The esports salary market is headed toward a correction

By Seb Joseph

The current economic downturn continues to expose the frailty of esports’ financial footing and critical need for reforms. Now, sky-high salaries for the best players — once deemed a cost of doing business for successful teams — is a cause for concern.

That’s the worry making the rounds among esports circles these days. And those insiders may have a point. The money that largely fuels player salaries in esports — i.e., from venture capital investors and advertisers — is drying up as the economy gets dicier. The scarcer those funds become, the harder it is for esports organizations to secure (and retain) the best talent.

Look at what happened to teams participating in the Overwatch League and Call of Duty League, as examples. Teams reportedly owe around $400 million to publisher Activision Blizzard, which agreed to defer franchise payments when the COVID pandemic struck. It seems likely those payments will be deferred yet further. Activision Blizzard did not respond to a request for comment.

“We’re watching [venture capitalist investors] check out and pull out entirely of this space,” said Ryan Morrison, CEO of talent management firm Evolved Talent. “VCs expected [team owners] to 10x their business model, and they did that by paying absurd salaries to really good players to try to win and build their brand. But you can’t 10x an esports organization like that, so these team owners are in a place where they’re now hemorrhaging money with no success.”

Esports teams agree that to be successful they need the best players, and because esports salaries operate according to an open market system (there is no unionization in esports leagues and thus no collective bargaining agreements determining what teams can spend), the only thing that limits a team’s spending is its owner. Rich teams pay big for the players they want, which has destabilized salaries across the board because it boosts the expectations of players.

Some Valorant pros are earning north of $40,000 per month — more than $480,000 a year — according to two current players with tier-one experience and confirmed by an executive who has negotiated player contracts in Valorant. Many other players, some playing for partnered teams and some not, are earning $20,000-$40,000 per month. The average Valorant team consists of five players. Those costs start to add up fast.

Such spending is a slippery slope many team owners have been on for a while.

In 2020, League of Legends player Perkz agreed to more than $2 million per year for three years as a Cloud9 player; Jensen agreed a three-year, $4.2 million deal with Team Liquid; and SwordArt signed a two-year, $6 million contract with TSM. Each of these deals was in North America’s LCS. League of Legends publisher Riot Games declined to comment on this story.

Even then it was clear that inflationary pressure had already affected player salaries in the top esports leagues.

Hal Biagas, then the executive director of the NALCS Players Association, claimed the average yearly salary …read more

Source:: Digiday