Riot Games, the video game producer behind League of Legends (“LoL”, its only game), has been hugely successful by any metric. In early 2014, 27 million people played LoL each day, which is about 50% more than the average viewership of an NFL game, and about 25% more than the viewership of the most popular primetime TV show.  This playership reportedly drove over $1 billion of revenue in 2014. Riot Games is undoubtedly a digital winner in the gaming industry, creating massive value for its players. But, is it actually revolutionary in what it does?
How Riot Creates Value
At the core, Riot creates value by creating, maintaining, and constantly improving a video game that people love to play. There are many facets to how Riot has been able to do this so well.
Looking at its technology, Riot updates its games every one to two weeks via software “patches” or updates that players must download as soon as they are available. This allows Riot to introduce changes that keep the game balanced, fun and challenging over time. The company also strives to reduce the latency that players experience when connecting to LoL servers, creating a more seamless gaming experience.
Riot is also a master of game design. It has a number of features that have been shown to increase the “addictivity” of a game, such as accruing “points” over time, developing quantifiable “mastery” over various ways to play, and playing a “meta-game” that extends beyond the individual games. Furthermore, the LoL world has a rich backstory that captivates its players. Finally, a key aspect of the game is the matchmaking system that groups players into two teams of roughly equal capabilities (based on past performance) for the 5-versus-5 battles, which makes the game more fun for all.
With these elements in place, LoL attracts players and builds up network effects. More players playing LoL means that more data is generated to help optimize the game even further. More concurrent players allows for even better matchmaking and a better experience for all.
How Riot Captures Value
Riot has always emphasized that the quality of the game and the player experience come first. LoL is in fact a completely free game. However, there are a number of ways in which Riot captures some of the value it creates for its users.
The main revenue stream comes from in-game purchases of purely cosmetic add-ons to one’s account. Two other revenue streams come from a budding eSports division, which produces and broadcasts professional LoL games, and from merchandise inspired by the LoL world.
Notably, none of these revenue streams come from products that change the core mechanics of the game experience – you can never buy an advantage in the game. Thus, Riot is essentially monetizing its players’ enthusiasm for and affiliation with the game. This is not online advertising, where publishers monetize the attention of its viewership via injecting ads. It is more akin to professional sports, where teams cultivate loyalty from a fanbase, hold events in which they play, and sell items for fans to display their affinity. Despite being free-to-play, Riot has managed to monetarily capture some of the value it creates.
Is it Revolutionary?
Riot Games is undoubtedly a digital winner, but it seems to have gotten to this point by perfecting an existing product genre (the online, multiplayer video game), rather than revolutionizing it. Many of the technological challenges had been addressed by previous online games. Even with game design, LoL started off as a close follower of a previous game (Defense of the Ancients).
Moreover, it’s hard to argue that LoL has disrupted any other industry. Despite LoL having a massive playership, it has not made a noticeable dent in competitive entertainment sub-industries such as television, movies, or professional sports. Some have hoped that the technological capacities and game design elements from the video gaming world would positively impact other industries such as education, but this has generally not occurred yet.
Riot is certainly a digital winner today because of how well it has executed on its goal of creating a wildly popular and player-focused video game, one which relies on the technology and network effects enabled by the internet. But, it might not be a digital winner forever – Riot will have to invest in constantly maintaining and improving LoL in order to keep players coming back. Perhaps it is only a matter of time before another game similar to LoL captivates players, or a new genre of game becomes popular.
 LoL number reported by Riot Games. NFL viewership (17.6M average over the 2014 regular season) reported by NFL and Nielsen. Big Bang Theory weekly viewership (21.3M) reported in June 2015 by tvinsider.