish a going rate and thereby determine market value.

In the LoL world this means players sign contracts without knowing how fit the deal is for their respective services. In traditional sports, agents and lawyers are hired by players and organizations to help secure value in contract negotiations. You can simply tune in to a sports channel and watch the bottom ticker display new deals, contracts, and player negotiations.

In Esports, although it sounds a bit noire, deals are negotiated mostly in the dark for the players signing on the dotted line. Currently Riot has no legal recourse or action available, and has done a great thing to help stabilize the scene by providing base minimum salaries.

Several different suggestions have been made recently as the discussion has grown from an in-house advertisement for one LoL team (Ember) into an at-large Esports discussion across games. Player unions, agents, salary caps,  and franchising have all been mentioned by various influential voices.

This brings us to a strange question as Christians: what does God have to say about business negotiations and market value?

In Genesis there are multiple narratives that include good and bad examples of conflict within negotiations.

Genesis 13

Abram and Lot are both so blessed by God, that they have to separate due to the immense amount of animals and herds they possess. They negotiated an agreement together despite the growing hostility between their employees. We can take from this narrative that employers need to look out for the welfare of their employees and are responsible for seeking out peace during labor disputes.

Genesis 25

Jacob and Esau negotiated a settlement wherein Jacob received the birthright of Esau in exchange for a meal. This negotiation is clearly not one that either party was completely comfortable with. If Jacob felt he had fairly negotiated his brother's birthright, there would have been no need to deceive his dying father Isaac in order to secure his blessing.

Genesis 29

Jacob is again in the midst of negotiations with his uncle Laban over his fair wages. Laban deceives Jacob for his first 7 years wages by switching out the agreed upon terms. Deception in negotiations leads to distrust and harmful family dynamics over the next 7 years of Jacob's employment at Laban’s.

 

Scripture takes seriously covenants, contracts, and agreements between invested parties. Jesus in the gospel of Matthew 5:37 commands "let your yes be yes, and your no be no". When bargaining, deception and expansion shouldn’t be the goal. Once terms have been agreed upon, those terms should be met. When two parties come together to make an agreement, deception is always looked down upon within scripture. Conflicts arising between employees and employers is due to sin within the negotiating parties.

What causes quarrels and what causes fights among you? Is it not this, that your passions are at war within you? You desire and do not have, so you murder. You covet and cannot obtain, so you fight and quarrel. You do not have, because you do not ask.
James 4:1-2

In Matthew 20:1-16 Jesus tells the parable of an employer who goes through several hiring waves of workers. When these workers are hired, they agree to their wages up front. At the end of the day they grumble because some who worked for more hours, were payed the same wages. At least one of the lessons here points back to Jesus’ command in Matthew 5:37. These workers agreed to work for this wage, regardless of the wage the employer would pay others. Once two parties have agreed upon a work arrangement, both parties, employer and employee need to honor that agreement faithfully.

 

What does this scriptural truth mean for Esports?

I’d like to suggest 2 Recommendations that are already in the works within esports:

  1. Let your yes be yes and let your no be no

Honesty and faithfulness must be upheld by everyone involved in this player salary discussion. When (not if, as it’s just a matter of time now before public pressure and legal means force teams to disclose salary information) players learn of the various contracts of other players they can certainly use that information to negotiate new contracts in the future. Be warned not to sign on the dotted line without a willing attitude to submit to the agreed terms!

Teams, businesses, and organizations also must honor their contracts faithfully. There have been plenty of incidents of team managers stripping teams budgets down in order to take a larger profit (see example bad management and player strife here). When a team, business, or organization puts forward a contract towards a player, a contractor, a staffer, or partner, they must do everything in their power to ensure the terms of the agreement are met.

If players want to unionize (as many have discussed in the collegiate football scene) in Esports, that is within their rights to do so, so long as their attempt to unionize doesn’t breach contract with their current employer. While this may sound like a catch 22 - If players are under contract, how can they form a union - contracts in esports are of relatively short duration (2 years is a long deal in the current LoL Esports world) and player movement from different organizations is rather fluid at the moment. There is undoubtedly a risk to forming a union. In one discussion I had this week with an esports enthusiast he pointed out that even if one or two players are willing to be martyrs for the formation of a union, it won’t shift the industry as a whole. Unionization will take a massive effort by every player and organization involved in order to form a players union. Small partnerships have already begun as precursors to unions within esports. Even with these small partnerships, it’s difficult to see full-scale player unions forming in the next few years. This isn’t just difficult, but at the moment some have called it impossible.

2. Introduce Franchising

A quick example from traditional sports:

MLB has recently developed revenue sharing as a structure, but has no hard salary cap, which means that any team and owner is allowed to spend as much money as they'd like to acquire a player and grow a team's salaries. This is why for years the Yankees were so successful as they outbid & outspent other organizations that just didn't have the same financial capital. Teams like the Marlins and Royals have much smaller comparative salaries as teams than teams like the Yankees or dodgers. This vast discrepancy is due to the lack of a "hard cap".

The NBA & NFL both share "hard cap" styles to their teams expenditures. There are subtle nuanced differences between them, although both operate in a world quite different from MLB. Where MLB allows for spending to the heart's desire, the NFL & NBA penalize teams for going "over the cap" or spending an excess amount of money beyond what the league office & player unions have agreed in their collective bargaining agreement. So when a team like the Lakers, Knicks, or Celtics decide they want to pursue a player, they have to factor that a player's contract is going to make up a % of their teams allowable roster salary space. If the salary cap for a season is set to $95mil, and you have 15 roster spots, 1 player at a max level deal of $25mil (annually) will leave you with $70mil for the other 14 roster spots. The same is true with the NFL, although their salary cap is much higher, but also factors in a much larger roster size (cap usually between 140-150mil for teams of 55 players).

In Esports there is no franchise collective to set a cap (hard, soft, etc). Riot for LoL provides supplementary salaries to NALCS players (which is in effect some sort of base minimum cap, but it is not a limit, it is a base threshold). Organizations like Team Ember that are trying to earn a spot in the NALCS are able to compete for a spot due to this promotional system within LoL Esports currently. Every season there are 2 “splits” in the NALCS scene, the spring & summer. These constitute two halves of the season prior to the world championships (LoL’s version of the playoffs). Since there are 10 spots available in the NALCS, with 1 spot automatically relegated ( the team with the 10th best removed is removed from the NALCS) and 2 spots (8th and 9th) go into a playoff to try and maintain their place in the NALCS vs two of the top finishing challenger teams (which is what Team Ember is hoping to be this upcoming year), there are 3 potential places for new teams each split. Each season this means an automatic turnover of at least 2 places in the NALCS and the potential for 6 total places to be swapped out. That’s an incredible amount of potential change in the professional scene.

What I am about to say is not based on any personal knowledge I have of the members of team Ember, it is rather a hypothetical situation that has the potential for reality due to the lack of franchising within LoL Esports presently.

It is currently cheaper to try and build a team to compete for an NALCS spot, than it is to buy a team in the NALCS outright. A former NALCS team recently sold for around $1 Million USD  to former NBA Los Angeles Laker player Rick Fox. If team Ember were to build an NALCS competitive team, and the costs of their infrastructure, salaries, and expenses totaled $500,000, the owners of the team could turn around and sell the team next season for an estimated $1.4 Million USD (given the growth rate in sales of NALCS teams over the last 2 years). That’s a huge ROI within a 6-12 month period. I’m not saying this is what the owners of team Ember are hoping to do, I’m simply pointing out that in this very wild time in Esports, these sorts of transactions and motivations are present due to a lack of franchising.  

With the high potential for turnover and the competitive nature of professional esports, these 10 spots within the NALCS are in high demand. Due to Riot’s grip on the professional scene, teams that lose out of the NALCS don’t have other competitive professional options for continuing their careers. In professional basketball, many professional players who (for whatever reason) aren’t able to secure a contract in the NBA can go play in Europe, or in Asia. The NBA doesn’t have a global stranglehold on the game of basketball. Riot, however, does have a global hold on the professional Esports scene.

By Franchising 10 different clubs to play in the Riot-controlled NALCS salary caps could be introduced, player movement and organizational development stabilized.

 

Do you have $500K lying around and you’d like to get involved in competitive Esports?

How does your company handle employee salary?

If you’re an employer, how do you handle employee negotiations?

Let us know in the comments below.