H2K’S LETTER TO THE EU LCS COMMUNITY

While H2K’s ownership is based in the U.S., H2K’s roots are in Europe and we are committed to the EU region so long as we continue to compete in the League of Legends.

During the almost two years since the change in H2K ownership, we have been privileged to develop close personal relationships with our players, cultivate a brand with strong ties to European fans and worked with great European partners including our media agency, sponsors and talented professional advisors. We believe that our core values and the environment we have created for our players are distinctly European.  It’s for these reasons and others that players have been attracted to working with H2K and why all members of the 2017 H2K starting roster signed with H2K without seeking offers from other teams.

We believe that League of Legends is the major league of esports and that RIOT has developed the most structured and organized league in esports. We also believe that RIOT, as the developer and owner of the software, is entitled and should derive very substantial financial benefits for the risks it has taken in developing a highly creative and unique electronic game which is played worldwide by more than 100 million users per month. We too love this game, the competitive league created around it and all the fans that support H2K and the EU LCS.

Sadly, however, from a business perspective we consider it irrational to continue in a partnership where our partner earns very substantial annual profits while, by contrast, we incur annual losses of over €1,000,000. The financial arrangement between RIOT and the teams is unfortunately backward and upside down. The fact is that most League of Legends teams lose money.  Operating costs continue to increase dramatically and RIOT’s team compensation only covers a small fraction of those costs. In essence, team losses are subsidizing the marketing activities of a multi-billion dollar company.

H2K as a premier team in the EU LCS, together with the other professional teams competing in the League of Legends, are the fundamental foundation of the League of Legends’ food chain. It’s the teams who identify, secure and financially support the players. It’s the teams who, in building their brands, also promote RIOT and the League of Legends. It’s the teams who principally promote their players and attract the loyalty of fans. It’s the teams who will fight hard to retain the best EU players in the EU while competing with the giant size NA LCS franchise structure. Without H2K and the other teams in the professional leagues, there would be no games for fans to watch, RIOT’s $2 billion in annual in- game sales would decline dramatically, RIOT’s streaming/broadcasting revenues (which will exceed  $ 50 million annually) together with in- game ads and major league worldwide sponsorships would disappear.

With H2K, since January of 2017, having already subsidized RIOT in excess of €2,000,000, the current situation is not sustainable and cannot continue. The partnership with RIOT is neither rational nor fair. As our partner, RIOT should provide financial stability for the teams. The teams in the EU LCS should not be expected to continue to subsidize a multi-billion dollar company.

Accordingly, H2K ownership has made the decision that we will no longer financially subsidize RIOT and will not continue in the EU LCS beyond the 2017 season UNLESS RIOT creates a new financial and operating structure. RIOT must provide the EU LCS teams with the realistic opportunity to earn through subsidies and revenue sharing, minimum compensation of at least €850,000 per year. Recognizing that as teams we must perform and contribute to the success of the league, we accept that a portion of the revenue sharing should be based on competitive performance, viewership, effective branding activities and other reasonable metrics. Also, critically important to the teams is that any planned changes to the EU LCS structure planned by RIOT for 2018 and beyond must actually increase the value of the legacy team slots and not diminish them.

H2K ownership and management very much wish to continue in the EU LCS. We have been patient partners with RIOT and they are fully aware of our concerns which have been discussed for many months. We now look to RIOT to make the changes dictated by fairness and common sense.

 

Richard Lippe, Board Co Chairman H2K

Susan Tully, CEO H2K