1.0 History and growth
Riot Games, Inc. (RGI) is a limited liability company based in Santa Monica, California, which started operations in 2006 (Riot Games, 2016). Marc Merrill (a former corporate marketing manager at Advanstar Communications) and Brandon Beck (a former strategy consultant for Bain & Company) found RGI with the intent of building on the developing multiplayer online battle area (MOBA) genre, which emerged from improvements on Blizzard’s hit games Star Craft and War Craft. They wanted to differentiate League of Legends (LOL) in four dimensions: “gameplay, community, e-sports, and intellectual property” (Gaudiosi, 2013).
When RGI released LOL in 2009, the game won positive critical and player acclaim, resulting to over 67 million of players monthly since then (Riot Games, 2016a). Two years later, Tencent Holdings Limited had acquired 91.8 percent of RGI for $400 million (Gaudiosi, 2015; Tencent, 2012). That year, RGI hosted its first championship tournament in Jonkoping, Sweden, which attracted hundreds of thousands of fans (Gaudiosi, 2015). The success made RGI realize the huge global interest and decided to establish the League of Legends Championship Series.
In August 2015, The LCS will be the first video game ever to happen in the Madison Square Garden in New York for the American Summer Finals after players succeeded competitions in Berlin, Brussels, and London (Gaudiosi, 2015). By December 2015, Tencent has fully acquired RGI for an undisclosed price (Johnson, 2015).
RGI uses a lean organizational structure, which is designed particularly as a service organization. Its game development strategy informs all six components of its organizational structure: service, marketing, community, network/operations, customer service, and the web (Merrill, 2016).
Today, RGI has grown into a global company with 18 offices in Europe, Asia, South America, North America, and Oceania. Its eSports business grew as millions of global enthusiasts and watching fans grew in bounds (Gaudiosi, 2015). In 2015, it became Fortune magazine’s top 13th employer (Hollins, et al., 2016). Fortune magazine called the LOL the “most-played video game in the world” (Gaudiosi, 2013).
2.0 Strengths and weaknesses in value creation
2.1 Strengths: As a developer, RGI has core competencies in game design, programming and art (Hollins, et al., 2016). However, it also operates as a publisher (Newzoo, 2015). In addition, its free-to-play format makes the LOL irresistible to online gamers (Gaudiosi, 2013). Excellent gaming experience fuels word-of-the mount advertising among circle of friends who often play together. Moreover, its high brand recognition allowed RGI to sell subsidiary products such as LCS Champion posters and statuettes (Hollins, et al., 2016).
2.2 Weaknesses: A serious weakness comes from the decision of the founders to sell the full control of RGI to Tencent. Although RGI management had been essentially autonomous in running the company under the majority ownership of Tencent, the decision to sell may have negative impact on the morale of the employee on what can appear as the founders’ lack of financial stake in its success. There had been no report that document the internal environment after full acquisition. However, this possibility cannot be discounted, particularly when Tencent decide to change management tactics and intervene in the RGI operations.
3.0 External environment
3.1 Competition within the industry: In the game development segment, competitors consists of other developers. Smaller developers usually outsource specialist tasks (e.g. motion capture, sound, or game engine). In the publishing segment, its direct competitors include big gaming publishers, such as Valve, Blizzard, Wargaming, and Hi-Rez (Newzoo, 2015). The most capable competitors, however, are Zynga and Blizzard (Gaudiosi, 2013).
3.2 Bargaining powers: Consumers of RGI core products have no bargaining powers as the software programming proposes a take it or leave it offerings, except in Skins Sale. The role of intermediaries are highly limited due to its free-to-play format with free installations available online.
3.3 Threat of substitute products: The threat for substitute are always there, such as the traditional MMO games, particularly in places not reached by RGI distribution or less active in participating in the championship series. However, in markets where LOL is present, substitute is still hard to find with the level of gaming experience LOL provides. Moreover, MMO subscription format tend to initially disengage non-diehard gamers.
4.0 Analysis: Evaluation of the internal and external environments
In general, the internal and external landscapes are currently favorable to the continuing success of RGI under the new full-ownership of Tencent. Despite the potential internal problems that may result from this full transfer of ownership from the founders, the business continues to show positive signs for future growth. It is also highly possible that Tencent will continue its usual hands-off policy in managing the RGI operations.
5.0 Corporate level strategy
5.1 Evaluation of its mission, goals, and corporate strategy: RGI aspires to achieve the “most player-focused” game development company globally (Riot Games, 2016a). Its goals include placing the player experience first, challenging gaming convention, focusing on talent and team, taking play seriously, and staying hungry and humble (Riot Games, 2016a).
Consistent with its goals, RGI strategy follows three major threads: game development; human resource management; and corporate culture. Game Development: The RGI game develop strategy is diffused with innovativeness and openness to new and courageous ideas. It adopts a policy of continuous idea generation, by challenging convention, and value creation, which is not satisfied with its current level of customer engagement and constantly seeking to improve it. Human Resources Management: RGI hire entrepreneurial individuals and develop them into teams with rewards focused on meritocracy and on the values that each employee delivered. Corporate Culture: The RGI culture is essentially entrepreneurial characterized by innovation, ambition tampered with humility, fun, and a sport-team spirit. Part of its daily activities is play and fun. The employees do not take their failures and successes seriously and move on with achieving their objectives. It prefers action over process and bureaucracy.
Overall, its mission, goals, and corporate strategy provide a rich environment for innovative and customer-centric product development policies, which makes RGI positioned to be highly relevant to customers and thus highly competitive in the games market.
5.2 Analysis of business line, subsidiaries and acquisitions: RGI develops game platforms, which it offers to online gamers as a free-to-play platform, which lowers the barrier of entry for gamers, thus, increasing the probability of greater patronage even non-hardline gamers (Gaudiosi, 2013). Currently it has no reported acquisition or subsidiary as it performs game development in-house.
5.3 Pros and cons on the corporate strategy: The lean and highly entrepreneurial, player-oriented service strategy of RGI perfectly supports its operations, creating the right internal environment to support its marketing strategy. At this point, no strong disadvantage that can be observed from its corporate strategy other than its susceptibility to less performing employees, which nevertheless appeared to be well-managed at recruitment stage.
6.0 Business level strategy
6.1 General business strategy: RGI’s overall strategy is to develop games, which is so far only LOL, make the games available online for free play, and market the game to gamers globally whether PC owners or internet café establishments.
6.2 Competitive strategy: RGI’s competitive strategy relies upon its full commitment to superior gaming experience, openness to user feedback, quick action on such feedback, and defeating the subscription-based traditional gaming policies with its free-to-play game.
6.3 Marketing strategy: RGI approaches marketing in an iterative, analytics-based advertising, which is ongoing in consumer-centric dialogues (Merrill, 2016). It also works with motivated PC partners. The largest and most successful marketing event for RGI is the LGS (Gaudiosi, 2015). However, the most irresistible money-making strategy is its free-to-play platform, which encourage non-players to participate and end up paying for new in-game characters (called Champions), which can significantly help the players win their battles (Gaudiosi, 2013). In fact, it stimulated a trend for free-to-play game offerings.
6.4 Cost strategy: As developer and publisher simultaneously, RGI naturally has lower publishing cost than non-developer competitors (Newzoo, 2015). Its non-use of intermediaries also cut down distribution costs.
7.0 Implementations
RGI’s structure and control systems appeared not difficult to implement as a result of its highly team-motivating culture. Its flat structure makes it possible employees to have full access to the founders themselves during working hours. Responsiveness to gamer suggestions and complaints also becomes faster with decision making travel a short organizational distance. Its flat hierarchy profile also makes RGI culture highly responsive to guided development from the founders themselves who work side by side the employees.
Meanwhile, organizational change in RGI seems to be of minimal need at present even after the full takeover by Tencent. The parent company has a history of hands-off policy in the management of RGI. This full trust to the current RGI management engenders freedom to manage the company from the best standpoint the management can without expecting interference from Tencent. Thus, it preserves the culture of teamwork and innovation, which may not effectively much with that of the parent company.
Conversely, its meritocratic reward system provides a sense of fairness while effectively encouraging employees to contribute more value to the company. It engenders trust in the RGI management, which is expectedly a rich environment for innovative risk-taking that the company itself drives to unimaginable heights. In the area of organizational conflicts, there had been no available evidence other than its being seemingly non-existent, at least to a point of disruptiveness. Between RGI and Tencent, the relationship had been effective since 2011.
8.0 Recommendations
One of the challenges expected in a technology company, which grows so fast, is the overstretching of manpower capability to meet the growing demands for innovations while enabling an ongoing search for better ways to keep the gaming experience at the edge of growing gamer satisfaction. Consequently, it is recommended that the top management establish an effective long-term plan for manpower acquisition and development based on the current rate of operational growth. Moreover, with the full-acquisition by Tencent, full respect of RGI autonomy should be establish to ensure that the current culture persists and develop more.
References
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