Since 2014, Korea and China have dominated international League of Legends events, taking first and second place in nearly every major event.
With players like TES Knight reportedly receiving contracts of 45 million RMB, the LPL’s pay structure has gotten out of hand (approx. 6.4M USD). The escalating cost of paying players has become a problem for lesser teams, threatening their long-term viability and capacity to compete.
It was announced in 2020 at the Global Esports Summit and Tencent Esports Annual Conference that the LPL will implement a soft salary ceiling with a baseline of 10 million Chinese yuan, or around $1.5 million per club, to address this issue. After being phased in throughout the 2021 and 2022 seasons to give teams time to adjust, the new rules will be completely enforced beginning with the 2019 LPL offseason.
Let’s examine the effects of this year’s LPL salary cap and speculate on what next year’s fully implemented version could do to the competitiveness of the Chinese League.
Salary limits at LPL: from the lite to the full version of the rules
After the 2020 season concluded, the wage cap was phased in gradually during 2021 to give teams time to prepare for the changes.
For instance, new rules would only apply to renewals and extensions of contracts after 2021, whereas previous year’s contracts were unaffected by the rules. Clubs also benefited from a reduction in the luxury tax of 50%. As the 2022 offseason has begun, salary cap regulations will be enforced more aggressively.
The Chinese League has not released any specific statistics on the present situation, but we will quickly describe what was discussed during the Summit.
It’s helpful to think of the LPL salary ceiling as having three distinct levels: the financial fairplay benchmark (), the luxury tax threshold, and the tyranny threshold.
A club does not have to pay taxes if the sum of all the players’ salaries is below the financial Fairplay baseline and the luxury level. Clubs will first be subject to a luxury tax in addition to the ordinary luxury tax, and then to the tyranny tax in addition to the tyranny tax.
Even if the wages of the top players in the LPL tend to be high, the overall cost of an LPL team is likely to rise because of the high compensation of the other players on the roster. The teams, like the NBA, will have various loopholes they may use to cope with this problem.
SINGLE OUTSTANDING ACQUISITION OF TALENT
Each team is free to sign a player who would otherwise be prohibited under financial fair play each year. Therefore, teams are free to offer any sum it deems necessary in order to secure a player’s services. This loophole, as the name implies, is intended for extremely well-compensated superstar athletes.
This clause grants the athlete the maximum individual wage for two consecutive seasons. Even if the team uses the exemption for numerous players, their combined salaries still can’t go above the cap by more than 25 percent.
However, this provision becomes null and void whenever a club crosses the tyranny threshold.
INITIAL CASE OF ROOKIE EXCEPTION
The financial fair play standard will not apply to any club that signs a player from the academy’s rookie class.
All of these rules were put in place to prevent a price war between teams and to level the playing field for the lesser-funded ones.
What criteria are used to divide the players into the three tiers?
What was discussed during the Summit indicated that player compensation, and by extension, tiers, will be established via a “honor system.” The ranking of each player will be based on a number of elements, including their individual performance and statistics as well as team outcomes.
Despite claims that details such as each player’s pay cap will be made public, no such system has yet been made clear.
Contracts worth 45 million RMB like the one Knight had would be eliminated, says Lao Yue, the former academy manager of EDG’s professional soccer club. A minimum of five individuals were receiving wages of over 30 million before the laws went into effect, while more than fifteen players were on contracts for 10 million or more in RMB.
According to former jungler Chang “Xinyi” Ping, several organizations have had to lower the pay of their elite players as a result of the new salary ceiling.
With the salary cap, LPL seeks to limit players’ ability to negotiate salaries
Esports are not the origin of salary limitations. They’re a regular sight in the NFL, NBA, and NHL, among many others. Everybody knows exactly how much a team can spend and how much an individual player can earn. However, unlike in other sports leagues, the LPL lacks a player union that can safeguard the interests of its players.
The “honor system,” which is based on the final score, is a major cause for worry since it has the potential to significantly reduce the participants’ leverage in negotiations. It may also be used to recognize and reward players whose primary motivation is individual glory rather than team success.
All of the players, regardless of their position or team, need to be on the same page, and the honor system is the only way to make that happen. How does a player’s success on a bad club effect his potential, for instance? Because of this, managing and standardizing the problem might become challenging.
However, a pay cap is undeniably an effective approach, even if it damages the players more than anyone else, if the end aim is to stabilize the Chinese esports industry. In the short term, players will feel the effects, but in the long run, the competitive scene as a whole will benefit. It all boils down to whatever component has more clout, but things might not be as fair as planned without a public and uniform framework.
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