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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 2014GDC Europe 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."

15 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:4 months ago

#1

Brian Lewis Operations Manager, Aeria Games Europe

141 93 0.7
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:4 months ago

#2

Klaus Preisinger Freelance Writing

1,182 1,267 1.1
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:4 months 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:4 months ago

#4

Todd Weidner Founder, Big Daddy Game Studio

429 1,025 2.4
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:4 months ago

#5

George Pigula Producer, EA Maxis

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:4 months ago

#6

Anthony Gowland Lead Designer, Outplay Entertainment

221 798 3.6
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:4 months ago

#7

Klaus Preisinger Freelance Writing

1,182 1,267 1.1
@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:4 months ago

#8

George Pigula Producer, EA Maxis

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:4 months ago

#9

Barrie Tingle Live Producer, Maxis

399 217 0.5
@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:4 months ago

#10

Steve Wetz Reviewer/Assistant Editor, Gamer's Glance

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:4 months ago

#11

Iain Stanford Experienced Software Engineer, Tinderstone

36 140 3.9
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:4 months ago

#12

John Kauderer Associate Creative Director, Atari

37 9 0.2
These comments are amazing. More insightful than the article itself. I love this website!

Posted:4 months ago

#13

Mariusz Szlanta Producer, SEGA Europe

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:4 months ago

#14

Mariusz Szlanta Producer, SEGA Europe

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:4 months ago

#15

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