Riot Games "a long way from breaking even" on esports investment
Head of global esports events explains company's decision to cut costs, focus investments over next three years
Riot Games is continuing its investments in esports, but seems to be having some growing pains as the endeavor transitions from the starting line to a full-fledged sprint.
In a Reddit thread yesterday, it was pointed out that Riot seemed to be making budget cuts to its esports endeavors. Specifically cited as examples were League of Legends' Mid-Season Invitational's tournament largely being confined to EU studios, the North American LCS Spring Finals being held in a smaller music venue, and the decision to hold Worlds finals just outside of Seoul in Incheon, as opposed to in the city proper.
Riot head of global esports events Derrick "FearGorm" Asiedu replied to the thread with a detailed explanation of these and other recent decisions by the company to keep its esports budget more tightly reigned in for the next few years. He began by noting that Riot has spent "way over" $100 million per year on global esports for the last several years and continues to invest, despite increasing costs.
That said, he noted that Riot would be exhibiting a bit more restraint in certain areas in the near future.
"Now we're out of "startup" mode in a sense for esports: instead of just making esports happen and be awesome, we also want to focus on making this a financially sustainable endeavor that can last decades or more," Asiedu said. "We're ok with costs continuing to be high, because we think the value esports provides to everyone who plays LoL is worth it. But we don't want to continue to be in startup mode - we're now a mature business and costs need to be more in line with revenue in the future: Now that we've built something awesome, we're going to start exercising more discipline around holding ourselves to financial constraints as revenue continues to pick up.
"This means that we're holding ourselves more accountable to net income targets (as in revenue minus cost) than we have historically. We're a long way from breaking even (revenue minus cost equaling 0), and are trying to see if on the cost side, there are things we can cut or scale back that fans don't care about, while continuing to invest in the areas fans do care about."
Asiedu went on to make it clear that the company still thinks revenue increases, rather than cost decreases, are the key to making esports successful for the company. Riot intends to invest further into business development in the near future, he said, as well as increase revenue via digital experiences and more traditional sponsorships. He also pointed out that this year's Worlds event will be the second-most expensive so far, falling behind only 2017's event in China.
Finally, Asiedu clarified that the changes had nothing to do with the company's relationship with Tencent. Rather, Riot wants to ensure its esports investments are sustainable in the long-term.