Game Marketing Tips, Analysis, and News

Friday, February 11, 2011

Riot Sold To Tencent

I found it interesting that there were two big acquisitions last Friday, of nearly equal size, that were covered very differently in the press. One was the acquisition of The Huffington Post by AOL for $315 million; the other was the acquisition of Riot Games by Chinese Internet company Tencent for just north of $400 million. AOL's acquisition was headline news on the television and in the news papers, covered extensively with plenty of speculation about what this might mean to the future of the media business. Tencent's acquisition was covered by a few gaming websites, but otherwise caused nary a ripple.

Riot Games is the creator of the amazingly successful game League of Legends, a real-time strategy game that's free to play. They make money by selling you different skins for the characters, and additional characters that you can use in the game. This model has been a winner for them. Not that they've released any revenue numbers, but I deduce this from the fact that they have 100 job openings (!). Tencent was an early investor in Riot, and they are positioning this as just a further investment in Riot Games. Tencent plans to leave Riot Games management alone, according to their press release. Why mess with success?

Tencent's totem creature apparently lays gold coins.
If you're wondering who the heck Tencent is, this article has some interesting facts. The most interesting tidbit: If you ask the question "Who are the top three Internet companies by market capitalization?", the first two companies to leap to mind are Google (#1) and Amazon (#2). The third one... is Tencent. They apparently do very well in social networking in China (no doubt the Chinese ban on Facebook has something to do with this).

What's more interesting is what this acquisition might mean for the future. We'll no doubt see other games from Riot Games at some point, and they'll probably use the same basic F2P (free-to-play) monetization scheme that's been working so well. I'm sure Tencent, who has other game studios in the US, will be using F2P in their games as well. How long will it take big US publishers to figure this out? Well, it could take a while. Converting an existing game is not easy; you can't just take Call of Duty and make some weapons cost money, not without unforeseen consequences to gameplay. A whole lot of testing and tweaking would have to happen, and even then it's not clear that existing players would go for it in a console game. Then there's the sheer guts it would take for a game publisher who gets the majority of their revenue from physical goods sold in retail stores to take one of those franchises and try to get the same revenue without selling it in stores... or without pissing off the retailers they depend on.

1 comment:

  1. Wow, I never thought Riot was worth so much. That's a lot of money considering their lacklustre customer service.

    Tencent seems like they don't make many mistakes too.

    I've followed this blog, very interesting information.

    My blog is directly concerning League of Legends itself, take a look sometime: