Riot Games Finds A New Partner

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#1: Riot Games, Meet Game Pass

It’s not often we dedicate a newsletter blurb to partnerships in the gaming space but Xbox’s recently announced partnership with Riot Games is noteworthy. Game Pass has seriously leveled up.

If you didn’t see the announcement, a suite of Riot Games’ titles (LoL, Wild Rift, LoR, Valorant, and TFT) will soon be available via Xbox Game Pass. Notably, subscribers of Game Pass will also gain access to champions / agents, which bypasses a significant revenue stream for Riot Games. The publisher brings 180M players and some of the strongest IP / brand recognition to the Xbox Games Pass ecosystem.

To set the baseline, Riot is quite picky in who they choose to partner with. League of Legends was developed with the intention to create superior player experiences, putting the player at the center of everything. This same ethos flows through Riot’s every decision, from investments to partnerships to transmedia. Just take a look at their acquisition of Hypixel Studios, creators of one of the largest Minecraft servers (to note: Minecraft is a Microsoft subsidiary and Hypixel may have been an important lever in these partnership discussions). While Minecraft has no immediate relationship to the Runeterra universe, the studio shares the same player values and created the basis for an acquisition to help mutually accelerate toward respective goals. This is an important foundation for a healthy partnership that Xbox clearly shares.

When I read the parntership announcement, I immediately thought of how Riot Games, which primarily monetizes through cosmetics is forgoing a significant revenue stream in its characters — how, then, do they plan to make any money? Does this move strategically benefit them in any way other than exposure?

The Xbox agreement probably looks something like this:

Xbox will give Riot a minimum guarantee — this is likely forecasted based on what Riot would make in revenue (maybe a bit below). We’ve previously explored how Epic Game Store used (and overused) minimum guarantees, so it’ll be up to Xbox to strike good deal terms.
If gameplay is above minimum guarantee, then Xbox will compensate Riot on share of total time played / number of sessions or daily average sessions.
As a side note, I do wonder whether Riot will be paid for percent of play time or paid a lump sum for the DLC to be part of the subscription. For example, Spotify doesn’t pay Podcast creators for playtime because those are monetized through ads.
There is also the possibility that Xbox struck a temporary exclusivity agreement with Riot on subscription and cloud gaming distribution. With Riot, Sony, Steam, Epic, Nvidia, Stadia, etc looking for content for their subscriptions / launchers, Riot Games would obviously be a prime target. Video game content and supply is the new frontier of media rights.

I’m also reminded of the following chart:

While Riot will “forego” character revenue (in the form of minimum guarantees), given the data shown above, The Xbox Game Pass will have to prove that they can convert users toward more purchases like cosmetics and in-game subscriptions — characters are already there and people will be directed toward other purchasing funnels that level their play experience. It’ll be good to get clarity if the character allotment is a one-time entitlement or if players must continue to be subscribed to have those cosmetics.

All things considered, there are also obvious benefits for Riot:

Related to the point above on purchase funnels, Riot could face a maturation problem where older players don’t monetize as well (because they already have bought all the characters and don’t monetize via cosmetics). This is speculation but if it were the case that Game Pass can increase spend compared to lookalikes, Xbox would gain a lot of leverage (i.e the perception of value changes across business models).
Wild Rift notoriously hasn’t monetized that well, with Valorant faring significantly better. This will be an interesting experiment into new revenue streams and distribution for these titles.
Cross-platform is the name of the game. Xbox is a clear leader in this regard and, if done well, can remove the need for bringing cross-platform development in-house. There will be lots to observe on player preference here.
Xbox is committed to player trust and safety in a way that a lot of publishers can’t be. This could be an entirely different communication, queuing, and streaming experience. It could also mean fewer smurfs (a player experience problem) as Game Pass has a higher barrier of entry.

While Xbox Game Pass will hopefully gain exposure to 180M new players, there are still challenges aplenty. Understanding latency, player preferences, and monetization (i.e is it really worth it?) are at the top of my list; however, the net of it remains that Riot is clearly looking at a variety of areas to increase its top of funnel exposure to new and old players, be it on PC, mobile, and soon, console. There's also the open question around game access — EA requires players to download the EA Play launcher to expierence Game Pass content, will Riot do the same? For Xbox, this is largely about proving Game Pass’s value prop around discovery and content diversification, and building out its holistic cloud and cross-platform strategy. Xbox has the budget, content library, and data to de-risk this new adventure for Riot. Let’s see if they can make it happen. (Written by Fawzi Itani)

#2: Can Dislyte Capture Mass Appeal?

This is the introduction to a full game deconstruction of Dislyte, written by Harshal Karvande. It publishes in Naavik Pro tomorrow. Sign up to read to full write-up and much more of our content library.

Dislyte is a new hero collector fantasy RPG from Lilith Games (of AFK Arena, Rise of Kingdoms, and Warpath fame) where players assemble squads of mythological characters to fight in turn-based battles in a stylish, cyberpunk setting. Dislyte is also the first game released by a new publishing brand called Farlight Games, which Lilith launched in April and is based in Singapore. This new publishing division is set to release upcoming titles Farlight 84, Boom Party, and an unannounced game under the codename “SAMO”.

Kenny Wang, founder and CEO of Farlight Games, stated that “the launch of Farlight Games represents a significant upgrade to our strategy of 'global localization'. We want to recruit top talent from around the world to provide a more localized service to players around the world.” Dislyte marks the first step for the Chinese developer, Lilith Games, to help support and facilitate global distribution going forward.

Looking back at AFK Arena, Lilith Games was already aiming to broaden the appeal of the hero collector RPG genre and bring it to the West. They managed to succeed in the global market by pursuing accessibility, ease of play, and generously rewarding time invested in AFK Arena, without losing the parts that account for the high LTV of games in the genre. Dislyte is the next step in that direction.

With this goal of creating a more refined and localized product for global players — from hero collector gacha RPGs to AFK Arena and now to Dislyte — the following sections attempt to answer:

What makes Dislyte stand out in its genre of F2P gacha RPG?
What do the early numbers predict?
What makes Dislyte, ‘a game for broader appeal,’ surpass AFK Arena and others in its genre?

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The Number of Downloads it Takes To Hit Top Charts (TechCrunch): "New analysis indicates it’s gotten harder to get an app to the top of the App Store, in terms of downloads, over the past several years. According to new data from app intelligence firm Sensor Tower, the number of downloads needed for an app to break into the No. 1 position on Apple’s iPhone App Store in the U.S. has climbed by 37% since 2019. Specifically, it estimates an app now requires approximately 156,000 downloads on a given day to hit the top spot, up from 114,000 daily downloads back in 2019." Link