Money

Huya Reduces League of Legends Esports License Fees

Published by

Tobias Seck

3 hours ago

Huya Reduces League of Legends esports License Fees.

Huya Inc. (NYSE: HUYA), a Chinese game live-streaming platform, announced yesterday that its variable interest entity, Guangzhou Huya Information Technology Co., Ltd., has entered into a second supplemental agreement to its License Agreement for broadcasting League of Legends matches with Tengjing Sports & Culture Development (Shanghai) Co., Ltd. – better known as TJ Sports, a joint venture established by Tencent Holdings Limited and one of its subsidiaries, the League of Legends maker Riot Games to organize the game’s esports program in China. Tencent is also the largest shareholder in Huya, with 66% ownership.

Under the new terms, the aggregate license fee payable by Huya for the years 2024 through 2025 will be reduced to ¥230M RMB ($32.8M USD). This marks a significant decrease from the previous agreement, where the license fee for the years 2024 through 2025 amounted to ¥300M ($42.8M). The original License Agreement, dated April 27, 2021, and supplemented in January 2023, had set the total license fee for the years 2023 through 2025 at ¥450M ($64.2M).

The Board of Directors and the audit committee of Huya have approved the amended agreement and the transactions under the revised terms.

Context of the Amendment

The adjustment comes amid a challenging period for Huya. The company has faced a decline in live-streaming revenues, primarily due to a soft macroeconomic environment and intensified competition within the industry. According to Huya’s 2023 annual report, live-streaming revenues decreased by 21.3% from ¥8.2B ($1.17B) in 2022 to ¥6.5B ($930M) in 2023. The decline was attributed to reduced user spending on live-streaming services and Huya’s strategic adjustments aimed at prudent operations.

In addition, Huya’s sub-licensing revenues have taken a hit. The company had previously generated significant income from sub-licensing rights for League of Legends matches. However, per the supplemental licensing agreement signed in January 2023, Huya no longer holds sub-licensing rights for these matches from 2023 to 2025. This change has led to a significant reduction in sub-licensing revenues for the company.

Details of the Original and Amended Agreements

The original License Agreement granted Huya exclusive live broadcasting rights in mainland China for League of Legends Pro League (LPL) from 2021 to 2022. The agreement was significant for Huya, allowing it to attract a large audience of esports enthusiasts to its platform.

However, the January 2023 amendment shifted the nature of these rights. Huya’s broadcasting rights were changed from exclusive to non-exclusive for the years 2023 through 2025. Additionally, the scope was expanded to include other matches like the League of Legends World Championship (S13-S15). Despite the broader scope, the license fee was decreased to a total of ¥450M ($64.2M) for the three years, and Huya was stripped of its sub-licensing rights.

The latest amendment further reduces the financial burden on Huya by lowering the license fee for 2024 and 2025 to ¥230M ($32.8M). This reduction reflects ongoing negotiations between Huya and Tencent’s affiliate to adjust to market realities and Huya’s current financial position.

Strategic Implications

The amendments indicate Huya’s efforts to optimize costs amid declining revenues and increased competition. By renegotiating the terms of its licensing agreements, Huya aims to maintain access to popular esports content while alleviating financial pressures.

Huya has also adopted a stricter screening process for content procurement and production to enhance investment efficiency. The company provided live-streaming services for 235 third-party licensed esports tournaments and game events in 2023. However, it is focusing on offering high-quality live streams and has become more selective in securing broadcasting rights.

Despite these challenges, Huya remains a prominent player in China’s esports live-streaming market. The platform continues to attract a dedicated user base, although users’ willingness to pay for live-streaming services has been affected by broader economic conditions.

Tobias Seck

Tobias Seck is a journalist and business analyst who spent more than seven years at The Esports Observer (TEO) as a business analyst. He was one of the first employees of the publication, having joined in 2015. In October 2018 he shifted to the role of business analyst and journalist, writing analysis and helping fellow TEO writers understand the world of finance as a supplemental editor when needed. He continued in that role when TEO was rolled into Sports Business Journal (SBJ), where he worked until February 2023.