A closer look at the cost of operating an LPL team behind the scenes

Foreword: League of Legends is one of the most popular games at the moment and commercializing faster and faster. In the advent of LPL’s fourth anniversary, let us take a look at the operational costs, sources of profit, and business management from behind the scenes.

How much does it cost to manage a team?

The annual cost of a team exceeds 20 million RMB.

On a night of July 2015, a timid guy called “Xiao Wang” sat in front of a computer, wrapping up the career of a famous ID in LoL, “Godlike”.

According to Godlike’s description (http://www.carry6.com/lol/zt/godlike804/index.html), his growth in career income basically follows the game of “adding zeroes”: S2 only including board and lodging, pre-S3 LPL starting position monthly salary – ¥5000, S4 North American minimum salary $24,000 (approximately ¥150,000 using the average currency conversion that year), and Godlike returned in S5 for a signing bonus of ¥100,000. If we estimate conservatively, Godlike’s S5 salary should be at least ¥300,000. This also symbolizes the frenzy of capital growth in the LoL professional scene for the past three years.

From the start of S5 when the KTA brothers were in the midst of a tug of war by the major organizations; to the Samsung organization’s 10-man entrance to China on even a higher level of free-for-all grabs; to when the person dubbed “Hou boss” allegedly spent hundreds of millions buying OMG and alluring Uzi; the bosses from all kinds of LPL teams flaunted the power of the RMB, showcasing their iron will and exuding the scent of a spendthrift. Well, how much does it cost for a spendthrift to “play” with a LPL team for a year?

1.      Basic Salary

For many reasons, the income of professional LPL players are hidden in the clouds, unbeknownst to anyone at the moment. But thank god that we were able to take a glimpse at the details. Referring to Korea’s KESPA regulations that the minimum annual income is ¥110,000 RMB and the NA LCS minimum monthly income of $4,000, we can initially estimate that the starting salary of the 2015 LPL season is about ¥100,000 annually. In last year’s Sicca incident, Aluka and him in 2014 were the starters but did not reach star level. Their salary were ¥20,000 per month plus other competition fees for a total of ¥30,000 per month. And according to Caomei’s retirement report, his pre-retirement monthly salary was ¥20,000, so we can see that starters sign for about ¥200,000-400,000 a year. Furthermore, we can find some clues by looking at the basic salary of top tier players and Korean imports.

In Whitezz’s stream, he estimated that Uzi’s monthly income is about ¥50,000-80,000 monthly and ¥600,000-960,000 annually. Since Uzi is a top player in China and one of the highest ranked ADCs in the world, his salary should be at the top of the Chinese star players. Because of this, the salary of top Chinese players should not exceed ¥900,000. According to the interview of many professional team managers, word of mouth, Imp’s responses on his Reddit AMA, and many public reports, we can figure out that Imp’s salary is higher than ¥900,000, but not by too much.

According to a foreign media report in 2014, the former mid-laner for SSB, Dade, entered LPL with an annual salary about $250,000, or about ¥1,500,000. According to Sina.com’s report, Faker declined an offer of ¥1,200,000 signing bonus + ¥2,000,000 annual salary from a Chinese streaming platform prior to the start of the 2015 season. Since Faker declined the ¥2,000,000 offer and Dade’s annual salary is the highest known at the moment, we can logically deduct that Korean imports and top Chinese players average about ¥900,000-¥1,600,000 salary per year.

2.      Signing Bonus

In 2015, with the stimulation of many LPL teams acquiring Korean imports in preparation of competition, a huge wave of import grabbing started. And the most popular method of grabbing such players is through a competitive signing bonus. Therefore, the signing bonus is one of the higher categories of costs in a club. Then how much is the signing bonus from the pro players?

At the start of 2014, the ACE league fined the ACFUN team for poaching. We can see that the average player’s singing bonus was about ¥400,000. At the same time, the drama between Sicca and team PE was blowing up. PE formally decided to give Sicca a ¥350,000 signing bonus, but Sicca declined. After negotiations, the club added ¥150,000. Therefore, Sicca’s signing bonus was about ¥500,000.

According to Whitezz’s estimates and other similar reports, Uzi’s signing bonus could have reached as high as ¥3,000,000. Therefore, sticking with the estimates, the average, past-prime players receive about ¥400,000 signing bonus, starting players about ¥500-600,000, star players about ¥1,000-1,500,000, and top players about ¥2,000-3,000,000.

3.      Transfer fees

There hasn’t been a large amount of player transfers within LPL yet, therefore this should not be included in the main expenditure category. But according to recent statistics development, there is a reason to believe that transfer fees would reach millions of RMB initially for the star LPL players. The difference is the money is paid to the other clubs.

4.      Team base operational costs

LPL teams basically rent villas as the base for their teams to practice and reside. For example, EDG’s location in Shanghai is especially luxurious. The monthly rent of businesses around EDG’s base cost about ¥3.78/square meter/day (including property tax).

If we estimate conservatively about EDG’s 500 square meter base, the annual rent fee is about ¥700,000. In reality, despite the fact that the base of other teams are not as luxurious, the rent fees still should not be below ¥300,000 per year. If the team hires 1 cleaning lady, 1 cooking lady, 1 security staff, and 1 manager for the minimal staff configuration, the annual aggregate salary of the backend staff should not be below ¥200,000.

5.      Team business operational costs

At the moment, every team established its own independent advertising and business management teams. If we calculate the minimal configuration of 1 official Weibo manager, 1 media manager, 1 captain, 2 assistant coaches or analysts, and 1 head coach, without factoring in the extra value of the Korean coaches, the operational costs should exceed ¥500,000 per year.

According to the calculations above, operating a LPL team costs about ¥7,770,000 minimum (very conservative estimation). With teams such as LGD and EDG with super-star level players, their annual expenditures should be at minimum ¥15,000,000. And teams like OMG that continues to sign its own star players and find additional super-star players, in 2015 their expenditure should have exceeded ¥20,000,000. If we look at a small-spending team like UP, their annual feed should be according to the following chart:

The elusive “mega-sharks”

A-Share listings or backend capital start-up requirements

How big of an investment is ¥20,000,000? Compared to the well-run, well-managed Chinese professional basketball league teams, an annual minimum investment is only about ¥25-30 million. With this endless sea of investment pouring into the teams, it makes people wonder just what kind of mysterious bosses are they?  Relying on the power of the Baidu search engine once again, I organized the 12 LPL teams with information found online.

According to the chart, we can see that A-Share listings or other backend capital start-up requirements. Including:

1.       WE, OMG, M3. According to sources from interviews, whether OMG still owns WE to this day cannot be confirmed. (Translator’s note: company’s official description basically hints that the boss of OMG owns both OMG and WE)

2.       EDG: according to Baidu descriptions, one of the supporters is Ed Chu. According to information online, Ed Chu, (basically associated with another big boss in China).

3.       IG: everyone should be familiar, no need to go in detail here.

4.       Snake: according to reports, (basically the son of a big boss)

5.       VG and LGD: according to reports, (basically another son of a big boss. According to other sources, he is also the son in law of another big boss).

6.       RNG and KING: cannot be confirmed. According to information on the internet, same owner as Royal Club.

7.       QG: cannot be confirmed. According to information on the internet, maybe the son of a big boss.

8.       UP: cannot be confirmed. According to information on the internet, maybe same owner as VG.

Confusing relationships between teams

How many teams does one owner have?

According to Riot’s and ACE league’s regulations, from the start of Spring Split 2015, LPL will implement a one-team police (i.e. Independent Corporation, name, company, coaches, and base). But these regulations seems to be accepted barely by some people.

1.      How many teams does boss “Hou” actually owns?

According to information revealed by several forums, boss “Hou” owns at least three teams: OMG, WE, and M3. There is telephone interview and registration change forms to prove this.

But I disagree with the rumour that OMG and Royal Club share the same boss. According to Whitezz’s speculation of Uzi’s transfer fee being higher than ¥5 million, if OMG and Royal Club share the same boss, then Whitezz would not have speculated this kind of fee.

2.      VG and LGD have the same boss?

According to information on the internet, Samsung’s head coach Homme entered VG and LGD as a shared coach. Despite this rumour of LGD and VG sharing the same boss being constant, with this kind of straightforward information, it makes people wonder if this is actually true.

3.      The unexplainable issue with Royal Club’s coach

After Royal Club was relegated in the 2015 Spring Split, using all kinds of puzzling purchases and name changes, Royal Club seemingly revived in LPL. At the same time, this brought in the speculation of KING/RNG/SHR/UP sharing the same boss. At least looking at the team rosters, this kind of speculation is not entirely baseless.

Summary

After collecting all kinds of information from the teams online, we shockingly discovered that, “A-Share listings” already became the requirement behind starting up LPL professional teams. And for the dominating teams in the Summer Split—EDG, QG and LGD—their supporters are either widely known companies or industry leaders in China with public listings. The “small pond” that is LPL in our memory has already gathered mega-sharks. Whether the sharks simply spent the money because they could or they smelt the scent of profit is another topic for the future.