November 10, 2016

To: Marc Merrill, Whalen Roselle, Jarred Kennedy and Jason Yeh
cc: Brandon Beck

Marc, Whalen, Jarred and Jason:

Over the past year, the NA and EU LCS teams (the Teams) have been working with their respective
Riot counterparts to address issues related to the Teams participation in the LCS. As part of that effort,
both the NA and EU teams have identified critical related issues which have been communicated to Riot.
Problems to Be Solved
The goal of the ongoing discussions held between the Teams and Riot were meant to solve a number of
serious problems, including:
1. The lack of job security, fair compensation and longer careers for players caused by insufficient
compensation and relegation;
2. The damage to the Teams ability to invest in LCS players caused by insufficient compensation
and relegation;
3. The weakening relationship between fans and LCS caused by relegation;
4. The harm to Team sponsorships caused by relegation and LCS restrictions on sponsors;
5. The effective elimination of the path to pro caused by the Teams need to redirect resources
from LCS to Challenger as a result of insufficient compensation and relegation.
6. The financial hardship suffered by the Teams caused by insufficient compensation paid to the
Teams.

Riot Proposals to Date

Unfortunately, Riots proposals to the Teams have done little to address these problems. As we
understand it, Riots position is now as follows:
1. Elimination of Relegation
a. In NA, changes to relegation are off the table until the commencement of Charter
Membership in 2018 and Riot is not sure that the current NA Teams are desirable longterm partners.
b. In EU, Riot has now stated that Charter Membership is not currently being considered
and is off the table at least until 2019. RIOT is exploring options for local regional
expansion. Relegation continues.

c. Riots shall not provide the Teams with the standards or criteria by which it will select
Charter Teams for NA and has refused to provide for auto-renewal and elimination of
relegation in the EU.
d. Riot shall not commit to provide the NA Teams with a date by which it will provide the
Charter criteria.
2. Financial Enhancements
a. Riot wants partners who will continue to lose money with the expectation of making
money in the long-term, but offers no long-term commitment to any Team. The Teams
have been advised that operating a business at a loss is our choice.
b. Riot will concede the following digital-item financial incentives:
i. 2017: Digital Item Revenue Minimum Guarantee (MG) of $100K/100K per
Team, to be split 50/50 with players. Payment terms and recoupment terms
have not been disclosed other than the MG includes Summoner Icon revenues
(already earned by the Teams).
ii. 2016/2017: 25% of the Championship Teams skin revenue will be shared
between all of the Teams and players in the Champions region (splits TBD);
iii. 2017: Summoner icon rev-share will be tweaked so that Teams will receive 100%
of 2017 revenue up to the total amount of 2016 revenue, then 50% thereafter;
iv. 2016/2017: Worlds Summoner icons an additional 10% of total revenue will be
distributed equally among all Teams participating in Worlds.
c. Merchandise Revenue Enhancements TBD
d. Sponsorship Revenue Sharing Off the table until 2018
e. Media Revenue Sharing Off the table until 2018
f. Minimum Guarantee of Total Compensation Off the table
g. Guaranteed Promotions Off the table

The Teams Response

The digital-item revenue concessions alone clearly will not solve the problems described at the
beginning of this letter, especially if no action is taken on relegation, revenue-sharing or the
establishment of an overall MG in 2017. Riots terms simply will not fix the instability and financial losses
which the Teams have articulated to Riot in detail.
In an attempt to close the gap between our positions, the Teams are willing to consider the following
compromise solution for 2017:
1. Relegation / Charter Membership
a. Given the uncertainties of Charter Membership and other revenue sharing growth
opportunities, there should be a moratorium on relegation in 2017. This would be a
public recognition of 2017 as a bridge year.

The business model for Charter Membership for NA, including the criteria for
membership, will be disclosed to Teams before December 1, 2016.
b. Auto-renewal provisions must be granted to EU Teams and relegation must be
eliminated permanently.
2. Team Compensation
a. The Teams cannot accept the proposition that they should silently suffer another year of
losses. Given that the Teams purpose now is to promote the LCS without any
meaningful revenue sharing or commitment on future Charter Memberships, Riot
should fairly compensate the teams for their participation in LCS, dedication of Teamfunded resources for promotional activities and use of the Teams IP at an annual rate of
$700K/700K.
The NA Teams will guarantee their players a minimum salary of $100K.
Riot has advised the EU Teams that Minimum Player Compensation (MPC) will be
eliminated in Europe effective 2017. Accordingly, minimum player salaries will not apply.
The increased compensation to EU Teams will offset operating costs including player
salaries, German social security payments and other more expensive regional operations
attributable to German labor and tax laws.
3. Merchandise Sales
a. Riot and the Teams will work together diligently in good faith to determine a mutuallyacceptable solution by no later than December 31, 2016.
4. Digital-Item Revenue
a. In conjunction with the terms above, the Teams accept Riots approach, but rev-share
should be 50% with respect to any items using Team IP or which are eSports-themed.
5. Sponsorship Revenue Sharing
a. Off the table for 2017
6. Media Revenue Sharing
a. Off the table for 2017
The above compromise solution represents an extraordinary movement of the Teams toward Riots
position in every area, including NAs need for Charter Membership in 2017, and EUs demand for autorenewal and the elimination of relegation, as well as the sharing of sponsorship and media revenue and
a dramatic reduction of the minimum guaranteed payment necessary to the Teams.
The compromise solution will not effectively solve the problems stated above and, at best, will still find
the Teams operating at a loss in 2017. We believe, however that, given Riots position on these issues,
the compromise solution outlined above is a minimally acceptable path forward for 2017.
We respectfully request that Riot adopt these compromise terms no later than December 1, 2016, so
that we may plan accordingly beyond that date.
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