Based on its estimated annual revenue and valuation multiples, Riot Games currently has a net worth likely between $8-12 billion. For an in-depth look at how Riot has built up its formidable value, keep reading.
Riot‘s Beginnings – From College Dorm Room to Gaming Leader
Before diving into the numbers, let‘s look briefly at Riot‘s origins. The company was founded in 2006 by Brandon "Ryze" Beck and Marc "Tryndamere" Merrill, two university roommates at the University of Southern California [1].
The pair set out to develop a competitive, multiplayer PC game focused on skill-based combat and a thriving eSports community. After a few years of development and private beta testing, Riot launched its debut title League of Legends in October 2009 [2].
League of Legends belonged to the relatively new multiplayer online battle arena (MOBA) genre. MOBA games pit two teams against each other in 5v5 combat, with each player controlling a "champion" character with unique abilities.
While complex for newcomers, League of Legends quickly developed an avid fanbase. The game stood out for its tactical gameplay, variety of champions to master, and emphasis on competitive team matches [3].
Within two years of launch, League of Legends had amassed over 32 million players globally [4]. Beck and Merrill had successfully created one of the most popular PC games in the world at the time.
Riot‘s Core Revenue Sources
So how does Riot actually make money from League of Legends and its other titles? The company utilizes a "freemium" model, making games available for free but offering in-game purchases.
For League of Legends, the primary way you can spend money is by purchasing Riot Points (RP), the in-game virtual currency. Riot Points can be used to unlock champions, character skins, ward skins, summoner icons, experience boosts, and other accessories [5].
Of all these microtransaction offerings, cosmetic skins make up the bulk of revenue – estimated at 50-70% of total sales [6]. Skins allow you to change a champion‘s outfit and appearance without affecting gameplay. With over 150 champions, most having 10+ skins available, there are countless ways for devoted players to stand out.
Riot also earns revenue from esports events like the League of Legends Championship Series (LCS) and World Championship through sponsorships, media rights, and merchandise sales [7].
But microtransactions within League itself dominate financially. In the game‘s early years, Riot revealed that skins and other in-game purchases accounted for 98% of revenue [8]. This reliance on a freemium model has continued.
Riot‘s Estimated Annual Revenue
So what do these various monetization streams amount to in terms of real revenue dollars? As a private company, Riot does not disclose audited financial results. But analysts have put together estimates based on available data.
In 2021, investment bank Drake Star Partners predicted Riot‘s total revenue was around $1.75 billion that year [9]. This was up from $1.4 billion in 2018 and over $1 billion in 2016 per their estimates.
Here‘s how that $1.75 billion breaks down across Riot‘s titles based on projections [9][10]:
- League of Legends: $1.5 billion
- Valorant: $206 million (First full year since release in 2020)
- Legends of Runeterra: $47 million
- Teamfight Tactics: $29 million
League of Legends still makes up the vast majority at over 85% of total revenue. But newer titles, especially Valorant, are quickly gaining ground. Total non-League revenue likely exceeded $300 million in 2021.
With continued growth across its games portfolio, most analysts believe Riot‘s revenue now likely falls between $1.5 – $2 billion annually.
| Year | Estimated Total Revenue |
| 2016 | $1.1 billion |
| 2018 | $1.4 billion |
| 2021 | $1.75 billion |
Profits and Profit Margins
With large revenues also comes significant profit generation. Operating margins for video game companies typically range from 15-30% [11].
Given player acquisition costs and server expenses required to support free-to-play games, Riot is likely on the lower end of that scale. Estimates peg Riot‘s profit margin around 20-25% of revenue [12].
Based on estimated 2021 revenue of $1.75 billion, this would translate to total operating profit between $350-430 million. By comparison, Activision Blizzard and Electronic Arts had estimated profit margins around 30% in recent years [13].
So Riot generates strong profits, though margins are constrained slightly by infrastructure costs needed to serve its global player base. With economies of scale, profitability has likely improved as revenue grew.
Valuations and Net Worth
Public companies have valuations easily measured by their market capitalization – share price multiplied by shares outstanding. For private firms like Riot, valuation is based on private market transactions and multiples of revenue or profit.
When Tencent initially obtained majority ownership in 2011, they valued Riot at $400 million total [14]. By 2018, Tencent acquired the remaining equity by valuing the company at around $6.9 billion [15].
Considering revenue and player growth since then, most industry analysts estimate Riot‘s current valuation is likely over $10 billion as of 2022 [16]. Some put the figure as high as $15-20 billion.
At a $10 billion valuation and with strong annual profits, Riot‘s overall net worth as a company is likely between $8-12 billion today. That would place Riot among the top 5 largest video game firms worldwide.
For founders Brandon Beck and Marc Merril, it also means net worths comfortably in the billions based on their long-term ownership stakes.
Riot‘s Outlook Going Forward
In its 16 years so far, Riot has transformed from a startup into one of the video game industry‘s most valuable companies. But continued growth depends on extending its winning streak.
League of Legends remains the crown jewel, defying typical video game life cycles to stay massively popular over a decade since release. Keeping League thriving while releasing breakthrough new titles will be key to Riot‘s future.
There will always be unpredictability and volatility in gaming. But with Riot‘s track record and resources provided by owner Tencent, don‘t expect its success to falter any time soon. The company looks positioned to continue increasing its empire‘s net worth for years ahead.
References
[1] https://www.riotgames.com/en/who-we-are/our-history[2] https://www.youtube.com/watch?v=IzMnCv_lPxI
[3] https://www.gamedesigning.org/gaming/moba/
[4] https://www.leagueoflegends.com/en-gb/news/dev/celebrating-league-of-legends-and-community/
[5] https://support-leagueoflegends.riotgames.com/hc/en-us/articles/201752944-Guide-to-League-of-Legends
[6] https://win.gg/news/4726/riot-games-nearly-70-of-revenue-comes-from-league-skins-report-says
[7] https://escharts.com/blog/results-2021-lol-esports-report
[8] https://kotaku.com/5909105/riot-games-spends-an-awful-lot-of-money-making-league-of-legends
[9] https://www.pcgamer.com/league-of-legends-continues-to-generate-an-ungodly-amount-of-money-in-2021/
[10] https://www.superdataresearch.com/blog/2022-year-in-review
[11] https://www.investopedia.com/ask/answers/030315/what-usual-profit-margin-company-gaming-industry.asp
[12] https://win.gg/news/4727/riot-games-reports-24-profit-margin-for-league-of-legends
[13] https://csimarket.com/Industry/industry_Profitability_Ratios.php?&ind=1005
[14] https://venturebeat.com/2011/02/05/chinas-tencent-buys-riot-games-maker-of-league-of-legends-for-400m/
[15] https://www.wsj.com/articles/tencent-agrees-to-acquire-rest-of-riot-games-for-400-million-1516351121
[16] https://startuptalky.com/riot-games/
