On Feb.28, US sports apparel giant Nike officially signs a 4-year sponsorship deal with Tencent for its League of Legends Pro League (LPL), becoming one of the head partners of the top esports league.
·Report (Chinese version): 耐克与LPL官宣4年合约，电竞价值终于被传统体育品牌认可
The partnership is announced by TJ Sports, which is a new joint esports venture created by Tencent and Riot Games on Jan.10. After landing 10 sponsorship deals for 2019 season including Mercedes-Benz, KFC, L’Oreal, Alienware, etc., LPL signed its first deal with a conventional sports company.
Notwithstanding the details of the deal are not officially disclosed, but sources familiar with the deal told Lanxiong Sports that Nike will spend around 50M RMB ($7.5M, including cash and cash equivalents) a year to buy out the apparel rights of all the 16 LPL clubs. Meanwhile, Nike and LPL will distribute the sales revenue of the Nike products featured LPL elements at a confidential ratio.
The deal between Nike and LPL experienced several-months’ negotiation. A source near LPL told Lanxiong Sports that several sports apparel company intended to acquire the deal with LPL, including Adidas, the direct rival of Nike, and Chinese sports brand 361°. Last year, executives of Adidas attended some LPL competitions and met with executives of the Riot Games several times, but Nike eventually took the deal from Adidas in the last minute, source also told Lanxiong Sports.
Actually, the partnership between Nike and LPL was revealed in last Nov. At that time, a screenshot of an announcement sent from LPL to their clubs was spread over the internet, saying that “LPL has signed a strategic deal with an international top-tier sports brand”.
Lanxiong Sports immediately sought for confirmation from LPL, but received no official response. But several sources confirmed to Lanxiong Sports later that the ‘international top-tier sports brand’ is Nike.
However, due to some disagreements over the terms of the contract, the deal is officially announced until today. There are two main reasons that resulted in the 3-months’ delay of the partnership, sources said. First of all, TJ Sports was officially established in Jan., which to some extent dragged the pace of the deal; Second, there were some problems in the process of trademark registration for several LPL clubs and those clubs had to replace a newly-designed logo, which cost time, too.
The deal between Nike and LPL is unquestionably a milestone in the history of esports, albeit seeing ups and downs. That marks the value of esports, which is gradually accepted as a branch of sports, is recognized by the conventional sports brands especially like Nike. And, most importantly, sports brands are showing that they are willing to invest real money into the esports market. For LPL itself, the investment from Nike further affirms the value of their esports IP.
With the title of 2018 League of Legends World Championship won by Chinese esports club Invictus Gaming, LPL has obtained an unprecedented influence in the esports community. According to the data revealed by TJ Sports earlier this year, the total viewership of LPL in 2018 climbed 50% to 15 billion, compared with 2017. And the final game of 2018 League of Legends World Championship saw a record 99.6 million viewership.
However, in comparison with the huge viewership data of esports, the marketing value of esports has still been underestimated. Despite causing nearly the same engagement of fans, esports clubs get far less sponsorship in terms of money. Even the leading clubs in LPL can hardly have a head partner which are willing to give them 10M yuan or more for club naming rights fee.
Today, although 50M RMB a year can not be seen as a huge number, compared with 300M RMB a year of Chinese Football Association Super League (CSL) and 180M RMB a year of Chinese Basketball Association (CBA), it is a praiseworthy progress for LPL and the esports industry.
In addition, King Pro League (KPL), which is the top level Honor of Kings( a mobile game developed and published by Tencent) league in China, has already signed an apparel sponsorship deal with HLA Jeans. A source near the deal told Lanxiong Sports that HLA Jeans will pay around 10M RMB a year to KPL as equipment sponsor, and the official announcement will be released on the opening day of 2019 season on Mar. 6.
Back to the deal of LPL and Nike, there are still considerable challenges that TJ Sports and Nike need to settle down.
Firstly, as the deal would see all LPL players, coaches and team staff exclusively wear Nike apparel on game days. This would create an issue for team organizations with existing apparel partners, or those looking to sign apparel deals in the future. Edward Gaming (EDG), for example, is partnered with Chinese local sports brand Li-Ning before the 2018 League of Legends World Championship. After the LOL S8, Li-Ning and EDG both had intention to reach a long-term deal.
Li-Ning's joint products with EDG
As a young sports league, the partition of the commercial rights needed to be settled properly. In Nov. 2018, Lin Song, former head of Riot Games China and current co-CEO of TJ Sports, was interviewed by Lanxiong Sports. He said they were working on that issue referring to the mature sports league like NBA and European soccer leagues.
But even in conventional sports, the commercial rights of the apparel differ from league to league. For instance, NBA collectively sold their apparel rights to Nike, but clubs in European soccer leagues can independently sign apparel deal with brands.
For Nike, it is also a question whether the investment to LPL can bring them their expected return.
Jian “Uzi” Zihao on Nike LeBron James' promotion campaign
It’s actually not the first time that Nike put its name aside esports. In Oct. 2018, Nike collaborated on a campaign with LeBron James to promote the basketball star’s upcoming documentary Shut Up & Dribble, which featured Jian “Uzi” Zihao—a player from LPL team Royal Never Give-Up (RNG). But Nike says that was just a simple marketing campaign.
On Feb. 27, the day before the official announcement day, we can still see the LPL-own-branded products on the LOL Official Online Store. The prices of the T-shirt, pants and coats were respectively 199, 319 and 619 RMB, which were relatively lower than the conventional sports apparel. Adding that the main part of esports fans are youngsters, whose spending power are highly doubtful, how to price and sell the products are the two main concerns for Nike.
According to the official media brochure from TJ Sports, given that the official apparel need some time to design and manufacture, some items of the Nike x LPL products will be put on sale publicly during 2019 LOL Mid-Season Invitation. As for the official Nike-branded team jersey, we will not see the samples until 2019 League of Legends World Championship, and fans can buy them in 2020.
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