Devin · @DevinNash
27th Dec 2015 from TwitLonger
Public Player Salaries - There is a Time and Place, but it isn't Now.
Let's weigh in on the issue of player salaries. Obviously the decisions CLG makes in this regard are influenced by my opinion. So in this case, the below does impact CLG.
I see player salaries as an umbrella for a couple issues:
1) The lack of transparency in the "market value" of players. What is a player worth? How do we know?
2) The question of sustainability with inflated salaries within e-sports.
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Ok. First, the release of salaries is a company choice. It's not absurd in the private sector, but it's rare. Some companies (https://buffer.com/transparency) release full salary and equity structure publically. In public companies, executives are required to reveal this information. There's a rising cultural case for releasing staff salaries in private companies.
In a healthy ecosystem and company culture, I see the point. I still think there's some psychological hurdles to get over with the glass door problem and perception of inequality, but that's a discussion for another time.
The keywords are healthy ecosystem. It's important to understand that right now (2016 Q1) e-sports is not a healthy ecosystem for the teams. North America and Europe are inflated by venture money. Wealthy firms and individuals have invested millions and bought out LCS spots.
Let me put in perspective how unstable the situation is. I'm careful to not reveal any detailed information I know, or name specific teams:
1) Just the first round of investment from some of these spots exceeds the market cap of entire popular e-sports teams.
2) From 2015-2016, salaries for most LCS teams increased at a **minimum** of 100%. 200-400% was NOT uncommon. By comparison, the average salary in the US raised 3% from 2015-2016.
3) Costs for LCS teams nearly doubled across the board for multiple teams. Predominantly in infrastructure and competitive salaries. Meanwhile, monetization methods stayed mostly the same. Sponsor budgets are not increasing (because their ROI isn't) and there's not enough product/service development to stabilize with the above increases.
I see no possibility that these inflated salaries are sustainable outside of top talent. I don't see how venture money will produce a significant return in 1-2 years. This has happened in blossoming industries before. I saw it in Green Tech. A lot of money comes in because you see the eyeballs. 3 million people watching and VCs think, "well, there has to be money there." Sometimes there's not, though, or in this situation, monetization may take longer to figure out. And if the money does come, whose to say it won't support the publishers (who control the viewership) and not the teams?
Therefore: Releasing public salaries is something you're going to see VC-backed teams advocate. This is a marketing move. Come here, we pay big bucks. Meanwhile every other team is forced to find VC themselves, or struggle.
This ecosystem broadcasts one message: money wins. New VCs with even more backing come in, or existing ones do another investment round. Salaries raise 200% again. And again. And again. And in 2 years, it's impossible to have an e-sports team unless you're a behemoth. You then lose classic brands who can't keep up, or cash out and don't choose to.
Eventually, investment doesn't meet the ROI, and the money drops out. Often suddenly. This happens in the markets all the time. People see the return isn't there and run to get money out of the failing system. There's a crash. We experience an e-sports EMP and player salaries are back to $1,000/month.
Further, the money doesn't encourage a quality viewing experience. High powered investors are mostly uninformed/uninterested in what creates a great team. They hire interested people. Whereas owners invested in their teams success for years have a handle on what makes great teams and can consistently deliver. They have something serious to lose, often their livelihoods, so they're all in.
Ok. There's more, but enough for now. Public salaries are hiding a bigger problem. How do we pay for these? Releasing public salaries says: "if your team isn't paying this, then you are doing bad/not as good as this team that is." For many reasons above though, we've seen that's not true. More money doesn't guarantee the best team, etc.
Big problem, right? So what is the solution?
The solution is for teams and publishers to work together to create a healthy ecosystem. Work together to provide higher ROI for sponsors, drive revenue from merchandising and other systems. Increase the value of the teams organically. Build great businesses to get the ROI. Create value. Use the revenue you receive from these systems to increase your player salaries. Most importantly, teams need to work together and cross-promote to accomplish greater value for major influencers.
Teams and players should grow with the ecosystem. I do want a world where my top players are earning millions a year. I also think that world is possible. I want that world to exist five, ten, and fifteen years from now. On the path we're on it won't.
For now, public salaries encourage a poor ecosystem. There is a time and place for it though, in a healthy system.
Team owners, viewers, and players are shaping a future industry. There's an enormous amount of good that can come from that. Teams should focus on creating great players and infrastructures to support those players. At a business level, we should be working together to bring positive change into the system. We should also improve our own brands to create value for people.
Organic growth will pave the way for a lasting and sustainable industry where thousands of players get the opportunity to make money doing what they love. Always think forward.
As always, thank you everyone for taking the time to read this.