Business Analysis Report: Riot Games

Table of contents
A. BACKGROUND AND MARKET ANALYSIS:

I. Background of Riot Games

II. Market Analysis and the Challenges of Riot Games

1. Market Analysis

2. Challenges of Riot Games

B. SITUATION ANALYSIS:

I. Internal Factors:

1. Strengths

2. Weaknesses

II. External Factors:

1. Micro Environment

2. Macro Environment

C. CONCLUSION:

I. Opportunities:

II. Threats:

III. Conclusion:

D. REFERENCES:

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Business Analysis Report: Riot Games

A. INTRODUCTION AND BACKGROUND:

I. Background of Riot Games:

Riot Games was established in 2006 by Brandon Beck and Marc Merrill and is managed by CEO
Nicolo Laurent with the intention to create, distribute, and support the world's most player-
focused games. In 2009, they released their iconic debut title, League of Legends, to obtain
international acclaim. 

Riot Games is well-known throughout the globe for developing unique games that captivate
players with high-quality visuals while remaining free. They are also an organization that
specializes in operations and distributes worldwide online gaming products. League of Legends,
Teamfight Tactics, League of Legends: Wild Rift (2020), Legends of Runeterra, and Valorant
were among the games released by Riot Games at the time the company was founded.

II. Market Analysis and the Challenges of Riot Games:

1. Market Analysis:

In 2021, the gaming industry was estimated to be worth $197.15 billion, and the market is
increasing at a CAGR of 10.1% from 2022 to 2030. Additionally, the growing popularity of
smartphones and 5G technologies is predicted to accelerate market development. The increasing
influence of games performed in major tournaments is also assisting in promoting the expansion
of the gaming sector. Currently, esports championships are experiencing tremendous growth in
viewers, converting into greater games and gaming technology sales. Gaming companies,
technology manufacturers, and corporations from other industries are rapidly investing in esports
to attract young customers, particularly Generation Z, who are usually difficult to reach through
traditional advertising methods.

Riot Games managed to release Teamfight Tactics, Valorant, and Legends of Runeterra in 2019
and 2020, a decade after League of Legends was published. This illustrates how a gaming firm
may develop and enter new sectors in a brief period of time. In addition, Riot Games has
established a pattern that other firms are attempting to achieve. To illustrate, the development of
Riot facilitated Xbox to publish a Halo series, while MDHR studio released “The Cuphead

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Show!” to keep track of the gaming production pace. The game created by Riot is currently
among the top 10 most popular free-to-play games and has made $1.75 billion in revenue from
League of Legends accounting in January 2021.

2. Challenges of Riot Games:

One of the significant obstacles Riot Games facing recently as an esport operation – for their
expert teams and leagues, the professional players’ wage rates are increasing tremendously.
However, revenues by item purchase cannot be able to keep track of the pace of salary growth
and they have to identify strategies to improve their business’s financial outlook substantially.

Traditional sports companies earn considerable revenue by charging broadcast networks

subscription fees for linear television. Nonetheless, Twitch and YouTube are Riot Games’
primary digital platforms, where most viewers enjoy the league. In addition, esports companies
such as Riot Games have to spend an enormous amount of money on content development to
draw viewership on those platforms, but they rarely gain as much as the license fees that would
get on linear TV. (Needham, J. - President of Esport)

B. SITUATION ANALYSIS:

I. Internal Factors:

1. Strengths of Riot Games: 

Riot Games has various strengths that position them above all rivals. To clarify, one crucial
element is they have built up numerous office locations in many corners worldwide; providing
access to global networks. Additionally, Riot Games employees can communicate further with
players and followers for future development and widespread brand identity. They employ this to
their strength to tackle unpredictable problems since they can pay attention to the concerns of the
communities and determine the particular issue. Furthermore, Riot Games also launched the free-
to-play model in order to deliver a fair and user-friendly gameplay experience. Despite the
majority of their profits would gain from "Riot Points" micropayments, they manage to
frequently provide content updates and arrange live world championships in which thousands of
viewers gather to observe professional players perform.

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2. Weakness of Riot Games:

In November of 2018, Rioters conducted a heated protest and sued Riot Games in response to
lawsuits involving workplace gender discrimination and assault. To clarify, when recruiting
managers searched for workers, they frequently expected employees to be men, and a female
employee indicated that it was one of the major problems she dealt with when she joined Riot.

According to Niko Partners, China is generally a critical market for Riot Games as the
attractiveness of gaming accounts for more than 32% of game earnings and approximately 45%
of total players. Riot mainly emphasizing distributing PC games, difficult to part take in the
ubiquitous mobile games market in China. The company has tried to follow this tendency and
released a mobile game called “League of Legends: Wild Rift” but is unable to compete with
other counterparts.

II. External factors:

1. Microenvironment:

a. The company:

Riot Games’ headquarter is located in Los Angeles, California, and has over 4,500 Rioters in
more than 20 branch office locations around the globe. Riot has been acknowledged as a Great
Place to Work for three consecutive years and appeared on various main pages including
Fortune’s “100 Best Companies to Work For,” “25 Best Companies to Work in Technology,”
“100 Best Workplaces for Millennials,” and “50 Best Workplaces for Flexibility.”

b. Supplier:

In February 2011, Tencent made its first investment in Riot Games, paying $400 million for 93%
of the stock in the company to make Riot Games a subsidiary. In 2015, Tencent acquired the rest
of Riot Games for an undisclosed amount. At this time, Riot's valuation is above 20 billion
dollars; therefore, Tencent should be satisfied with its initial investment.

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c. Intermediary:

MasterCard has proclaimed that it has diversified the cooperative relationship with Riot Games
to support the financial services category for the League of Legends Championship Series (LCS),
strengthening the bond with the world's largest esport and raising its assistance of the esports
community. Additionally, from 2023, League of Legends and Teamfight Tactics will be
distributed in Vietnam by VNG Games. As part of the transition, Riot Games will retake
ownership and operation of the Vietnam Championship Series and continue to manage the
Pacific Championship Series after 12 years of collaboration with Garena.

d. Target customers:

According to recent data, a Vietnamese person spends approximately 6 hours 30 minutes online
a day, 86% of Vietnamese individuals aged 16 to 24 claimed they engaged in online games, and
nearly 46% of Vietnamese interviewees aged 25 to 34 years claimed they played online games
on a regular basis (Statista, 2022, July 14). Therefore, Riot Games have approached the gaming
market by launching free-to-play products and advertising online to target teenagers who spend a
decent amount of time staying connected. 

e. Competitors:

Undoubtedly, the gaming industry is significantly growing, contributing to the severe

competition in this sector. To illustrate, Riot's acclaimed game League of Legends competes
directly with Valve's DOTA. To clarify, the materials in League of Legends are generally basic
and homogeneous which is more accessible to amateur or inexperienced players. However, it
restricts players' creativity and has a tendency to create boredom. DOTA 2 battles last longer
because of the larger maps and include more diversity in gameplay interactions, giving players
more flexibility. 

f. Public:

The company produces shareable content for users on platforms like Facebook, Instagram, and
Twitter. Riot Games have found a method to apply inbound marketing by creating quality
content and distributing immediately via social media channels. Players can also watch streamers

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on Twitch and YouTube playing Riot’s games or discussing topics to contribute viewpoints
toward gameplay development and create relationships while playing.

2. Macro Environment:
a. Political:

Riot Games have declined to endorse any form of political dialogue as they prefer the
concentration to be on the games and players, rather than on the political issues that influence
gaming throughout the globe. However, diversity in the workplace and distribution is suitable for
each nation. Riot Games' executive workforce is constituted of 25% women and 75% men.
Caucasian individuals account for 48% of the management team, Black or African American
people make up 13%, 19% of employees are Asian while Hispanic or Latino in 20% of
instances. 

b. Economic:

The method for selling skins in Riot Games' fair and free-to-play system; yet, it illustrates what
Arvidsson and Colleoni (2012) would refer to as an "affect-based law of value" fundamental to
platformer connections. As Arvidsson and Colleoni emphasize, recognizing occurrences of
economics is essential to evaluating the political business activity of Internet platforms and a
significant site evolved in the micro transactions of games such as Riot. 

c. Social:

The Riot Games Social Impact Fund was introduced in 2019 to assist Riot Games in increasing
its capacity to have a worldwide impact. The Social Impact Fund's principal purpose is to tackle
underlying fundamental challenges and encourage attitude change. Riot has sponsored 400
projects in 25 countries and donated $23 million in grants through the Social Impact Fund to
date.

d. Technology:

Riot Games developed teams to develop tools that interact with a variety of APIs and
frameworks, both internal and external, allowing them to identify tendencies of both problems
and solutions. They also established departments managing Riot's worldwide network to reduce

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uncertainty and improve user experience (UX). Riot’s strategy is to extend the network directly
to gamers by building network infrastructure and cooperating with Internet Service Providers
nationally and internationally.

e. Environment:

Riot Games' worldwide carbon impact increases with the release of new products. The
organization starts working on particular targets and measures to minimize its environmental
impact. On Earth Day 2021, Riot Games donated to Eden Reforestation Projects to plant roughly
a million trees. Moreover, two Rioters who wanted to use their candle-making hobby to sell them
and raised $27K for the Ocean Conservancy. 

f. Legal:

The US authorities have prohibited League of Legends in Iran and Syria due to the escalating
conflict between the US and Iran. The President Donald Trump administration's efforts to
enforce trade penalties on Iran and Iranian companies would not be permitted to conduct
business with the US which has led to League of Legends being temporarily shut down in Iran
and Syria. 

C. CONCLUSION:

I. Opportunities:

Riot Games' goal is to be the most player-focused gaming company in the world. Recently, the
company gradually climbed up by implementing the e-sports ecosystem and composing music,
which resonates with songs such as K/DA - POP/STARS, Enemy, and Legends Never Die. Riot
Games is running five games lately; eSports is evolving considerably; Arcane (Riot's top 1
Netflix movie product for many weeks) premiered worldwide; contributing to the widespread
brand identity. Furthermore, Riot Games succeed in e-commerce, social media, and providing
unique and attractive content; consequently, the firm aim for a cinematic universe made of
games, the most popular music comes from games, the most developed sport is e-sports, and
gamers are the driving force behind the most dramatic cultural changes. 

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Business Analysis Report: Riot Games

II. Threats:

Despite having intellectual property rights, Riot Games' business model is duplicable by
entrepreneurs. Riot asserted in its case that Mobile Legends which had 500 million Android
downloads since its debut in 2016—steals intellectual design, and features, along with the slogan
of Riot's League of Legends series. According to the lawsuit, Mobile Legends has been involved
in an "intentional and prolonged attempt to free ride on Riot's enormously important rights", and
the circumstance is "deliberate plagiarism." Riot initiated a similar lawsuit against Mobile
Legends in the same court in 2017, but the judge rejected the case, suggesting that it should be
adjudicated in China instead. 

III. Conclusion:

Riot Games effectively understood their consumers’ needs and wants and kept open
communication with them. Although they are not dominating a particular gaming field, Riot can
become one of the best companies and create one of the worldliest acclaimed games. They do not
rest on their laurels, in reality, Riot not only attempted to distribute fresh content, but they
continuously improve the previous products and diversify their sectors with successful music and
even movie sectors. 

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Business Analysis Report: Riot Games