The business model of Riot Games
May 22nd 2013
Games are not only entertaining and fun, they also challenge people, bring people together and are perfect for experimenting with strategy and innovation. Businesses can learn a lot from the gaming industry. That is why we organize the Bootcamp Business Model Canvas The Game in June in Amsterdam, together with Dutch Game Garden and Alexander Osterwalder’s Strategyzer. What can we learn from games, game developers and the gaming industry? We start by exploring the business model of Riot Games.
League of Legends
Riot Games is a successful and fast-growing gaming company. It created the online game League of Legends, which was released in 2009. 32 million people play the game each month! League of Legends is a strategic game you play with a team. It is free-to-play, yet Riot Games actually generates estimated revenues of over $150 million per year. What is the X-factor of their business model?
The X-Factor of the Riot Games business model
The X-factor of a business model is the combination of building blocks that makes a business model drive results in terms of revenues, growth of the customer base, customer loyalty, or stakeholder engagement. In case of the business model of Riot Games we see that the Value Proposition caters to a fundamental human need: joining forces and working together towards a common goal. The game is all about Team Play. With their Customer Relationships Riot Games supports teams to play an even better game. The community services go beyond the industry standard. Riot Games continuously reaches out to gaming communities and intentionally invests in their own community, both online and offline (eSports Tournaments). They also provide direct support to their players and invite players to co-design the game through Inside Design developers diaries.
Make a product you love
Players start playing for free and can only proceed to the next level by playing and learning. This is reflected in their Revenue Streams. Revenues come from customers wanting to play better or learn more, not from selling game power to their players. The Key Activities at Riot Games is developing games they love to play. Besides that, they are focused on continuous improvement of the game. That is why people at Riot Games are supported to play and learn through gaming themselves.
Strategic partners for worldwide coverage
Riot Games’ key resources are player-focused teams, which include interns. They have a Manifesto with five principles that guides decisions and game development. They have their own robust technology platform. League of Legends is not massively online multiplayer, which makes the technology platform simpler than for example World of Warcraft. This Key Resource is therefore easier to manage and allows developers to continuously update the game with new content to keep players engaged. The Key Partners are companies or organizations that extend the reach of the game. In exchange for great content (League of Legends), Riot Games gets direct access to entire new markets (Europe, China). Tencent, the largest internet company in China, has a majority stake in Riot Games. This partnership enabled them to launch in China. In Europe they launched by partnering with GOA, the largest European Game Portal. Riot Games main costs are related to people (and their development through Riot U) and the technology platform. They also finance a Play Fund providing each Rioter $300 to spend on whatever games they like. In the image above you see a visualization of the business model of Riot Games, designed by Erik van der Pluijm. You find more Business Model Visualizations here.
Business Model Canvas The Game
During the bootcamp Business Model Canvas The Game, that takes place in Amsterdam from June 5-7, you will meet various game companies that will make the Business Model Canvas playable: Ranj, Weirdbeird, RageSquid, Little Chicken, Headcandy and Firebrush Studios.