What a "Franchised" Esports League Is, and Why It Changed Competitive Gaming's Business Model
Franchising trades the risk of relegation for the security of a permanent seat at the table — borrowed directly from how the NFL and NBA structure their own leagues.
Most traditional soccer leagues run on promotion and relegation: finish poorly enough in a season, and a team gets demoted to a lower division, replaced by whichever lower-division team finished on top. American leagues like the NFL and NBA work completely differently — a fixed, closed set of franchises, bought in for a large upfront fee, that keep their spot in the league regardless of how badly a single season goes.
A franchised esports league borrows that second model directly. An organization pays a franchise fee, sometimes tens of millions of dollars, for a guaranteed, permanent slot in the league — no risk of relegation for a bad season, no need to requalify each year, in exchange for both that upfront cost and an ongoing revenue-sharing arrangement with the publisher running the league. Call of Duty League and, before its 2023 shutdown, Overwatch League were both built around exactly this structure, publisher-run competitive leagues with a closed roster of paying franchise slots rather than an open circuit anyone could enter by winning their way up.
The appeal to an organization is the same appeal a sports franchise has always had: a permanent, sellable asset with guaranteed league participation, rather than a competitive spot that has to be re-earned or defended every season. The appeal to the publisher running the league is a large, predictable revenue stream up front from franchise fees themselves, independent of how the season's ratings or attendance actually turn out.
That predictability cuts both ways, though — Overwatch League's shutdown after franchise fees as high as $20 million per slot is a visible reminder that franchising doesn't transfer the underlying risk of an esports scene not growing as fast as hoped, it just relocates who absorbs that risk and when: from a league's season-to-season results toward a smaller number of much bigger, much earlier bets made by the franchise owners themselves.