League of Legends is, by an objective measure, the largest game in the world.
It has a monstrous base of players, and those players log into the game often. It's also one of the most spectated games in the world, if not the largest.
"Over 32 million fans watched SK Telecom T1 earn the Summoner's Cup in front of a sold-out Staples Center. At peak, more than 8.5 million fans were watching at the same time," a Riot-penned blog post claimed. "To put those numbers in context, the Season 2 World Championship was watched by 8.2 million fans, with 1.1 million watching at the same time. In short, we're beyond humbled by your passion for and commitment to League of Legends."
There is no metric by which League of Legends isn't a huge success. Which means of course it's time for consultants to tell us what's wrong with the model.
A poor conversion rate
A recent Gamasutra article claimed that the conversion rate of players who download the game into players who purchase goods is rather low.
"As of 2013, League of Legends had earned: 70 million registrations since 2009, 32 million [monthly active users], 12 million [daily active users], 3 million [peak concurrent users], $1.32 [average revenue per user] and $6.24 million in revenues. The average revenue per paying user on popular games is about $35: Crunch all these numbers and get 1.2 million paying players, a 3.75% conversion rate," the article stated. "That's remarkably poor as rates go."
If these numbers are accurate, Riot is profitable due to scale, not because people buy a lot of online goods.
"Riot doesn't care. Optimizing monetization is not the top priority. They monetize purely through their reach. So it only works because of the large user base, and if you don't have that user base or don't expect to, you should not adopt their monetization," Ubisoft Blue Byte's Teut Weidemann stated. "It should not be a role model for your monetization system."
"LoL gives away too much for free, Weidemann suggests. The company could aggressively increase its revenues across even a smaller player base, and chooses not to," the article says. This is the part that made me fetch a deep sigh.
The wrong lesson
The act of uncritically looking at any monetization strategy for your own game is folly. Every game is different, and what worked in the past may not work for you. But looking at conversion rates and revenue per user as some kind of goal for monetization in the short term is why the industry often seems so willing to piss off its players
The most popular game in the world isn't good enough
If your goal is to make money fast — and certainly there were a few individuals who came out of the flaming wreckage of Zynga with millions of dollars more than they went in — Riot looks insane. Why give away so much of the game for free? Why not add more things to buy, and more ways for the player to give the company money? The article, and the consultant, have a point. If those numbers are accurate Riot is doing very poorly when it comes to monetizing their game.
If you look at the industry through a very short-term, cynical pair of eyes, Riot has to be one of the most frustrating stories in the business. The stories of investors and executives not understanding long-term value in gaming are becoming legion.
"We believe Nintendo can create very profitable games based on in-game revenue models with the right development team," a gentleman representing a hedge fund once argued. "Just think of paying 99 cents just to get Mario to jump a little higher." This was in a letter to Nintendo's Satoru Iwata.
Here's what monetization specialists miss, and why money people tend to be tone-deaf in their arguments to make games less fun for more money: Riot has successfully taken a free-to-play game to the top of every chart in the business, and they've kept the game growing in a time frame that can be measured in years, not months. The company is thriving and flush with cash, and it seems to have created a sustainable business model.
"The above mechanics are not meant to be exhaustive, but give a basic overview of key techniques used in coercive monetization model based games to defeat a customer's ability to make informed choices about the costs and values in these products," Ramin Shokrizade, the economist for Wargaming America, wrote in an unrelated Gamasutra article. "The more subtle the hand, and the more you can make your game appear to be skill based the more effective these products will monetize."
Keep in mind Wargaming is a company that is held up as an example of "better" monetization than Riot by Weidemann, because more people pay money to play. If that's your metric, than you likely have a point. But Riot is playing a longer game.
Here's another quote from the article by Wargaming's economist:
As discussed in my Monetizing Children paper, the ability to weigh this short term "pain relief" vs. the long term opportunity costs of spending money is a brain activity shown by research to be handled in the pre-frontal cortex. This area of the brain typically completes its development at the age of 25. Thus consumers under the age of 25 will have increased vulnerability to fun pain and layering effects, with younger consumers increasingly vulnerable.
League of Legends players are often young, so according to these specialists they should be easy to exploit for cash. Think of all that money Riot is "losing" by not putting the screws to their players! This is where we are as an industry: A company has taken the free-to-play model, created an implementation that is fair to players, and our response is to criticize the fact they don't get enough.
The most popular game in the world, in other words, isn't good enough.
Yes, this should be a model for your game
Saying that your game can't emulate League of Legends because Riot relies on the size of the audience rather than a conversion rate is accurate, but framing your argument with that fact is short-sighted.
These experts are selling themselves
League of Legends wasn't born into the world at this size, it was a process to get there and the game continues to grow, while also creating a secondary market for everything from merchandise to live events. League of Legends isn't a game as much as it's an entire industry, and every player who signs up adds value to that industry.
Counting heads purely as conversions into paid customers is a great way to show how little you understand about creating long-term, sustainable value in your games, a trait that in which Riot, along with Valve, has excelled. The model that other company's should emulate is that view towards long-term success over short-term gains
Let me be clear: These experts penning articles that say League of Legends, or other popular, profitable games, are doing something wrong aren't interested in making the game better, they're interested in selling themselves. They're arguing that Riot needs to change from its current approach, which is stomping all over the more manipulative and short-sighted strategies, to something they know how to do.
"Regarding the assertion that we give away 'too much for free' ... guilty as charged, though we disagree with the idea that over-delivering value to players hurts our biz," a Riot spokesperson told Polygon. "When making decisions, we always try to do the right thing for players and optimize for the player experience first. This focus on players is core to who we are."
"We’d also challenge the idea that aggressive monetization is good for anybody’s business. Gamers are really savvy about value and move on fast when they feel like they’re being milked," they continued.
Riot also noted the numbers cited in the story are old: as of of January 2014, 67 million people play League of Legends every month, with 27 million daily players and 7.5 million concurrent players at the daily peak.
So it's fair to say the game is continuing to grow.
If other companies, consultants, experts, or executives knew how to do what Riot is doing, and what Riot is doing is creating a new, sustainable market of long-term customers, they would do that. But they have no clue how to do so, so the argument becomes that Riot needs to change their approach to something they understand. This is the equivalent of a light bulb salesperson writing an article saying the sun is inefficient.
Riot has a better product than most free-to-play games, and that should scare people who aren't used to respecting their players.
Riot has created a model that has built a huge audience that's sticking around, that's making the company loads of money, and it's silly to look at the result in a vacuum and claim that other companies can't get there. Of course a consultant is going to tell you not to monetize like League of Legends. If you did so, they'd be out of a job.