Riot Games has been prolific in sealing League of Legends esports media-rights deals with Asian streaming platforms in recent months.
In January, Riot sold rights to the inaugural 2020 Pacific Championship Series to agency Redd+E in Southeast Asia, Taiwan, Hong Kong and Macau, and exclusive rights to the 2020 North American Championship Series and European Championship to Chinese live-streaming platform Huya.
This follows the fierce December bidding war over rights to the annual League of Legends World Championship in China. The country’s first example of an open tender for exclusive media rights to an esports property extracted a huge winning bid of ¥800m (€102m/$113.1m) from video sharing and online-gaming site Bilibili.
Bilibili’s likely motivations for its ¥800m bet is to grow its content community that produces anime, comics and gaming (ACG) content, which is popular among younger demographics. If they can attract League of Legends fans to their platform, there could be a fair amount of viewership retention, which would be a big boost to their user numbers.
The company has been broadening its services beyond video-sharing and game publishing to live-streaming, online comics and e-commerce to boost growth and reach a market capitalisation of $10bn, a goal set by chief executive Chen Rui in September last year. Bilibili listed on the Nasdaq exchange in 2018.
But despite all this activity – and projections for global esports media-rights revenues to hit $396m by 2021 – media-rights revenue is not the primary goal for Riot, whose core business is still games publishing.
Speaking to SportBusiness, Riot Games’ head of strategic partnerships Jamie Lewin says: “The deal with Bilibili was huge for the whole ecosystem in China – it set the bar for media rights in a big way, and for esports in Asia, setting benchmarks in pricing and the size of the deal.”
“But when we look at revenue-per-fan, the value that’s really generated is indirect. That’s because the real value is captured by the developer publisher, because of the cyclical manner of the audience and the interaction with the content when watching esports.
“Viewers will invariably go play more of the game – we’ve seen incredible spikes around our world championship – and we ultimately make billions of dollars a year by people playing the game and buying in-game items. Essentially, our commercial model is very different: viewership is what fuels the rest of the main machine, which is players playing our games and making in-game purchases.”
Though it was released more than a decade ago, Riot’s League of Legends still generates considerable revenues – over $1.4bn in 2018. In 2016 the game hit a landmark 100 million monthly active users, and according to Riot, is still holding firm at those numbers as of last year.
Riot’s primary aim in media-rights negotiations is to achieve cost-neutrality for marketing its games in Asia. Lewin says: “From our point of view, it makes sense to try to get esports marketing to a place of cost-neutrality. Esports operations are very expensive, so [it is crucial to] go out and forge strategic partnerships that balance our books.
“At the start, these events were just marketing for the games, but they’ve grown and now come with a large inherent cost, so the goal is to lower our cost for them. That view, we understand, is frustrating to people in the esports space saying ‘it’s an exploding industry worth millions’, but how you quantify that number is an inexact art.”
Lewin explains that the difference for esports, compared to traditional sport, is that its audiences are players themselves.
“The difference between traditional is watching Arsenal is not going to make you a better player; 99 per cent of the audience are people who aren’t active players, but view football as a form of entertainment. Esports is so new that the majority of viewers play the game – so there’s a large audience that’s there to skill up.
“The really key thing to understand is how unlike traditional sport it is – kids playing five-a-side does not make LaLiga or the Premier League any money.”
A study by research firm Niko Partners backs up his assertion, showing that almost two-thirds of gaming viewers in Greater Southeast Asia are players. This demographic are also the highest spenders, averaging $15.80 per month on PC games and $10.10 a month on mobile.
With the game’s audience willing to splash the cash on watching top players duke it out as a form of masterclass for their own gaming growth, this represents further monetisation opportunities for gaming platforms like Bilibili, Douyu, Huya and Kuaishou.
Lewin explains: “If I look into the potential space for Asian broadcasters, anyone who is in the broadcast space for OTT can add Pro View [a premium streaming option in which a fan follows a single professional game in an esports title] as an add-on for potential revenue streams, apart from growing their subscriber and viewership base.”
Riot, via its League of Legends‘ official website, is charging $9.99 for multi-view streams (point-of-view or main event) for its North American and European League of Legends Championship Series in 2020. Launched last year, Riot has committed to splitting the revenue from Pro View between its regional leagues and teams to keep growing its player base.
Ultimately for game publishers like Riot, aspirations of growing media-rights revenue are tempered by the need to maximise exposure to market its games, which is counter to why streaming platforms would pay huge media-rights fees.
Lewin says: “Media rights are usually all about exclusivity. But for game publishers, our investment is in the product – the game – and production of it, and we will always first achieve scale by the democratisation of distribution – which means we will cut our content into whatever forms and across as many channels as there is an audience for that channel.
“The difference for us compared to traditional sport is we will not accept putting our content behind a paywall. We will accept an additive experience behind some form of payment, but the main content cannot be gated.”