Huya Reduces League of Legends Esports Fees

China’s live game broadcasting platform Huya Inc. (NYSE: HUYA) announced yesterday that floating-share entity Guangzhou Huya Information Technology Co., Ltd. has signed a second addendum to its License Agreement for League of Legends publishing. Legends, better known as Tengjing Sports & Culture Development (Shanghai) Co., Ltd. matches with TJ SportsIt is a joint venture established by League of Legends maker Tencent Holdings Limited and one of its subsidiaries. Riot Games Organizing the game’s esports program in China. Tencent is also the largest shareholder HuyaIt owns 66% shares.

Under the new terms, the total license fee Huya will pay from 2024 to 2025 will be reduced to ¥230 million (US$32.8 million). This marks a significant decrease from the previous agreement, where the license fee for 2024-2025 was ¥300 million (US$42.8 million). The original License Agreement, dated April 27, 2021 and added in January 2023, set the total license fee between 2023 and 2025 at ¥450 million (US$64.2 million).

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

Content of the Change

This adjustment comes in the midst of a difficult period for Huya. The company faced a decline in live streaming revenues, primarily due to the soft macroeconomic environment and intense competition in the industry. According to Huya’s 2023 annual report, live streaming revenues decreased 21.3% from ¥8.2 Billion ($1.17 Billion) in 2022 to ¥6.5 Billion ($930 Million) in 2023. declined. This decline was due to lower user spending on live streaming services, and Huya’s strategic adjustments were aimed at prudent operations.

Additionally, Huya’s sublicensing revenues have also taken a hit. The company had previously generated significant revenue from sublicensing rights for League of Legends matches. However, under the additional licensing agreement signed in January 2023, Huya no longer has the sublicensing rights for these matches from 2023 to 2025. This change led to a significant decrease in the company’s sublicense revenues.

Details of Original and Amended Agreements

Original License Agreement gave Huya exclusive live broadcast rights in mainland China for League of Legends Pro League (LPL) The deal was important for Huya and allowed it to attract a wide base of esports enthusiasts to its platform.

However, the amendment made in January 2023 changed the nature of these rights. Huya’s broadcasting rights have been changed from exclusive to non-exclusive from 2023 to 2025. Additionally, the coverage has been expanded to include other matches such as the following. League of Legends World Championship (S13-S15). Despite the broader coverage, the license fee was reduced to a total of ¥450 million (US$64.2 million) for three years and Huya was stripped of its sublicense rights.

The latest change reduces the license fee to ¥230 million (US$32.8 million) for 2024 and 2025, further reducing Huya’s financial burden. This reduction reflects ongoing negotiations between Huya and Tencent’s subsidiary to adapt to market realities and Huya’s current financial situation.

Strategic Implications

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

Huya has also adopted a more stringent screening process for content sourcing and production to improve investment efficiency. The company provided live streaming services for 235 third-party licensed esports tournaments and gaming events in 2023. However, it is focusing on delivering high-quality live streams and has become more selective about securing broadcast rights.

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