LPL Salary Cap | Implications and effects already felt in the offseason

Ever since 2014, Korea and China have been dominating the international League of Legends tournaments, monopolizing the top spots on most occasions.

While it’s normal that well-performing players receive good salary increases over the years, the situation has been running out of control in the LPL, with players like TES Knight signing a 45 million RMB (rumored) contract (approx. 6.4M USD). For smaller organizations, players’ rising salaries have become an issue that can damage their financial sustainability as well as their ability to keep up with the competition.

To deal with this problem, it was revealed back in 2020 at the Global Esports Summit and Tencent Esports Annual Conference, that the LPL would impose a soft salary cap with a baseline of 10 million Chinese yuan, which is approximately $1.5 million per team. It was already partially implemented in 2021 and 2022 to allow teams to adjust, the regulations will be fully applied to start this LPL offseason.

Let’s see how the LPL Salary cap worked this year, how the fully implemented version will work going forward and what can potentially mean for the Chinese League and its competitive level.

LPL Salary Cap

LPL Salary Cap – From Soft version to Full Regulations

Following the announcement, the salary cap was slowly rolled out after the end of the 2020 season and through 2021 in order to give teams the opportunity to adjust to the new rules.

For example, last year contracts signed before 2021 weren’t influenced by any regulations and new regulations would be applied only upon renewal or extension. Luxury taxes for clubs were reduced by 50% as well. That being said, now that the 2022 offseason started, rules regarding the salary cap will be more strictly enforced.

While the Chinese League hasn’t disclosed detailed data about the current situation, we’ll briefly explain the information that was mentioned at the Summit.

The LPL salary cap is essentially divided into three tiers: the financial fairplay benchmark (财务公平基准线), the luxury tax threshold, and the tyranny threshold.

If the total salary of all the players falls between the financial Fairplay benchmark and luxury threshold, the club doesn’t pay any tax. Above the luxury tax, clubs will have to pay a certain percentage of luxury tax and above that again clubs will have to pay the tyranny which has an even higher percentage compared to the standard luxury tax.

That being said, LPL teams usually not only have superstar players with high salaries, but they usually also have various substitutes that will certainly increase the total spending of the team. To deal with this issue, the teams, just like in the NBA, will have some exceptions that they can take advantage of.

Top talent pickup exception (优秀人才引进特列)

Every club every year can bring in a player that doesn’t get regulated by financial fair play. This means that the clubs can pay whatever amount it wants to convince a player to join the team. As the name suggests, this exception will likely be used for superstar players with high salaries.

Bi-annual exception (双年特列)

If used on a player, then this player can get the maximum individual salary possible for two years running. If the exception is used on multiple players, the team must still make sure that the total salary of the team doesn’t exceed the maximum threshold by more than 25%.

That being said, if a club exceeds the tyranny threshold, then this clause can no longer be utilized.

Rookie exception (新秀特列)

Every club that signs rookie players from the academy will not be regulated by the financial fair play benchmark.

All of these regulations were added to avoid a price war among teams and to balance the competition of smaller ones.

How are the players categorized between the three tiers and based on what criteria?

According to what was said on the Summit, player salaries and therefore, tiers, will be determined by an “honor system”. To calculate their rating, players’ performance and statistics will be taken into consideration alongside a handful of other factors, like results from the team.

While it was said that the information will be made publicly available, including the upper limits of each player’s salary, there isn’t a publicly disclosed system as of right now.

According to EDG’s Lao Yue (老岳), the former team’s academy manager, the 45 million RMB contracts like the one Knight had will no longer exist. Before the regulations, there were at least 5 people exceeding 30 million in salaries and more than 15 players with 10+ million RMB contracts.

Former professional jungler Chang “Xinyi” Ping (新一) mentioned how with the new salary cap, many star players of different clubs have had their salaries reduced: for some, salaries have been halved, with some being reduced even by 70%.

TES Knight

Contemplating becoming the highest paid LPL player?

LPL moves to strip bargaining power from players with the salary cap

Salary caps are not something that was born in esports. They have been a standard presence among many sports leagues such as the NFL, NBA, and NHL. All have determined numbers and amounts regarding a team’s limit to spend money and how much players can make. The difference maker between the traditional sports leagues and the LPL, however, is the fact that the players don’t have a player association that can protect and guarantee players’ interests.

The biggest concern is regarding the results-based “honor system”, which can potentially strip away a lot of bargaining power from the players’ side. It can also reward those who play for their own sake rather than for the team’s overall performance.

The honor system must ensure coherence across players from different roles as well as from different teams. For example, if a player is performing extremely well in a bottom-tier team, how will that affect his limit? It can become a rather difficult issue to deal with and to standardize.

That being said, if the ultimate goal is to stabilize the Chinese esports ecosystem, a salary cap is without a doubt an effective solution, even if it hurts the players more than anyone else. While players will be affected in the short run, the overall competitive scene will gain from it. It will be a matter of which factor becomes more influential but without a public and standardized system, things might not be as fair as intended.

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