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Schalke 04 pull out of EU LCS

German newspaper Sport Bild reported this week that Schalke 04, the German football club that currently participates in the EU LCS, is set to withdraw from the competition. The report suggested Schalke’s decision was taken over the high cost of entry demanded by Riot, with a spot costing around the €10m euro mark for those companies that want to guarantee a spot in the competition.

According to speculation and other reports, they may be replaced by another European football side, with three Premier League clubs mentioned in the article including Arsenal, Crystal Palace and Swansea. It remains to be seen if those moves materialise, but it is always possible that the Gunners finally moved Arsene Wenger from the dugout because they think he’s the ideal man to run their League of Legends team, we suppose.

The switch to franchising was only officially confirmed on March 28, 2018. In a move that will seem far more familiar to US fans than European sport fans, promotion and relegation were removed in favor of long-term buy ins, with fees as mentioned, €8.5m for existing EU LCS teams and €10.5M if you want to join the club. Given all of this, the minimum player salary increases (from €24K to €60K annually) seem almost exploitative, but player remuneration in franchise leagues is another, much larger story.

Sponsors are impossible

It seems as though they are not the only team struggling to justify the costs, as Bild also reported on Unicorns of Love owner Jos Mallant confirming he was not going to be able to raise the full buy-in fee, and “finding the necessary sponsors by the end of the deadline in Europe is impossible". Fortunately, there is a bucket of venture capital for anyone with half a business plan, but this sort of model can only be considered short-term if it requires continued outside investment to sustain.

This comes at a time when the value of franchise spots is up for debate, not just around League of Legends but also Overwatch, and when other European sports teams have shown there is another way to operate. The model demonstrated by FC Copenhagen and North is probably not worth copying unless you really hate money and trophies, but PSG’s recent partnership with LGD is working out nicely, with the first major DotA 2 win for a Chinese team outside of China their reward.

Writers in the esports space have speculated that this move is related to Schalke making their way into the Champions League next term, and the need to invest accordingly.

This is only made more pressing by the fact they are likely to lose not one, but two young players for free this summer, with Max Meyer on his way and Leon Goretzka the latest to join the German giants Bayern, who sit atop the league system like a bowling ball placed atop a delicate souffle.

As with the Overwatch League, it will also be interesting to see if the owners attempt to maintain this level of investment from the parties buying in, or if they are forced to adjust their demands as the market learns what the spot is worth. For now, the stories suggest that demand for franchise spots is far greater in the USA, but for Riot to maintain that level of investment it needs to be the same on both sides of the pond.

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