Deconstructing D2C success: How Riot built a GTM strategy worth over $20B (pt 1)

Riot Games is one of the most successful studios in the world - their portfolio of famous IPs, including the hit desktop game League of Legends, also extends to entertainment (their Netflix show Arcane), esports (LoL leagues include LEC, LPL, LCS, and PCS), and more. And a big part of this success is owed to their D2C strategies, including using a proprietary game launcher to distribute their games and bypass the 30% commission fees of platforms like Steam.

But this company wasn’t founded by industry insiders that devoted their lives to game design. Instead, founders Brandon Beck and Marc Merrill were business students that were inspired to establish a “player-focused studio” that focused on sustaining (and growing) its titles and community into the long-term.

“[It was a] combination of an extremely passionate team focused on customer quality and engagement, with a distinct distribution advantage and a business model that was amenable to scale.” - Mitch Lasky, an early investor in Riot, in a Stash podcast episode

So in 2006, they established Riot Games and looked to apply their unique approach to launching a title. This is the story of how they grew that first game - League of Legends - into a smash success that beat out competitors to earn over $1.8 billion in revenue in 2022 and spawn spinoffs like LoL esports, which became the first esports tournament in the world to surpass 6 million concurrent viewers. 

Ahead, we’ll deconstruct the factors and strategies that helped establish Riot Games as the industry leader they are today. Over the course of the next few articles, we’ll explore:

• The background of League of Legends and the competitors in the MOBA space
• Riot’s go-to-market strategy, including their community-building efforts, D2C distribution strategy, and esports domination
• How they innovated on DotA’s original game design - and what they kept
• The ethical monetization model they used to earn over $20B as an F2P game
• Key takeaways that you can apply to your own GTM and distribution strategies

Let’s start with taking a look at where it all started: the history of League of Legends and the competitive landscape at the time it was launched. 

The rise of DotA & MOBA

We can’t talk about League of Legends and the success of Riot Games without first peering into the past of the genre it dominates and the games that inspired it. It all started with Warcraft 3: Reign of Chaos, the hit real-time strategy game published by legendary developers Blizzard Entertainment in 2002.

Warcraft 3 was groundbreaking for many reasons - it wasn’t just phenomenal RTS gameplay that drew a loyal following. Like Blizzard’s previous titles (Warcraft 2 and Starcraft 2), Warcraft 3 was an early pioneer in modding. Any player, even those who couldn’t code, was able to modify the gameplay with built-in support for tweaking the maps and game parameters. This was made possible by launching the games through Blizzard’s own game launcher, Battle.net.

In 2003, Kyle “Eul” Sommer built one of these mods - which is where our story really begins.

This mod was called Defense of the Ancients (DotA), and it marks one of the first examples of the multiplayer online battle arena genre (MOBA). MOBA games are often highly skill-based and defined by a set of distinct features, like a 5v5 player field, 3-lane map, and unique player abilities. Often, these games attract a highly engaged core gaming community that’s super competitive yet encouraged to team up to succeed. 

So DotA did in fact attract a loyal and close-knit community that grew quickly and was fostered in large part by popular community forums, like DotA-Allstars.com. This forum came to attract over 1 million monthly visitors, achieve 1 million+ daily pageviews, and boast a volunteer staff of over 100 players. DotA was so popular, in fact, that just one year after launch in 2004, the International Gaming Syndicate (IGS) hosted the first DotA esports tournament with 20 participating teams.

It was this infrastructure of community forums and esports tournaments, along with the core gameplay, that eventually led to the rise of League of Legends.

Standing out from the competition

LoL didn’t grow in a vacuum - other games in the genre vied for dominance and tried to reach a similar player base. But unlike some of these competitors, Riot couldn’t rely on a recognizable IP as a studio to build hype around League of Legends’ release. 

We’re looking at each of these competitors to see where Riot stands out and how they differentiated themselves, even without the initial brand recognition:

S2 Games: Premium vs F2P 

At the same time that DotA started gaining traction, the team at S2 Games saw the potential for the new MOBA genre to take off. In 2010, they released Heroes of Newerth (HoN), which was heavily based on DotA - initially in beta, the games even had the same heroes, skills, and items. 

Sharing these foundations like League of Legends, HoN built a game that was clearly inspired by DotA and went after the same audience of hardcore, loyal, and competitive players. There were even rumors that they brought on IceFrog, one of the original DotA developers, to help design the game. But unlike LoL, Heroes of Newerth was first launched as a premium title with a one-time fee of $30. This created a barrier to entry that HoN was never able to recover from, even after transitioning to a free-to-play model one year later. 

Once DotA 2 was launched in 2013, Heroes of Newerth consistently came in third behind LoL and DotA 2. After the DotA 2 launch, for example, each game had the following monthly active users:

Even at its peak of 30 million registered accounts, Heroes of Newerth fell significantly behind League of Legends - LoL reached the 100 million active player mark in 2017. Eventually, HoN shut down on June 20, 2022. 

There were many factors that led to LoL’s success, but Riot's F2P model is definitely one that helped it scale from the get-go. Compare this to Heroes of Newerth, which established a barrier to entry and slowed initial scaling due to its $30 price tag. 

Blizzard: External vs internal communities

There’s no denying the powerhouse that is Activision Blizzard. With franchises like World of Warcraft, Call of Duty, and Diablo in their portfolio, this AAA publisher earned over $7 billion in revenue in 2022. Rewind to 2002 when the studio launched Warcraft 3 - and it quickly became the fastest-selling PC game ever. It also represented the start of a new genre that grew out of MMOs: real-time strategy, or RTS. But another major, distinguishing feature of Warcraft 3 was its World Editor:

“It included a visual programming language, a map building tool and thousands of unit and building models. It even included online gaming capabilities that allowed anyone who owned Warcraft 3 to host and play a map that they had downloaded, effectively giving modders an instant distribution network.” 

The game attracted entire communities of modders that would build their own maps, games, and other custom details. As we know, one of these custom maps turned into DotA - and eventually League of Legends, which went on to outpace Warcraft 3 in both popularity and revenue. And that’s due at least in part to the fact that Riot capitalized on their community and fostered it in a deeper way than Blizzard.

Blizzard had a community that numbered in the millions playing Warcraft III. But rather than fostering loyalty that kept players in the Warcraft universe, these users used the world editor to create their own games and leave the world that Blizzards built. What Riot did differently was deepen their engagement with players so they stuck around, even though gameplay was similar to the competition. 

For example, comparing something as simple as patch notes and product updates between the two companies reveals stark differences. Blizzard’s patch notes for Warcraft III: Reforged sit in their forum - and look like forum posts (e.g. text-heavy, homogenous formatting). Compare this to Riot’s game updates page for LoL: it’s formatted in a visually-engaging way, including feature images and an organized layout. And the posts themselves are written with an engaging tone of voice, include a variety of images, and some are even published as videos.

Riot was founded on these values, prioritizing a player-first experience. Travis George, a nine-year veteran of the Riot team who joined in 2008 and then became Product Lead for League of Legends, says of Riot’s emphasis on putting players first: 

“I've never worked at a company that was more truly player focused…We almost always erred on the side of making the players’ lives better as opposed to making our own lives easier.”

And Blizzard even recognized this:

“We were very inspired by what Riot was doing, especially how you cultivated the community, grew the community and formed a relationship with your community. Over time I think it really helped Blizzard rethink how it wanted to engage with its players.” - Michael Morhaime, former CEO of Blizzard

Valve: Brand building

Valve got its start as a PC game development company, starting with its debut title, Half-Life, in 1998. But it didn’t take long - just 5 years later in 2003 - for the company to expand beyond game design and launch Steam, which went on to become one of the biggest gaming platforms in the world. Valve didn’t get out of the development game, though: among other titles, they published Dota 2 officially in 2013. Right in time to compete with another hit born from the original DotA: League of Legends.

Dota 2 was released exclusively on Steam to a user base that exceeded 7 million by the year’s end. Like LoL the title benefitted from direct distribution - and esports. Valve leaned heavily into the esports market to build hype for Dota 2, starting with a tournament in 2011 before the official release date that had a top prize of $1.6 million (the biggest prize pool of any esports tournament at the time). Dota 2 became so popular in the esports realm that the top prize grew beyond $20 million in 2016. But the game still couldn’t unseat League of Legends in terms of popularity. Looking at esports viewership of both titles from 2017-2022, LoL always outpaced Dota 2 - and by pretty significant margins.

Many attribute this to the fact that Dota 2 was a more niche and complex game - and therefore a smaller player count than LoL. However, another factor to consider in Riot’s dominance over Dota 2 is the extra content and brand universe the studio built around League’s IP. Dota 2’s website today has limited engagement features - patch updates and a Heroes page are the most interesting parts about it.

Compare this to the League of Legends website, which has tons of lore, community features, and even an entire external site devoted to the League of Legends “Universe”.

Not to mention, the League of Legends IP has extended to a Netflix Show (Arcane), a line of merch, and dedicated music playlists.

All of these community efforts paid off for LoL - and left competitors like Dota 2 in the dust. Sure, Valve benefitted from the DotA brand name and continuity in terms of gameplay and characters for Dota 2. But they couldn’t compete with Riot with community-building and brand building, whether that was in the esports arena, on the web, or in-game.

Player experience first

Many competitors focused on finding the sweet spot of customer fulfillment and technology vs. perfecting the backend features of the game. But by putting player experience above all, Riot was able to create League as a more accessible title that not only became more successful than its competitors, but also shifted users from their competitors’ titles to their own. 

For example, Fly - an esports player - saw the shift among esports players from Heroes of Newerth to League of Legends: “I would say around 85 to 90 percent of the competitive players I knew in HoN have made the switch.” And World of Warcraft similarly lost out on subscribers as League of Legends grew in popularity - in Q1 2013, they lost 1.3 million users as these players made the switch towards more competitive yet accessible games, like LoL. 

“To compete with someone else, you don’t need to compete on product features. You need to compete on what’s the fulfillment I’m offering my potential customer that they can get in a better way with my product” - Travis George, former Product Director at Riot

Stay tuned

Join us as we continue taking a deep dive into Riot’s success with League of Legends. Next in this series, we’ll explore their go-to-market (GTM) strategy, specifically looking at their community efforts, direct distribution approach, and esports strategy. 

In the meantime, if you’re looking for a solution to stand out from your competition like Riot did, it’s time to try going direct-to-consumer. At Stash, we can help you launch D2C experiences that can become the best ways for players to play and pay. Talk to us today about launching your own D2C channels and giving your players an experience that will encourage them to keep playing, spend more, and engage more deeply.