After spending years trying to transcend its origins and become an entertainment giant, Riot Games is scaling back its ambitions this year, with a focus on its core gaming products.
Initially, at least, the mindset was encouraged by scale: Riot Games’ user base expanded considerably in 2020, boosted by a COVID-19-fueled rise in worldwide gaming activity, as well as the release of the popular first-person shooter title “Valorant,” Riot’s second major esport after the fan-favorite “League of Legends.”
Brimming with confidence from this growth, Riot’s leaders embarked on a mission to transform it from a gaming company into a Disney-esque culture and entertainment giant, using Riot intellectual properties as a launchpad. But gaming activity returned to earth by the end of 2022, with global gaming revenue shrinking by nearly $10 billion year-over-year, according to Newzoo’s annual report for the year. As a result, these dreams faltered, making it imperative for Riot to refocus on game publishing to achieve its long-term goals as a company.
“Games are at the core of everything we do, and esports and entertainment are vital to the game experiences we build for players around the world. So while the internal framing of our aspirations may have changed over time to help inspire our teams to work more closely in service of our mission, our commitment to esports and entertainment certainly hasn’t — it’s actually stronger than ever,” said a senior Riot executive in a statement, without answering additional questions on-the-record. “We just finished our most successful Valorant Champions Tour Masters tournament in Madrid this weekend, we’re introducing a new partnership model in LoL Esports to give teams more financial opportunity and we’re gearing up to unveil ‘Arcane’ Season 2 later this year. It’s full steam ahead for us across the entire game experience for players.”
Across the board, video game publishers are tightening their purse strings and refocusing their ambitions after a 2023 and early 2024 marked by successive waves of layoffs. As gamers adjust their spending preferences from premium console titles to free-to-play or live service games, publishers have been forced to pivot as well, putting them in an uncertain position despite gaming’s cultural ascendance.
Disney dreams
As Riot’s star rose in 2020 and 2021, Riot executives saw dollar signs. They viewed the company’s growth as an opportunity to use Riot IP as a spearhead into the broader entertainment world. Much like Disney successfully spun its film and television properties into a merchandise and theme park empire in the 20th century, Riot’s leaders hoped to use games as an avenue into the core of culture itself — and crank out revenue in doing so, according to five former staffers who spoke to Digiday for this article.
“‘Let’s be Disney, let’s be Marvel, let’s do all of this,” said one former staffer cut from Riot during the January layoff, who requested anonymity, paraphrasing company leadership. “That was our ‘big bet’ for the next 5 to 10 years.”
Riot executives repeatedly used the Disney comparison and drew parallels to the entertainment giant in internal messaging to Riot staff. In conversations with Digiday, five former Riot staffers said that upper management had explicitly and repeatedly stated the company’s goal of using its games as a springboard into Disney-level cultural dominance, both in onboarding calls and company-wide global conferences from 2021 to 2023. This comparison was the preferred language of specific company leaders — not quite an officially codified Riot policy.
“In my orientation, they were like, ‘we want it to be an entertainment company; we want to be the next Disney,’” said another former Riot employee who requested anonymity.
The Riot executive who led the Disney charge was former CEO and current advisor Nicolo Laurent, according to five former staffers. Laurent stepped down in May 2023, with former Riot global president and CFO Dylan Jadeja taking on the role of CEO in his stead. Laurent did not respond to requests for comment, and Riot Games did not arrange for an interview directly with Jadeja.
Too hard and too fast
Gaming IP is indeed ripe for adaptation, as shown by the success of releases such as “The Super Mario Bros. Movie” and “The Last of Us” last year. “League of Legends” IP is no exception. “Arcane,” the popular television show produced in collaboration between Riot and Netflix, broke viewership records on the platform after its release in 2021. Its success bolstered Riot leaders’ confidence in the Disney comparison, giving them evidence that Riot IP could flourish across different forms of entertainment if done right. Although Riot’s short-term purpose in expanding into entertainment was primarily to keep players engaged and interested within its gaming ecosystem, turning a profit was one of the company’s long-term goals.
To accomplish this expansion, Riot hired talent from companies like Disney and Netflix, though former employees characterized this move to Digiday as a push that came too hard and too fast. It took decades of organic growth for Disney to evolve from a cartoon company into its current form; former Riot staffers felt that their leaders wanted the company to undergo a similar evolution in a matter of years.
“‘League of Legends’ has been out for years and years, and when you’re trying to move the IP into some other area, it’s very difficult to do. Riot has now come to the conclusion that that is probably not the right fit for that kind of expansion,” said Gareth Sutcliffe, the head analyst covering the games industry for the market research service Enders Analysis. “At a practical level, when we talk about how to try to expand that franchise, it’s very, very expensive — and I think it’s pretty clear that they have to do something to stem the losses that are occurring as a result of that, and bring it back to where they were before they decided to go into this extension.”
In spite of the critical success of adaptations like “Arcane,” Riot’s push into the broader entertainment world has reportedly been a drop in the bucket in terms of the company’s overall revenues thus far, per former staffers, who did not share specific numbers. Three years in, publishing games remains Riot’s core business, according to former employees. Most of the consumers who enter Riot’s ecosystem do so as players.
So it’s not a huge surprise that when former CFO Dylan Jadeja took the reins as CEO last year, part of his responsibilities were to help refocus the company on its strongest assets, according to both former Riot staffers and Jadeja’s own messaging. On January 22, Riot announced a cut of about 500 staff across multiple departments, representing about 11 percent of the company’s global staff. In an official memo, Jadeja said that January’s layoffs were the result of the company “changing some of the bets we’ve made,” characterizing the move as a necessary correction following overambitious expansion in the preceding years.
Reading between the lines, Jadeja’s statement means Riot is pivoting back to a focus on its core moneymaker of game publishing — and inherently scaling back on its product development around the games, including both film and TV adaptations and esports leagues, as a result. This doesn’t mean that Riot is divesting from its entertainment and esports initiatives, but it does mean that when the company does invest in those parts of the business, it will do so in a way that is first and foremost intended to improve the in-game player experience.
The second season of “Arcane,” for example, was renewed shortly after the first season came out in 2021. But as the second season’s November 2024 release grows closer, its producers have thus far been quiet about the potential for a third. And earlier this week, Riot announced a delay of several years on the development of its highly anticipated multiplayer online role-playing game located in the “League of Legends” universe. In a Twitter thread, Riot co-founder Marc Merrill wrote that the MMO delays were a “necessary” step to help “do something that truly feels like a significant evolution of the genre.”
Riot’s scaling back of its Disney dreams does not mean the company won’t eventually deliver on its goal to become a bona fide entertainment giant. But it does mean that Riot’s leaders are becoming more pragmatic about their current business, in the light of 2024’s post-COVID decline in gaming activity. Like Disney decades ago, the company might be better served by focusing on its strengths — making really good video games — and letting the rest come in due time, per former Riot staffers.
“If you look at “League of Legends,’ ‘League of Legends’ isn’t just a core game, right? It’s almost ultra-core, and it is far much more of a dedicated gamer audience than some of the other game IPs that are out there,” Sutcliffe said. “And I think that this is a reflection of where Riot has landed.”
https://digiday.com/?p=538830
>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : DigiDay – https://digiday.com/marketing/why-riot-games-is-scaling-back-its-dream-of-becoming-the-next-disney/?utm_campaign=digidaydis&utm_medium=rss&utm_source=general-rss
