Learning Digital Business Transformation through example… from my kids
Yesterday I had a deep conversation with my eldest son about League of Legends. I must admit I am not fully comfortable with him spending countless hours playing this online game. What I did not understood until yesterday was the profound undergoing digital transformation that the entertainment industry is experiencing as we speak.
If you think League of Legends is just an online game and its creator Riot Games are just a game publishing company, you are as wrong as I was. Let me try to explain what wonder me most by doing an analogy with football (i.e. soccer for those few reading in the U.S.)
More than hundred years ago, all around the world there were the football players playing football matches in the football field, and there were also the supporters in the stadium’s bleachers attending the matches. Local leagues of football teams organized local championships, regional federations organized regional cups and, then less than hundred years ago, the worldwide federation, also known as FIFA, organized the worldwide cup in my home town. Bribery and scandals aside, football is a multibillion dollars business, isn’t it?
About seven years ago, Riot Games developed and published League of Legends, a multiplayer online battle arena, real-time strategy video game, very popular among teenagers from 12 to 19 years old. There were teams of five online gamers teams playing games against other teams eventually in opposites sides of the world in real time. These gamers are actually gamethletes, a skill-based ranked community of people all around the world, who love to play this online game. There are local championships, regional championships, and there is the worldwide championship. The topmost ranked gametheletes are actually professional players who get paid for playing. Amazing, uh? Well, not really. The Messis, the Suarezes, and the Neymars of the football are paid, and very well I must say, for playing the sport they love to play, aren’t them?
Who pays the League of Legend’s gametheltes? Riot Games does for most of them and teams participating in the Worldwide Championship are even sponsored by brands like Samsung or SK Telecom. How Riot Games makes money to pay them? Well, you can get almost everything, and go almost everywhere in the game without a penny, but money can make things go faster. Just by playing games you earn points, and then you use those points for stuff like costumes for creatures in the game. But you can also buy points. And before you ask, yes, my credit card number is somewhere inside Riot Games’ datacenters; somewhere deep inside, hopefully.
But here’s where things become even more interesting. The 2014 League of Legends Worldwide Championship final was played at the Sangam Stadium, also known as the Seoul World Cup Stadium, built for the FIFA’s World Cup in Korea in 2002. About 40 thousand people attended the 2014 League of Legends finals live and companies paid for advertising spaces on the stadium, yet another 27 million watched them live online via streaming served by 40 broadcasters who also paid for the content. I don’t know how much they paid, but winning teams raised about 2.13 million dollars in prizes, so there should be good business case, shouldn’t?
The game’s user interface layout used for broadcasting is similar but different to the game layout used to play against other teams: it needs to show the full battlefield, not just the portion your team controls, and needs to show both teams’ actions. But it also allows space for advertising, so that’s how the broadcasters makes money.
My analogy with football isn’t about the sport, it’s about the entertainment industry. And there’s this multi-million dollars business of online multiplayer gaming, of which League of Legends is just one of them, mainly for teenagers who don’t have money, run by relatively few people, that enables a huge ecosystem for others to make money too, including those content generator teenagers who record their games and publish them online on YouTube or broadcast them on Twitch and get paid for it because other teenager consumers do watch them.
Putting it simply, that’s pretty similar to the business model behind the entertainment industry, isn’t it? And it’s fully digital. And it took just seven years to get there.