Need More Gold: LoL and the New Market of Games

League of Legends Tops 2014 Worldwide Revenue for MMOs

After the conclusion of League of Legends (LoL) World Championships in Seoul, Korea, only the seasonal Harrowing content is breaking the silence from Riot. After Superdata Research, a digital goods research firm, published its findings on the highest grossing massively multiplayer online (MMO) game for the period of January to September 2014, LoL is once again making noise after reportedly topping the earnings chart for 2014.

Image from Superdata Research

The Numbers

According to the research, current Worldwide MMO revenues sums up to almost $8 billion and is expected to close at $11 billion by year-end. This number represents 21% of the worldwide digital games market and is expected to grow to $13 billion by 2017. The top four has set themselves apart from the rest, as #4 World of Warcraft (WoW) gives the largest revenue gap against #5 World of Tanks by a whooping 97% (revenue gap vs World of Tanks revenues).

LoL’s revenues increased by more than 50% from $624 million last year, proving an undeniably successful 2014 season. It seems that Riot Games’ revenue model of having no subscription for players to play (free-to-play) is proving to be more effective than subscription-based titles like WoW. LoL’s primary mode of monetization involves leaving players with options to increase their experience and IP gain (IP is the currency used in the game). IP can be used to buy skins that aesthetically improve character’s looks, and boy do they have good skins! Check out their two latest skins from the Harrowing:

I’m Totally Looking at Her Feathers: Ravenborn Le’Blanc

The Incredible Hulk Monkey King: Underworld Wukong

Other ways that Riot makes money is through implementing weekly champion rotations that dictate the availability of characters that a player may use. Every week, Riot releases a list of champions that are usable for free. Champions outside of this weekly list can be used if they are purchased either through IP or real world currency.

Free-to-Play vs Pay-to-Play

It is undeniable that World of Warcraft (WoW) dominated the subscription-based MMO titles with last year’s revenue of $1 billion, but the actual story proves otherwise. Financially peaking from the hype of the third expansion set, Cataclysm, WoW has since experienced revenue decline starting from 2010. This is highlighted by the 800,000 subscription loss this year and a 54% revenue drop last year. While I personally think that World of Warcraft is a really good game–and monumental as it reached its first decade this November–the Pay-to-Play revenue model doesn’t seem to sit well with the average gamer.

Asia remains the biggest market for MMOs, raking in $4.2 billion in revenues or 40% of the Worldwide MMO games market revenue. Here, Tencent took advantage of China’s protectionist policies to become a  dominating force in the industry. They’ve focused on investing and acquiring companies that offer high quality gameplay and cultural relevance. This statement triggered an arms race for Asian publishers aiming to replicate their success in Western markets towards Asia (SuperDataResearch.com). Of note, Tencent owns 92.78% equity interest of Riot Games. This was realized back in 2011 when Tencent bought the majority of shares from Riot Games for about  $230 million. Riot has since issued a statement, saying that it will retain independence in running its operations.

The preference of free-to-play titles over pay-to-play is clear but doesn’t necessarily equate to the latter’s decline. In actuality, whenever a major release in pay-to-play titles goes out in the market, there is a significant drop from free-to-play spending. This is reflected as WoW stood their ground with 600,000 new subscribers on the advent of its fifth expansion set, the Warlords of Draenor. Targeting $8.2 million subscribers by the end of the year, Blizzard is confident that WoW revenues will once more exceed $1 billion. The turnaround is that World of Warcraft now offers microtransactions and some free-to-play components to its game.

More Than Just a Competition

The shift from pay-to-play to free-to-play is real, as companies like Activision retired “Titan” and invested more on “Heroes of the Storm”. Still, it is very wrong to say that pay-to-play will die as the numbers in the model’s game revenues and player subscriptions speak that game quality, whether free or not, is the most sought-after item in the industry. To compete between free-to-play and pay-to-play is as superficial as comparing League of Legends to DotA 2; the real competition has traditionally revolved around the quality of play in these games.

With LoL topping the revenues charts for 2014, having no signs of slowing down as 2014 closes, it is clear that free-to-play Multiplayer Online Battle Arena (MOBA) games are the current market leaders in the industry. LoL’s almost $1 billion revenue gain as of September 2014, Valve Software’s Dota 2 jump from 20th place in 2013 to 9th place in 2014 and Activision Blizzard’s Heroes of the Storm push are indicators that the model works and that there is plenty of space for healthy competition and new innovations within the MOBA genre.

League of References:

League of Legends tops MMO revenue list, Hearthstone No. 10 by Jessica Conditt

MMO Market Report 2015 by SuperData Research

League of Legends Second in Online Gaming Revenue for 2013 by Shannon Doyle

Number of World of Warcraft subscribers from 1st quarter 2005 to 3rd quarter 2014 (in millions) by Statista: The Statistics Portal

‘World of Warcraft’ Revenue Drops 54% in Seven Months by Denny Connolly

‘World of Warcraft’ Still A $1B Powerhouse Even As Subscription MMOs Decline by Paul Tassi

World of Warcraft Loses 800,000 Subscribers in Three Months by Eddie Makuch

TENCENT HOLDINGS ACQUIRES MAJORITY STAKE IN GAME PUBLISHER RIOT GAMES by Riot Games

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