Esports Salary Caps Are Sorely Needed, But would They Work?

The wage ceiling is an obvious solution to high player wages in eSports, which is a major cause of burdensome operating costs among many organizations.

Esports Salary Caps Are Sorely Needed, But would They Work?
By Shubham Dalal | Feb 1, 2023 | 3 Min Read follow icon Follow Us

In November last year, negotiations between game publisher Activision Blizzard and the US Justice Department over the ‘competitive balance tax’ of the Overwatch League (Owl) were broken. The wage ceiling is an obvious solution to high player wages in eSports, which is a major cause of burdensome operating costs among many organizations.

The potential slowdown, coupled with declining investor confidence in the return-on-investment potential of eSports teams, is making teams unattractive to stakeholders. To combat this, eSports teams must reduce costs. If you need more information about Esports Salary Caps Are Sorely Needed, But would They Work? then read carefully and don’t forget to share with your friends.

Esports Salary Caps Are Sorely Needed, But would They Work?

Whether soft, like owls – teams are fined for spending more than X – or harder – teams can’t spend more than X – some kind of player salary control seems comfortable.The NBA, NFL, and NHL do a good job of controlling salaries within the total revenue generated by the teams. The NBA calculates the salary range based on the revenue generated by the league last season. For the 2022–2023 season, it is over $123 million (~£99 million). Teams will have to spend at least 90% of this, and if they want to go above the threshold, they will have to pay ‘luxury tax’; This is a soft pay limit. Other leagues like the NFL have hard caps.

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However, a lot of red tape can be cut before the salary limit is taken seriously in eSports.”You can’t impose a wage cap without a union,” said Philip Aram, executive director of the LCS Players Association (LCSPA). LCS is the top league of legends (LOL) competition in North America. “[The wage ceiling] will be a big curb on trade and will attract distrustful concerns about any country, certainly in the United States,” he said.An official player association should be established, which enables ’employees’, in this case, players to collectively deal with payment terms with their employers.

Why is it harder for eSports players to form associations than NFL players? According to Aram, unionization is generally designed as a two-party system. It happens this way in the game. The NFL Players Association (NFLPA) represents the interests of players – Party #1 – in negotiations and disputes with teams – Party #2.

The parties negotiate what is known as the Collective Bargaining Agreement (CBA), which sets rules on various league issues such as compensation and player welfare. Importantly, in a salary-capped league like the NFL, a CBA sets the minimum and maximum that teams can spend on player wages, which is usually based to some extent on the total revenue generated by the respective leagues. However, in eSports, there is a third, all-powerful side: the publisher.

Publishers own the intellectual property of their game, which means they have the final say on everything. The NFL does not own football, nor is there any other entity. The game is in the public domain. It’s different in eSports. Riot Games owns the game of League of Legends. This makes the unionization of players quite complicated. (Reuters did not respond to a request for comment on this story.)The wage ceiling will benefit the eSports industry financially. Right now, the misalignment between player compensation and team turnover makes little financial sense. Harris Peskin, executive director of the Esports Bar Association, said on Jacob Wolf’s Visionaries podcast last August that many teams have a salary-to-revenue ratio of 100%. The wage ceiling would be good for a relatively young, insecure industry as the world goes through a macroeconomic slowdown.

“If we form a union today, we will union with the teams,” Aram told Esports Insider. “[We] would end up in a situation where even if the teams formed a joint bargaining unit and we bargained together with 10 [LCS] teams and approved the CBA, we would still be governed by Reuters and whatever rules they could make.”Proper antitrust-immune salary cap system is one way in eSports, but solving this problem can go a long way to sustaining the industry. As is often the case, however, this will require more collaboration from publishers.

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