By John Gaudiosi
FORTUNE -- Riot Games' League of Legends is, by multiple accounts, the most-played video game in the world. The free-to-play game, a so-called multiplayer online battle arena game, or MOBA, launched in 2009 and has over 70 million registered gamers with some 32 million playing on a monthly basis.
Even in the overnight hit-prone video games business, that is startling growth. What's going on?
Riot Games was founded by Marc Merrill, who serves as president, and Brandon Beck, the firm's CEO. Beck is a former strategy consultant for Bain & Company where he specialized in media and entertainment and private equity. Merrill is a former analyst at USBank and corporate marketing manager at Advanstar Communications. They are both die-hard gamers. Riot was created with the intent of putting a new spin on the emerging MOBA genre that had spun off of modifications of Activision Blizzard's (ATVI) StarCraft and WarCraft. "With League of Legends, we really wanted to differentiate across four primary dimensions: gameplay, community, e-sports, and intellectual property," says Merrill.
One key to the success these two entrepreneurs have had globally is the fact that the game is free. It was one of the early games out of North America to be designed to allow free access to all the content and offer paid micro-transactions for new in-game characters, called Champions, and other content. "When Marc and I founded Riot, most gamers were being asked to pay $60 for a traditional game-in-a-box to be played on consoles or PCs," says Beck.
Now free apps dominate the mobile and tablet stores, and free trials are commonplace even in hardcore genres, he argues. "Many traditional MMO subscription games have converted to free-plus-upgrades," Beck points out, "and many important new games are launching free. Over the last eight years, there's been a real revolution."
Although Chinese technology giant Tencent paid $400 million for a majority stake in Riot Games in February 2011, the company has maintained its independence. With over 700 employees in North America and another 300 around the globe focusing on expanding the game world, Riot's founders have utilized their growing fan base to improve the game experience. "The free-to-play model only works when you're giving players content and services they value, so we're really kept on our toes," says Beck. "Players aren't shy about telling us when we've screwed up."
Merrill and Beck don't have separate offices inside Riot's Santa Monica offices. They sit nestled among the other game developers and are accessible to employees as well as to the gaming public. They keep things interesting at work through internal hackathons, called Thunderdome. "One of the most important values is challenging convention, so we often give this award to someone who's challenged constraints -- someone who's broken rules, conventions, and bureaucracy to accomplish something exceptional," says Merrill.
Beck says that while a lot has changed in the game industry since Riot was founded, one thing remains the same -- the importance of an excellent player experience. If a company delivers that, he promises today's gamers will respond pretty much like gamers always have -- with lots of enthusiasm. They'll tell their friends about the game, too.
"What's new are the potential distribution choices," said Beck. "Should companies try to self-publish? What's the role of a publisher anyway in today's market? A big contributor to where we're at today was the choice to self-publish. There have been fewer intermediaries and communication barriers between Riot and players."
Riot has also invested millions of dollars in electronic sports, or e-sports, turning League of Legends into an international spectator sport and propelling professional gaming into the stratosphere with huge numbers of live-streams. Riot's League of Legends Championship Series is currently in its third year, offering fans another way to experience and stay connected with the game.
Now Riot will have to keep on its toes as competition in the genre heats up. Powerful firms like Warner Bros Interactive Entertainment, Zynga (ZNGA) and Blizzard are all going after League of Legends' success. Such is the peril of being number one.
The business model formulated to attract Chinese consumers is taking over around the world.
By John Gaudiosi
FORTUNE -- With the Electronic Entertainment Expo just around the corner, the gaming world will soon be focusing on the next generation of gaming from Sony's PlayStation 4 and Microsoft's Xbox One consoles. Both of those holiday releases are guaranteed to be in short supply this fall. But as exciting as the promise of next-gen MOREJun 4, 2013 7:22 AM ET
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