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"If they let me change League of Legends I could double its revenue"

GDC Europe/Gamescom 2014 in association with
"If they let me change League of Legends I could double its revenue"

Mon 11 Aug 2014 3:49pm GMT / 11:49am EDT / 8:49am PDT
Free-to-Playgamescom 2014

Ubisoft's Teut Weidemann explains why Riot's smash hit is a bad role model for good monetisation

Ubisoft Teut Weidemann has warned developers seeking to emulate League of Legends' success to look beyond its monetisation model when seeking inspiration - however large its customer-base, Riot Games' hugely popular online title is profitable mainly by virtue of its scale.

Speaking at GDC Europe in Cologne, Weidemann gave the third talk in a series in which he closely analyses the metrics, gameplay and business models of successful online products. Previously, Ubisoft's senior online game supervisor had scrutinised Puzzle & Dragons and World of Tanks. Today, it was Riot's turn.

A focal point of Weidemann's talk was League of Legends' $1.32 average revenue per user - initially taken from this SuperData report, but corroborated and justified using data for 2013 released by Riot, and the annual report of its parent company, Tencent.

"User acquisition with ARPU that low is hard," he said. "I haven't seen a League of Legends banner ad on the internet, and that's because they can't afford to. So how do they acquire users?"

Weidemann was in no hurry to answer his most pointed question right out of the gate, so the GDC crowd had to wait until the session neared its end. However, after careful dissection of the game's features, community and saleable items, Weidemann eventually circled back.

"You shouldn't look at League of Legends if you want to learn about good monetisation"

League of Legends had 32 million monthly active users at the end of calendar 2013, spending an average of $1.32 each. That gives a total of $42 million revenue every month.

Weidemann then used $35 as its average revenue per paying user; an assumption on his part, but Weidemann argued that $35 ARPPU is, "an industry standard number that most successful games actually beat."

Dividing $42 million by that $35 ARPPU suggests 1.2 million paying players per month - a conversion rate of 3.75 per cent of its total customer-base. Weidemann said that he had actually confirmed with people working inside Riot that League of Legends' conversion rate was below 5 per cent. The response? A nonchalant, "Why not?"

"Usually, conversion rates for client based games is between 15 and 25 per cent," he said. "World of Tanks has 30 per cent.

"5 per cent is pretty bad," he continued. "My conclusion was that League of Legends gives too much away for free and it doesn't sell power. Riot could sell exclusive premium champions - they could, but there would be a Riot in the customer-base... If they let me change League of Legends I could double its revenue, and they could afford to lose 60 per cent of the customer-base and still do twice as much money."

So while Riot may be able to shrug a "Why not?" in the direction of anyone questioning its conversion rate, Weidemann argued that the same wasn't true for those in the GDC crowd. League of Legends monetises through reach, and its reach is big enough to generate a whole lot of revenue - certainly enough to seduce a developer attempting to make a buck in the free-to-play space. However, that's not the same thing as being good at turning players into payers.

"With 70 million people, if 5 per cent pay, that's a whole lot of money," he said. "For Riot it's not a priority, but if you want to adopt its monetisation system you should ask yourself if can you do that successfully.

"This is my key recommendation here: League of Legends is an exception. It should not be a role model for your monetisation system... You shouldn't look at League of Legends if you want to learn about good monetisation.

"Riot can afford it. You might not."

19 Comments

Popular Comment
"If they gave it to me, I'd 'pay to win' the entire thing and we'd be swimming in cash".... that's a wonderful message to send the customers' way... and a fantastic way to keep the eSports train rolling...

Posted:A month ago

#1

Brian Lewis
Operations Manager

132 84 0.6
You may not like how he presented the facts, but he did provide good advice for new developers. LoL is just as much an anomoly as WoW. Neither one of these should be used as an example of how to monetize a game.The reality that the rest of the market has to live with is different than these extreme examples, and as such they are not good templates.

Posted:A month ago

#2

Klaus Preisinger
Freelance Writing

1,095 1,054 1.0
Considering how Riot is ramping up the sports broadcast aspect of its product, even hiring screenwriters, I doubt doubling profits at a 60% loss of consumerbase is an offer they are willing to take.

Also, if they let me change League of Legends, I would turn it into a sequel to Symphony of the Night.

Posted:A month ago

#3
For Riot, I wouldnt attempt to break the golden eggs and Golden goose...it works, it works so damn well for it, why try harder?

Posted:A month ago

#4
Popular Comment
"If they let me change League of Legends I could double its revenue"
and likely kill the game in a year or two.

Short thinking money grabs, is that all people think about these days?

You know what advice Riot needs from people like this? the answer is NONE

Edited 2 times. Last edit by Todd Weidner on 11th August 2014 7:37pm

Posted:A month ago

#5

George Pigula
Producer

3 1 0.3
Playing the numbers, he is correct. I don't think this would kill the game in two years. Still having 19 million users a month would keep that community chugging along just fine. He is not talking about making a better game or experience, just a more profitable one. It is interesting to highlight that the opportunity is there, and this is something Riot does know. You can infer that their priorities are the larger community/better game over the profits.

Posted:A month ago

#6

Anthony Gowland
Lead Designer

186 606 3.3
Still having 19 million users a month would keep that community chugging along just fine.
Assuming that the game keeps that number of players. That turning the game p2w wouldn't turn people to a competing title, that the loss of non-payers wouldn't damage the game's perceived popularity and force them to start doing paid UA, that the lower player-base and p2w mechanics would still support the eSports community.

Which is a big assumption, I think.

Posted:A month ago

#7

Klaus Preisinger
Freelance Writing

1,095 1,054 1.0
@George
That is still assuming Riot wants to monetize its players in the future. But observing Riot, one cannot help but notice that they tend to take this sports broadcasting thing rather serious. Professional sportscasting, however, does not monetize the player, it is monetizing the audience. Football is big business, because a lot of people are willing to pay money to see it, not because they pay money to play it. Valve did the same with the International: monetize the audience. If that is your goal medium to long term, then trading part of the audience for short term profits is not an option. Especially being the top dog with the most players is hugely important, since it most likely creates the largest audience.

Posted:A month ago

#8

George Pigula
Producer

3 1 0.3
I was implying that Riot wanted to grow the community more than maximize an ARPPU with a pay to win strategy that Mr. Weidemann was proposing. They are okay with their low ARPU and aim to continue a high volume of players.
I don't know if pursuing the monetezation of an audience is the smart thing to do. They would have to compete with youtube, twitch, MLG and other places where players can just up and share their gameplay. It seems a lot to take on in a market with some pretty big players already.

Posted:A month ago

#9

Barrie Tingle
Live Producer

374 148 0.4
@Jehferson, that is exactly what I got out of it.
They may be giving away too much and not offering pay to win, but the players are obviously responding to that in player count. Look at Twitch, most streams are of LoL not Ubisoft games.

You could monetize it into oblivion and lose 60% of the user base but it feels like (and I may be wrong), Riot are putting the gamer first above business and so far it is working for them. $45 million a month is not to be sniffed at. There are indies out there that long for those kinds of numbers.

Posted:A month ago

#10

Steve Wetz
Reviewer/Assistant Editor

213 529 2.5
Popular Comment
@Barrie,

I think it goes deeper than that for Riot. Everything from the "Summoner's Code" and banning pro-level (but vulgar) players to the low level of monetization suggests a company with a passion project. A successful one at that. They are clearly crafting the experience with player enjoyment in mind, and putting profit as a secondary goal.

League of Legends may have a inefficient profit model. But they are gaining customers FOR LIFE. When a company creates an experience like this for their customers, the profit isn't just seen in that single game. Think of how many games you have bought based on that company's previous offerings. Blizzard made it's name this way - there isn't a Blizzard title I regret buying*. Similarly, Riot's future projects can and will be widely supported by it's current LoL players. Teut's viewpoint is too narrow for this kind of sustained profit.

*Now that the Real Money Auction House is dead and gone.

Posted:A month ago

#11

Eric Pallavicini
Game Master

286 182 0.6
@Steve

If Riot can pay their employees, running costs and so on they are then a healthy company. If they can finance future projects they have the abilities to grow and LoL is definitely profitable. The question is more about is it better to have a steady flow of revenue or bursts and peaks that are followed by gaps?

I did read Hazlitt "Economics in 1 lesson" where he mention the fact a bad economist is often one who don't consider and even less anticipate consequences on all parts of a market or on all markets. Anyone can generate a burst of sales and an immediate flow of revenue, but it is much harder to maintain it on the long run.

I agree with everything in your post except "LoL may have an inefficient profit model". I would rephrase that to "Riot may have a long term and sustainable strategy (that is not about strategically impressing investors ASAP) which doesn't produce as much revenue as it could if it was more aggressive but could pay off over time as it also produce other benefits like company image and external partnerships (I.e Games of Thrones adverts)". Considering this, only time will tell if Riot made the right choice - in meantime most their employees are happy and so are their customers - which for a game company is sort of "achievement unlocked".

Edited 4 times. Last edit by Eric Pallavicini on 12th August 2014 8:46am

Posted:A month ago

#12

Iain Stanford
Experienced Software Engineer

33 126 3.8
People seem to be missing his point.

He says right here...
"With 70 million people, if 5 per cent pay, that's a whole lot of money," he said. "For Riot it's not a priority, but if you want to adopt its monetisation system you should ask yourself if can you do that successfully.
He's saying, it works for them because of their scale, but that monetisation wise they actually have a poor conversion, so if you're a team out there spending big budgets on a new F2P title, mimicking Riots model....then you better hit the large scale users otherwise you're going to struggle.

Posted:A month ago

#13

John Kauderer
Associate Creative Director

32 5 0.2
These comments are amazing. More insightful than the article itself. I love this website!

Posted:A month ago

#14

Eric Pallavicini
Game Master

286 182 0.6
He's saying, it works for them because of their scale,
Well scale also scales with company running costs. Something you sort of stated there: "so if you're a team out there spending big budgets on a new F2P title, mimicking Riots model....then you better hit the large scale users otherwise you're going to struggle.", key word being "spending big budget". If you are a small studio, with a low budget and a similar conversion rate as LoL but also enough people to generate sufficient revenue to feed your team and a pleasant product that inspire customer's loyalty for enough time for you to develop another project, then why shouldn't it be ok?
but that monetisation wise they actually have a poor conversion
Definitely, but I do not think this is such a bad thing (and Riot executives obviously are not pushing too hard for it). It also shows that the product is perfectly enjoyable without spending money which may be considered a positive thing, meaning that while your conversion stays low (compared to other products) your acquisition/retention rates are still acceptable and compensate for it.
People seem to be missing his point.
Maybe, maybe not. If Riot wanted to change LoL to double its revenue they definitely have the intel and skill in-house to do that, they wouldn't need anyone to tell them how to achieve that. But so far, they did not and I am pretty certain there is a (good) reason for that and they are fully aware of everything (I am speculating of course, though I can hardly believe Riot have met such success by chance).

Edited 1 times. Last edit by Eric Pallavicini on 12th August 2014 9:05pm

Posted:A month ago

#15

Mariusz Szlanta
Producer

31 27 0.9
Writing In slime chance that author still follows this conversation, I would like to say it was one of the best presentations this year on GDC right next to Tameem's Antoniades take on history of Ninja Theory.

Presentation was smart, free of bias and well backed by numbers and analysis. Having said that, I still think the grand finale why Riot lives with monetisation at such a low level was not fully responded. Sure, they are vastly profitable anyway but also too smart to let millions pass by.

Teenage mostly player base surely is a factor but my understanding is they want to expand as much as they can to maximise e-sports angle. Every competitive player they have is a player who does not play other e-sports games on high level. If Riot can reach critical mass (or maybe they are already there?) and lock out competition (Heroes of The Storm and DoTa 2), then they will effectively form new e-sport of LoL and then can adjust rules in closed monopoly environment as they like.

For the record, it was not suggested that LoL should become play to win. I re-read this article and it is not suggested here either. Not sure how some readers reached that conclusion.

Posted:A month ago

#16

Eric Pallavicini
Game Master

286 182 0.6
For the record, it was not suggested that LoL should become play to win.
"My conclusion was that League of Legends gives too much away for free and it doesn't sell power. Riot could sell exclusive premium champions - they could, but there would be a Riot in the customer-base... If they let me change League of Legends I could double its revenue, and they could afford to lose 60 per cent of the customer-base and still do twice as much money."
I don't know how's your interpretation of this.

There is "Exclusive" (constrain the user to pay to access content/features he would otherwise not even be able to get, which is only one tiny step away from pay to win - as there would be an incentive required to that exclusive content - since if it was only cosmetic, then Riot is already doing that).

There is "loss of 60% of the player base" (sarcasm on: you know those useless people who don't pay) which certainly means "let's squeeze the superfans" (or whales as some call them), something that has been heavily criticized by a significant part the industry not so long ago in regards of game as a service and F2P model.

While I do agree it would be possible to have exclusive premium champions which aspect and gameplay are unique and at the same time balanced compared to other champions - and even craftily get the whole community to accept the split - how would you specifically monetize them? If they affect the metagame (i.e "this premium champion gain twice as much experience as non premium champions) then you cannibalize other monetisation features that already exist. I am not pretending you cannot find something, implement some innovative features to support the premium champion idea, but we all know the easy path would be pay-to-win (and you wouldn't like to spend too much time/money on research&development of a better solution/design since the whole idea is to make more of it asap, or am I wrong?).
Presentation was smart, free of bias and well backed by numbers and analysis.
Was it really free of bias? I mean data and stats can be presented (or omitted) in anyway that support the presenter point and especially if the latter is smart.

Despite not having seen the presentation, I am pretty sure many decisive factors were not mentioned even if the "truth about good monetisation" was uncovered. For example, was the fact considered that on 30+ million a little percentage will actually talk about the game and bring more people to try your product (and 5% of those freely acquired users may be converted) without you needing to spend a penny on marketing taken into account? Was it considered how the recommended 60% loss of the userbase could affect that side of things? After all "doubling revenue" is not equivalent to "doubling profit".

Maybe my considerations are insignificant. I am just having the concern that when it looks too good to be true, it may actually not be true at all.
Teenage mostly player base surely is a factor.
Definitely.

Edited 4 times. Last edit by Eric Pallavicini on 14th August 2014 6:15pm

Posted:A month ago

#17

Mariusz Szlanta
Producer

31 27 0.9
Hi Eric,

Yes, it was one of several comments author made during presentation about possible changes to LoL and it was built on earlier thoughts about existing champions system where new champions are overpowered and only balanced after weeks when all competitive players already bought them (price is usually dropped too). Riot is well aware of that and gets away with this quite obvious pay to win element.

As it is, Riot sells power of which author is very well aware but possibly thinks they could sell way more of it or maybe sell soft power.

Last but not least, it was half serious remark made to see reaction of listeners.

Similarly, 60% loss of player base argument was made to show how badly monetised game is and also how big it is. If LoL ever enters crisis, Riot has a lot of space to manoeuvre. They don't run tight business where slight change and loss of 5% of players can push them under. Again, it does not mean that pay to win elements must be added. For example, serious change of battle system can also drive many people away.

Sarcasm not needed really. Anyone interested in F2P models knows how important not paying users are and usually puts a lot of effort to make them happy. It's people from outside who seem not to understand that.

There are numerous other ways to monetise other than champions.

Make app that let users run ranked tournaments and let them set both entry fee and prizes and then then a cut. Riot would focus on organising top level tournaments only in that case and could make a requirement to have rank to be selected. Just like in tennis.

Use power of 3D printing to sell exclusive goods like T-shirts for winning (or participating in) tournament available for download and print only for these who won or participated.

Sell golden dust of uniqueness by letting users to have completely unique looking units which will be designed in cooperation with dev team - entry price would be high for that but I'm sure it would sell great anyway.

Sell power boosts that allow to unlock additional powers of champions faster. As WoT proves, illusionary pay to win nature of this feature is very quickly dispelled on battlefield.

It did not take me long to come up with the list above and I'm rather convinced that company's like Riot have whole teams with long lists of possible features ready.

I generally don't understand your assumption that evil lurks in the dark and waits to turn every great game into pay to win. People who run these businesses are really not that stupid. Western culture does not accept pay to win and free market will take care of redressing balance. Will LoL turn P2W, it will immediately be replaced by other game, almost identical in design but free of P2W.

Well, you haven't seen presentation but you are sure you have right to demonise author and actually offending him by accusing him of twisting research to prove point which you think he wanted to prove.

What Teut Wiedemann did was as follows - he proved that LoL monetises way below current industry levels, that Riot knows about this but don't take any actions, that player base grows very rapidly without any costly user acquisition actions in place and that there is a lot of space should any correction of course were needed. He's conclusion was that Riot can get away with it because of size of the game but he is unsure if this is right approach for them and he definitely advised not to copy it for anyone wanting to break fresh into market.

As I said, I wanted to see more about connection to e-sports and Riot intentionally building huge player base at cost of profit at the moment.

What was this presentation not about is how to turn LoL into P2W.

Posted:A month ago

#18

Eric Pallavicini
Game Master

286 182 0.6
Hello Mariusz,
Yes, it was one of several comments author made during presentation about possible changes to LoL and it was built on earlier thoughts about existing champions system where new champions are overpowered and only balanced after weeks when all competitive players already bought them (price is usually dropped too).
Since champions are available to anyone who got some non-premium currency, in stock anyone can buy them on day 1, at least technically that is possible. Therefore it is not really an exclusivity nor pay-to-win in disguise. Now in practice of course if an user don't have that stock he can rely on good old cash.

As for balancing, yes, there is a grey area there and I agree with you it may be part of a release strategy (you get it first so you have an advantage, this advantage impress others players who want it too). But there may be fair reasons for that: it could also be that Riot devs honestly don't know exactly how to balance their new champions without confronting them to the current content and can only do it in a live environment (making datadriven and user feedback based decisions) and as such they prefer to aim for an overpowered champion that will be nerfed rather than go the other way around (which not only could affect sales, but also will diminish the amount of feedback collected - lose-lose situation for everyone).
Well, you haven't seen presentation but you are sure you have right to demonise author and actually offending him by accusing him of twisting research to prove point which you think he wanted to prove.
I did not, I haven't seen the presentation and made that clear which disqualifies me from commenting on the presentation or presenter instantly.

I was speaking generally as "100% of my happy customers have bought my product" looks nice and is the truth but doesn't mean "100% of my customers are happy with my product". Doubting or questioning is not accusing or defame I think, and if i was given the opportunity to confront Mr. Weidemann directly, I would because I am very interested by this topic and would like my doubts dissipated and his point clarified (because I am sure I could learn a lot from doing so from someone who's got such experience and insight). Though I can only base my opinion on my interpretation of the reported extracts is in this article since I wasn't assisting to that presentation.
I generally don't understand your assumption that evil lurks in the dark and waits to turn every great game into pay to win
Wasn't saying or assuming that either. There is a difference between taking an easy path because it is the easy path and judging the fact as evil. Additionally i do believe selling power in F2P game can be done in a right way (in my opinion World of Tanks does it right to some extent, by making the premium tanks advantageous compared to equivalent tier stock tanks, giving them some metagame advantages like extra gold gain and no crew training requirement to name a few, while these effects partially wear off compared to fully-upgraded non-premium tanks of the same tier - type59 being a rare exception as it remains competitive with even the tanks of next superior tier).
People who run these businesses are really not that stupid.
They aren't indeed, not at all. What I question sometimes is that people who run these businesses sometimes runs them with more MBA qualifications than passion for making good games and providing their audience with an edifying experience (or actually simply games and not monetisation systems with graphics). I don't question the intelligence, nor the strategy, at the end "a truth is a truth when it works" and if success is measured in money/revenue/profit then it definitely works and those people running those businesses are definitely doing a good job.
What was this presentation not about is how to turn LoL into P2W.
Ok, thank you for clarifying what I couldn't fully understand from the article and my apologizes for having left some ambiguity in my previous posts.

I also understood part of Mr. Weidemann's point regarding "not taking Riot as an example to follow" with a high risk of struggling and eventually failing (because they were the first on that F2P MOBA market as well they achieved something which may be extremely hard to reproduce now they hold most of it). Though LoL monetisation is also pretty clever when it comes to runes, runes pages and the amount of champions required to participate in ranked matches which may make it a very long and frustrating process for a good player who really wants then to place a bet on himself by buying some package. What I mean here is that monetisation of LoL is mainly affecting the metagame, and as it has been compared to WoT (one of the best known conversion rate at this time) it is in fact hardly comparable since WoT monetisation casts a much wider net affecting metagame (and we could say metagames, talking about clanwars on top of account progression), gameplay, or both.
Sarcasm not needed really. Anyone interested in F2P models knows how important not paying users are and usually puts a lot of effort to make them happy. It's people from outside who seem not to understand that.
Sarcasm was NOT aimed at you or anyone involved in the topic. I have clearly heard a few industry professionals, also at manager level, (during the F2P part of my gaming industry career) dismissing the importance of non-spenders. Reason why I allow myself a bit of irony, because I witnessed the unexpected a few (already too many) times already.

Edited 8 times. Last edit by Eric Pallavicini on 15th August 2014 5:01pm

Posted:A month ago

#19

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