How Riot Went From One Game to Five Hits | Mark Sottosanti, Riot Games

Hello everyone and welcome to Deconstructor of Fun Deep Dive interview series. This is a first of its kind because Kress and I are going to interview a very special guest, Riot CFO Mark Sodosante. So, a few fun facts about Mark before we get started. Number one, Mark was pretty much number one on Eric Kress's list. He's like, "If I'm going to do something that isn't Twig, it's going to be with the CFO who actually knows what the hell he's talking about." So, well done there, Mr. Sodosante. And then, he realized, Kress did, that hosting an interview was a lot of work and too much, so then he kind of like wrangled me into wrangle the cats. And if it's anything like Twig 401, thank god I'm here. So then, I I was thrilled to do this because I actually had a chance to work at Riot. My era is like 18 to 2021, and so I got to know Mark during my time there, and so it's going to be fun to go back in the wayback machine, talk well then up

to now. Mark is one of the good ones, so Mark, welcome to the podcast.
Yeah, it's great to be on. Great to see you both. Thank you for having me.
Kress, first tell me a little bit more about why you wanted to do this. How How did we come to be doing this awesome podcast?
So, Mark reached out a few months ago and we kind of chatted, and I said, "Well, you should come on the podcast and talk about what the hell's going on at at Riot, right?" Because, [clears throat] you know, I I'm I'm truly like fascinated by Riot. I mean, I think, you know, they have successfully navigated from a one-product company to a multiple-product company, which very few companies, if any, really have done that with this level of success. So, I also don't think we actually hear that much from Riot from a PR perspective. I kind of remember in the past that, you know, Riot was out there a little bit more, particularly when they announced all these new products. So, this was in what, 18 19 time frame. So, I just kind of wanted to get a sense, honestly, where they are now and where they're headed on their key franchises

and kind of the overall look for the industry from Riot's perspective. That was it.
Awesome. But well, why don't we start a little bit at the beginning? Mark, can you tell us a bit about your journey? Like how did you How did you land cuz you've been at Riot for forever, right? Like it's been a long time.
Yeah, actually it was 2012. I was running a smallish hedge fund at the time and I wasn't looking for a job at all, but I'd been playing League for 2 years with my son and I had a chance to visit the Riot offices back in 2012. So, that turned into meeting with some Riot leaders and actually learned they'd been looking for a head of monetization for quite some time, but the only candidates they found with free-to-play experience were from Korean MMOs or Facebook or mobile games, all of which had aggressive monetization that clashed with with Riot's culture. And so, I proposed helping them out on a part-time consulting basis with some monetization decisions and just kind of fell in love with the people and the culture and decided to apply for the the full-time role, committed to wind down

my hedge fund, but it was just an amazing opportunity to prove that, you know, building a healthy business and doing right by players could go hand in hand.
Well, Andrew, I didn't know you were such a monetization guru. I mean, I guess a little bit from back in the day. I mean, something was mad That was magical about the time when I was there is, like you said, going from like one game and then putting the S in Riot Games. And the company operated very much like a startup. So, you were there at the beginning. It's like startup mode. And then when I got there, it felt very much like a teenager. Like it was starting to kind of find a little bit of its footing, get ready to go to college, have to figure out how to adult a little bit. I think at the time I was there there was like 19 different regional offices. So, I want to hear a bit of a bit about that journey going back from that 12 all the way through. How did you think about growing and helping a company learn how to adult along the way and in a sense becoming a multi-game publisher along the way?

Yeah, it was it was like almost a child a child prodigy from the startup point of view, right? It was a bunch of gamers who had a lot of passion, a lot of heart, you know, pretty modest ambitions, but they, you know, had had had the success, this unexpected success, and they were doing everything they could just to to keep the train on the tracks. And coming in as as the new head of monetization, you know, one of the first things I tried to do was, you know, instill a philosophy that, you know, it's it's okay to talk about money, it's okay to think about ways of giving players ways to spend money and doing that while building a healthy business at the same time. And so, you know, combining player focus and and having a healthy business. And so, at that time, you know, Riot just had one game, and we only had one game for 10 years because every time people would go start to work on a new game for a few months, they would get pulled back into to League because some crisis or some opportunity, you know, required their expertise. And so, that's why it took 10 years to to, you know, ship game two, but and then over a two-year period, we actually shipped

four games, right? There's Valorant, TFT, Wild Rift, and Legends of Runeterra. And you know, Riot had been working hard to build the technology and the processes and tools to, you know, support the live service of so many games, and that required, you know, new systems, new new tools, and teams. And we hired a lot of great talent in those years both to prep for the launches, and then also once we saw the early success of Valorant and TFT and and Wild Rift, you know, we wanted to build on that.
The way I remember it though is that it was like almost zero to hero in like one year. Like it was like announcement of your 10-year anniversary, and then you went from making one game to announcing six games, right? Plus, I think you I I at the time you announced Arcane as well. So, this was Legends of Runeterra, Wild Rift on the mobile, Teamfight Tactics, Project A which end up being Valorant, Project L which was a fighting game, and then the MMO. Right? So, it's like what happened? I mean, how did that happen? Well, it seemed to happen very quickly, but you're kind of implying

that these plans had been in existence for longer than
Yeah, I mean, Valorant had been in the works for several years. You know, TFT only for several months, but it was a lot of secrets that we finally decided to share when really, you know, there had been many years of of work there. And so, yeah, I think it was our 10th anniversary of League of Legends. We decided to, you know, just share it all with the world. And and so, that's why it why it felt like it happened all at once, but really, you know, there was years of effort behind that.
So, Chris, I think you were going to ask a little bit about going into the the making of those games. Like, how do you think about the in a sense, the budgeting and the forecasting and the business side of like, how does it make sense to spread your wings to go to so many different games and and to do it so quickly together, I right?
Yeah, I think at the time I was obviously very skeptical as I tend to be about the ability for you guys to go to six new games
[laughter]
like what seemed like immediately. But generally, like you make one or two

bets and, you know, divert the teams, but at six different bets simultaneously seemed ambitious. So, I guess from a team perspective, you know, did you hire new teams? Did you just reallocate resources from League or did what like how did that actually all manifest itself, I guess?
Yeah, those teams have been building building out over time. Sometimes we people from League moved on to new games and then we back filled them on League. We actually didn't shrink the League team at all at the time. Actually, we never have at this point. And the Yeah, so each of those games was on their own timeline and you know, I think Riot Games ship when they're ready, you know, a little bit like Blizzard, I guess. And so, you know, it so happened that when we were coming into 2019, we realized you know, Valorant was a year or so away, TFT was moving very fast, you know, Wild Rift was was making great progress and some of the other games were still further away like, you know, MMO and and fighting game, but we just decided to put it all out there and the ones that were ready to ship in the next

couple years shipped when they were ready and some of those teams have been working, like I said, for many years and I think the other part that you touched on was the central teams. Like everything from the data bases had to change, right? We were so used to analyzing our business as one game and now all of a sudden you have multiple games and you have cross game play and things that didn't exist in the past. So, I was a big part of redefining all of our game metrics, how we thought about game health, how we thought about financial health. Some games are really financially healthy, some are less so and and how do we, you know, size our investment and and and growth and other areas to reflect that that multi-game mindset. But it really also made us more resilient, right? Like there's a lot of risk when you only have one game, especially on one platform. And and so we were, you know, somewhat at risk to, you know, unexpected hiccups in the market or or, you know, shifts in player behavior, but with multiple games, multiple platforms, multiple regions, you know, it made us a lot more resilient and able to place even bigger bets going forward.
Now, in retrospect, based upon the performance of these games, I mean, clearly Valorant's been a runaway hit.

Wild Rift has found some kind of market in Asia, not so much in the West. Teamfight Tactics done well on mobile. I think Red Legends of Runeterra Runeterra was kind of a miss, maybe. And then obviously game and then MMO reboot, right? So, out of all these like projects, like is there any key learnings that you guys had in terms of how going about like, red, you know, green lighting these type of projects or like, what would you take away from success and failures?
taken big lessons from each, I'd say. You know, when I think about it, we've had seven, you know, seven major launches of games we developed, most recently Riftbound, which, you know, is a physical card game, but, you know, five of the seven have been very successful and I think you know, we believe will be for decades to come. And I you know, there's some variance in that. League and Valorant are certainly the biggest and then and TFT actually is is, you know, similarly big from a player base perspective. You know, it doesn't it it doesn't generate as much revenue per player. And then Wild Rift and Rift Bound are a little bit smaller, but still quite successful by by any measure. So, those are those are the five successes. You know,

Legends of Runeterra and 2XKO haven't haven't, you know, hit some of those those goals, but we've learned a ton from each. You know, I don't know that I can boil it down into into one lesson. It's a lot of a lot of it is, you know, Riot's philosophy of looking at a genre and thinking we can make it better in the genre and having passionate players of that genre and talented devs, you know, work together as a team to, you know, create what we think will grow the genre, you know, make the genre a better place to be. And we sometimes we've been wrong and more often we've been right, but we'll continue to take those bets. And if we continue to hit at that hit rate, I'll be pretty happy.
Eiffel Tower, [music] iconic. Tower of London, historic. The two towers, simply epic. But none of them tell you anything about mobile app intelligence. [music] Downloads, revenue, active users, and my personal favorite, weekly cohort of retention. Get the real story, get the real data, get Sensor Tower today.
Guessing where your users come from? That's so 2010. [music] AppsFlyer is like having a cheat code

for mobile marketing. Pinpoint attribution, real-time insights, [music] and analytics that actually make sense. Stop flying blind and start flying smart. AppsFlyer, because your data is your best co-op partner.
This episode is sponsored by Moloco. More than 2 billion daily active users. Over 2.8 million independent apps globally. That's the reach Moloco ads unlock for performance marketers who don't want to stop at the usual walled garden. It's all powered by Kara. Moloco's compound AI system continuously learning from billions of events
[music]
and getting smarter with every campaign. Hop over the walled garden. [music] Check out moloco.com. That's m o l o c o dot com.
So, from your standpoint, like the current state of the business is like what are you actually working on live

and then what are the kind of future projects that you guys may be working on that you feel like you can share?
Yeah, so we have full dev teams on those five games. All of them are constantly updated with new features, new content, new events, new modes sometimes, new expansion games that come out of them in some cases. So, there's a big ecosystem around each of the five games. And then, you know, we have our R&D teams. There's several of those that are working on a variety of games and a variety of genres. You know, most of which we have not announced and probably won't until they get closer to launch. And you know, and one reason is simply that if it doesn't work out and we need to scale that game down, you know, then we haven't excited the players of that genre and and you know, created a an incident when there doesn't need to be. So, we we're we're playing it a little closer to the vest in terms of new games, but we've been public about the MMO. You know, that that's the game I'm looking forward to the most.
Like World of Warcraft has three freaking SKUs now, right? Like we need more MMOs in the West, right? To be

competitive against these guys. I just got my early access code from Blizzard. So, now I'm in, dude. But I am the first person in line for the next MMO from Is there any announcement you can make on that or any like kind of color as to what's happening with that project?
People have interpreted things through job postings and all and so we you know, we've continued to hire some great talent from in some cases from Blizzard and other MMO companies in some cases, you know, people from other parts of the industry, but you know, making a genre-defining MMO in this, you know, day and age is is no easy task, right? Incredibly complex. We're not going to release something until we're extremely proud of it, but you know, when we do, I believe it is going to be awesome. I think, you know, my retirement dream is to be a guild leader in that MMO, and so I can't retire until it comes out, but but yeah, someday.
Well, that's awesome. So, Mark, one of the things that I was so impressed with when I was at Riot was that at the time

it was 19 regional offices or country-based offices. And I thought that that was so magical because one of the values of Riot is player first and player experience first. And I think Riot really does walk the talk on that. I mean, it's actually why I still say player and not gamer and everything that I do is because I think player is a more inclusive term, and it it truly can mean anyone. So, walk me through the regional strategy that like where it used to be and then how it's evolved to today and how that it plays into being a key success for Riot.
From the beginning, you know, we wanted to be as close to players as possible, right? Because, you know, whether it's esports or creatives creators or, you know, events or community, they're all part of how we make our games feel locally relevant rather than, you know, just globally distributed like a lot of games. And so, we still have about 20 offices across multiple regions and time zones, you know, and a similar number to where you were here, but you know, the mix has changed, right? We've

we changed the footprint in different countries and regions depending on, you know, where we're seeing value and investing in a local presence versus serving players from a regional hub. And so, ultimately comes down to the having the right presence and how we stay connected to players while allowing Rioters to work most effectively together. And like one example, Sydney, you know, years ago, I think when you were here, we had a Sydney office dedicated to publishing and esports in Australia and New Zealand, but unlike other regions, you know, we didn't see a lot of evidence that the local presence was was creating unique value for players because Australian players watch, you know, North American esports and they consume the same English language content. So, over time, you know, we merged those capabilities back into our LA teams to continue to serve, you know, players in those regions from LA. But then in 2022, we had the opportunity to acquire a Sydney development studio from Wargaming and we realized it was a perfect fit to support the growth of Valorant and our platform expansion into console. And so, we've since grown the Sydney dev studio to where it supports multiple Riot games. And so, that

footprint has changed since you were here, but the commitment to serving players globally is the same as ever.
Interesting. Can you talk a little bit about the regional split at the highest level of how you think about where the focus of the business or the focus on players goes across regions?
Yeah, definitely. So, yeah, from a player engagement and revenue standpoint, I've always looked at our business as five major regions, which, you know, we define as North America, Europe, China, Korea, and then rest of world. And so, our revenue has actually been fairly balanced between those five regions. In some recent years, none of those regions was over 25%, right? It was a pretty equal split. If you're just looking at it as the West versus Asia, it's been more like a 50/50 split of revenue. And I think, you know, Korea is a unique region that captures the point about local presence where, you know, Riot's been uniquely successful there compared to other Western game companies. And so, even though it's not a huge country, you know, it's still one of our major regions because gaming and esports are massive parts of the culture. And if you

look at the PC cafe data, Riot games, you know, our games account for about 40% of of play time in PC cafes every day. And so, yeah, that didn't happen by accident, right? We invested in understanding the player experience and the cafe owner experience and, you you serving both of those both of their needs, you know, in a very personal way.
And this is Riot data, so Tencent, which is China, is not included in those numbers, right?
Yeah, no, we we are completely independent entity under Tencent, so for example, like even when our games ship in China, we don't get all of that revenue, right? Like every Western company, you know, we have to partner with a China publishing partner, and so in this case, we partner with a separate division of Tencent, and you know, they get the bulk the majority of the China revenue, we get, you know, a healthy minority, but so it's actually very similar to any Western company, and our Tencent ownership doesn't affect our financials substantially, cuz it's cuz we operate independently.
I want to talk a little bit about our journey to mobile. I had the pleasure of being there and helping to set up the

mobile publishing team and run launching Riot's first mobile game, TFT, which eventually, actually, I'll ask you about in a second, cuz Fight for the Golden Spatula is the China version of that skewed, but in any event, when you think about mobile, and I it was very challenging to get a bunch of folks who are really PC nerds to understand the value of what mobile could bring, and that players around the world actually love mobile games, and it wasn't necessarily like crappy games, we're actually making high-quality games. So, when you were thinking about this from like that executive and that CFO kind of like level that we were that you were at at the time, how do you think about convincing the organization and that that mobile is something that is worthwhile, that we should be going for, and I know that TFT is especially near and dear to your heart, because I I think I hear you're a TFT master. I mean, I only got to gold, so to be a master in almost every set, like, you know, kudos. So, so you got

your master skills in TFT, you got like your financial skills. So, tell me a little bit about that journey of getting the organization to be okay with mobile.
Yeah, I guess TFT first, yeah. So, I actually finished a few sets at Grandmaster rank, but usually Master.
Okay. Oh.
You know, over so over the years I've played TFT for thousands of hours, right? Trying to keep my skills at that level. And I love it. You know, some people exercise in the morning before work, but I play TFT. Some sometimes both the same time since since, you know, it's not quite as as mechanical as as games like League of Legends, but there's hundreds of Rioters and and millions of players, you know, who feel that passionately about each of our games. But at [clears throat] Riot, like that passion for a game is is deeply valued, right? It The belief is it makes me a better CFO because I can deeply understand and relate to the player experience. And you know, the TFT team knows that when I have input on the game or the strategy, which, you know, I've had a lot of this month, for example, it comes from a a place of of deep understanding. And so

So, that's that's TFT. Back to your questions on mobile, right? I think you know, it's I think you you know, you've you helped us helped Riot, you know, understand mobile better and think about mobile differently when you were here because you know, mobile is is in some ways has been the antithesis of of what Riot does well. I think we've gotten a lot better over time. Traditional mobile, I think of it it's heavy spending on mobile ads to acquire players, right? There's a lot of hand-holding during the onboarding process. And then, you know, they try to convert players to spending relatively quickly, right? Where Riot's games are about deep mastery and strategy layers and harder to learn, but when players overcome that, they tend to play for a very long time. And we don't look to monetize quickly. We still don't invest deeply in UA, but we have recognized, thanks to you and others, that mobile requires different publishing expertise that reflects mobile play patterns, mobile expectations. So, we've been continuing to build that expertise while staying true to our mission. But no doubt where we've had the most mobile success is China, right? Riot has three of the top 15 mobile games in

China. And so, that's that's Fight for the Golden Spatula, which is TFT, and that's Wild Rift, and that's Valorant Mobile. And so, that's been for two reasons, right? One is Tencent has very deep mobile publishing capabilities, right? They they earn their share of revenue. But also there's a strong tendency for players in China to play hardcore games on mobile, right? In many cases they didn't have access to PC or console growing up. And so, you know, the number one mobile game in China is a mobile MOBA. You know, not ours, a different Tencent game. And number two is mobile PUBG. So that just illustrates how different China is than than other countries.
Does China push the monetization more than the than you guys do in the West? Or is it the same skew?
The gameplay is 100% the same. Some of the out of game progression and in monetization in some cases can be different, but we've merged that quite a bit over time. I think they they have Tencent has realized that our games thrive with the monetization systems that they were built for. Like Valorant Mobile has no, you know, no loot boxes, anything like that. And it,

you know, at first there was some skepticism or questions around whether that would make sense in China, but but I think it's proven out over time.
So there's no pay to progress, pay to win even in China?
Absolutely not.
It's all cosmetic?
Yes. Yes. Same model.
That's amazing. It's the same thing on TFT or Fight for the Golden Spatula. I thought they did have some loot box elements, but I mean we even had that in TFT on PC here which was
TFT definitely has loot box elements. It's it's Valorant that does not.
Oh, okay. [clears throat] Got it. Got it.
Yeah, because TFT is a game about random chance. The entire game is sort of, you know, has some of the same mechanics of your, you know, you're getting uh champions and you don't know which ones you're going to get. You're getting items, you don't know which ones you're going to get. We did build the monetization system around that same concept. So so yes, TFT does have loot boxes. And then, yeah, League has a combination of, you know, direct purchase and and some loot box mechanics as well.
When you think about Wild Rift and the split with Tencent, which is co-developed and is still, I believe is

still co-developed. How do you think about the growth opportunity for mobile MOBA? I mean, what one of the things that Chris always goes on about is that play patterns. The Western player, as we just talked about, plays very differently, especially with mobile MOBAs, as they do in the East. You just said, you know, that that other game Honor of Kings is typically the number one game in China all the time. How do you think about the future of Wild Rift and like rolling that out and you know, where does that go?
Yeah, Wild Rift is interesting. You know, originally we thought it was more for a younger game audience, you know, the players that grew up playing on mobile. And to [clears throat] some extent that that has been true, but we've also found a lot of ex-League players graduate to Wild Rift because, you know, they're not as hardcore anymore. They just want to have that experience, you know, on their phones or their iPads. And so So yeah, so Wild Rift is, you know, it's been an interesting place where it's been a balance of of of audiences. And I think, you know, we believe that over time, you know, mobile hardcore gaming will continue to be important in China,

especially and and and and will expand to some extent to other regions. So we believe that Wild Rift will be a be a big part of that over time. So we're continuing to invest in it. But But yeah, the co-dev, you know, creates complexity that's, you know, yet another division of Tencent that we work [clears throat] with to to co-develop the game. And so we're always trying to improve that relationship and that capability. And as we bring more, you know, games to China, we, you know, we're constantly reconsidering the best way to do it.
As we're talking about, you know, other platforms, I think of Valorant on console. Is there anything in the console space that you want to talk about?
So yeah, Valorant on console launched a little over a year ago. I think we've been really happy with it. It's not as big as it is on PC, but it's been a healthy, successful game. It's been growing over time. Second year is stronger than the first. So in the long run, our new games that are in R&D, many of them will, you know, could potentially launch on console as well. And so it's it is an area that we've been building expertise in and we do believe in.
Based on my conversation the last time, my recommendation were to do some kind of action RPG like

Elden Ring with their IP. So.
Oh.
That doesn't mean they're doing it. That was just my recommendation. Just saying. Yes, I do remember. I passed [laughter] it on.
Free strategy advice.
Yeah. Yeah. Has there been any pressure from yourself as a as a finance guy or other people in the organization to get more aggressive on the monetization front? Like loot boxes and pay-to-win, pay-to-progress and staying true to your culture.
I would say there's no outside pressure and or internal pressure. I think that you know, every time we enter a new genre, we do think hard about what makes the most sense in that genre. The prevailing wisdom around Legends of Runeterra, which which has some accuracy to it, is that we did under monetize, right? We didn't let people pay to open packs of cards and that's actually a really fun thing about TCGs. And so, you know, when we launched our physical TCG RIFTBOUND, it's obviously there's you're limited when you're in the physical world anyway, but we just embraced that model of of letting players, you know, buy packs and open packs and and that

game's proven a lot more successful. But no, to answer your question, you know, I think Valorant really proved out that, you know, we don't have to aggressively monetize. We we can continue to um make it better to be a player in a given genre and players will reward us with both time and money. And and you know, that success has actually probably moved us further away from loot boxes and you won't see them in in as in as many of our future games unless it's a genre that, you know, that sort of where loot boxes is an inherent part of what makes the genre work.
All right, the next subject, my favorite, is uh transmedia. So, [laughter] the challenges of transmedia out there, Arcane being one of the kind of a great case study in that in the sense that it was among one of the most remarkable series ever made for gaming. Like just period, end of sentence. Like it is truly a remarkable achievement. Having said that, it cost a gazillion dollars to make and has been reported as to not been profitable for

Riot. But anyway, in that context, like what are the kind of the key learnings from Arcane and other transmedia stuff that you guys may or may not be involved in and are there any other initiatives that you're thinking about doing?
You know, certainly Arcane season 1, you know, cost Riot a lot of money. Actually, season 2 was was effectively break even when you include the incremental impact on skin sales cuz we were much better about, you know, letting players purchase their favorite Arcane characters through through skins. The reality is actually Netflix and others weren't willing to cover our cost for Arcane, you know, when we first brought it to them because we were new to this type of media, you know, we had no reputation. But for our future projects, right, all the production costs would potentially be covered by the distribution partner because we now have have the reputation of being able to create these shows in a compelling way if if we decide to go with Netflix or or a streaming service. So, so they don't have to be, you know, cost centers, but, you know, that doesn't stop us from doing them, right? You know, going back to Arcane, originally, right, it came to life very organically like like many things at Riot. There was

actually [snorts] a player support writer, Christian Linke, who had a vision to do something amazing for players, right? He started out making songs that were very popular, then short animated videos, and he slowly earned the trust to create Arcane. You know, now Christian's the head of our our animation studio, but we obviously have to be responsible about, you know, where we invest in this type of thing. We but we don't evaluate Arcane, you know, season 1 through purely traditional KPIs, right? We do stuff that other businesses wouldn't do and and and that's intentional. I think, you know, esports is how we started down this path long ago. It's an ecosystem investment that brings our universe to life for tens of millions of fans or players worldwide. Um, there are some similarities there. They both deepen the passion for for the games or for the IP and they build that, you know, long-term brand equity that impacts every game that we make or benefits every game that we make. And so, we actually don't do a lot of traditional marketing, I would say. You know, we do have some UA, some brand marketing, but it's very small relative to most game companies because we

believe that, you know, investing in experiences like Arcane and esports has a higher long-term return, is better for the the ecosystem around the game.
I mean, what's really funny is that when we were talking about esports way back when, that was like the feedback I got from Riot back then was that esports was always just a marketing expense, right? And so, is that how you guys consider the esports stuff now and or and also the transmedia stuff as just more of non-traditional marketing? It's not a profit center is what I'm I'm trying to get to.
No, it's definitely not a profit center. Actually, as CFO, I ask our entertainment initiatives to strive for break even. And because if we can achieve break even, then all the ecosystem benefit is pure upside. And sometimes we achieve that, like with Arcane season 2, sometimes we don't. But when we don't cover our costs, we do look at metrics such as cost per viewer hour just to better understand the relative ecosystem ROI compared to similar efforts and that influences future investment decisions. So, we understand how much we're kind of

paying for that exposure and ecosystem benefit. But really it's about like it's back to our original approach, right, which drives our R&D games and everything else, which is let's create something incredible. If players love it enough, we'll figure out ways to make it financially viable. And you know, that's how Arcane started. And it really a lot of our R&D games start the same way, right? We don't even think about business model until we're sure we have a game that's super fun and then we consider business model from there. It's definitely not for every game and, you know, even our own games, right? We don't We don't go into a game saying we're going to invest massively in esports. We generally will ship the game and we'll see if the players are demanding esports and putting on their own tournaments and kind of creating that excitement around the concept and if pros are asking to to from other games and into our into our games. and so so you know Valorant was sort of the the perfect storm of everything lining up great to make esports a huge part of what the game is. Um and some of that, you know, we anticipated and invested in up front, but it really was built from that passion. Whereas other games like Wild Rift, we haven't invested a lot in the esports ecosystem because the League of Legends, you know, esport really

captures that for the MOBA.
Got it.
When you say break even, is the revenue attributed to skins only or is it attributed to like any incremental new player acquisitions that come in?
Yeah, we actually look at all the above. So if, you know, for something like Arcane, you know, we'll get payments from Netflix and you know, any other provider streamer that's that's showing it. So there's some direct revenue from that and that will only grow with future, you know, shows. Then there's the incremental revenue from skins, right? So we could release a regular skin, you know, or we could release Arcane-related skins and then we measure the difference between an Arcane-related skin and a and a regular skin and we attribute that that revenue to Arcane. And then we actually do measure growth in new players during that timeframe when the show is on over what our models had had predicted, you know, that we would get in the absence of Arcane. And so to the extent that new players come into the game because of Arcane, you know, we're able to capture that as well. And so putting all that math together, you know, resulted in in season 2 being a covering its cost.

Mm, understood. When when I was there, there was a pretty big entertainment team looking a lot of new entertainment initiatives. I think a lot of that got reformatted and and maybe shrunk down a little bit. What's the current state of how you're thinking about entertainment in support of the games?
Yeah, we've moved to more of a studio model where, you know, we have some what we consider internal game studios. And then we do have a couple entertainment-related, you know, studios to use the same term like the animation studio I mentioned earlier. But yeah, so the animation studio, it is it is a lot of different people than were here when you were here. Definitely there was some evolution in the structure there. And like I said, it's led by you know, Christian Link who who was, you know, the vision holder behind Arcane and the creator of Arcane. And so, he's working on what the next big things are.
In sickness and in health. In soft launch and in live ops. Through every meta shift and every platform policy change. That's the kind of loyalty VIBES

build between your game and your players. AI-powered targeting, a real [music] meta layer, grow us optimization that actually compounds. That's what makes VIBES the fastest growing loyalty platform in mobile games. Till churn do us apart. VIBES. v y b s .co
[music]
Unless you've been living under a rock, you know this is web store rumspringa. 70% of top apps are using a web store, and the best ones, they're doing it with Appcharge. Do you want a $20,000 in-app purchase? Yeah, [music] Appcharge does that. Do you want to pretend that subscriptions are still a viable monetization strategy for games? Yeah, Appcharge even lets you do that. They get what high average revenue per paying customer means, and they're [music] already doing over half a billion dollars in transactions a year. So, are you going to be the first to do a $20,000 IAP? Don't accept microtransactions, embrace macrotransactions.

Learn more at appcharge.com.
Satori. It's the Japanese Zen Buddhist term for sudden enlightenment. That flash where everything clicks. We're told that Heroic Labs team had theirs when they realized that most studios run live ops like a horoscope. Vague, kind of generic, same advice for everyone. So, they built Satori. Real-time experimentation, player-level personalization, events that actually respond to player behavior. Say sayonara to your old live ops stack and konichiwa to Satori from Heroic Labs.
[music]
We can't have a conversation with a big-time developer without talking about AI. So, um like where how does AI fit within Riot? You know, what are like you guys using it for from a game development perspective? Are there Is there teams that are dedicated to this that are building tools? What what's happening with AI in your estimation?

Yeah, definitely exploratory. Um you know, it is going to change the industry. So, so we are paying a lot of attention. We're exploring various AI tools. The goal is always to add value to the the player experience or the writer experience. Personally, I use it as a powerful tool to do analysis of the business, right? It If you have the right prompts and the right data sets, it can synthesize both public data and proprietary data and help me understand the market better, the the business better. Some of our game teams have had success using it to make more realistic bots when players choose to play against bots instead of humans, which can be a less stressful way of playing some of our competitive games. I'd say it's been extremely helpful in the past year or two to our anti-cheat and player behavior teams, right? It can scan chat logs, it can scan behavior patterns just way more effectively than, you know, than a human can. And so, you know, cheats are only going to get more effective through AI and so we need to stay ahead of that. Our game balance teams are now using it to, you know, simulate gameplay before we release new content and so that can ensure the game is balanced competitively before that

content ships. So, yeah, you know, we we don't force anyone to use it, but we do encourage teams to explore its its potential for for their use cases. Especially valuable in speeding up low-value work in some areas and that that lets writers spend more time on, you know, opportunities they've been wanting to explore and and that are higher value. But yeah, ultimately, you know, there will probably be studios out there that that create games that are almost entirely created by AI, but, you know, Riot's always been successful because of its people, you know, and that's not going to change. We're just looking to use it to empower empower writers, ultimately create better experiences for players.
Is there any community challenges that you're seeing? There's definitely like a the brand of AI is under attack in in the Western world and especially in the East it's it's okay. There's it's an acceptable thing. From a comms perspective or from a player perspective, is there anything that you all have to be like extra sensitive about?
I mean, certainly, you know, protecting the artists and the the developers and and having our products reflect, you know, the the human creativity that goes

into it. You know, for us it's it's not just that the community doesn't like it. It's it's part of our core, you know, culture and and and value that we bring to the table anyway. So, it actually meshes pretty well. I think we care deeply about player experience and and human creativity. And so, you know, there are going to be so many games coming out that are made, you know, what is it? Steam has 20,000 games a year now. I can only imagine that number going up and so, I think there is some belief that players will continue to look for the truly authentic and human created games that are out there. I mean, again, not every player, but the ones that we hope to serve. So, that is if anything another reason that we are keeping humans at the center of what we create.
At a high level, I guess the last question I have is what is your thoughts on the industry as a whole? Like there's a lot of talk about the collapse and lots of issues going on right now. Although, the market's still huge and growing. Like where the opportunities lie in your view? PC, console, mobile, like platforms. Like you know, what's your kind of take over the overall market?
It's definitely been going through somewhat of a hangover for the last few

years after, you know, huge growth during the pandemic, but you know, it's not player engagement and spending hasn't declined, right? It's just not growing as fast, which is healthier than than it has been at times in the past. And to your point, it's a very big industry at this point. So, there are opportunities for, you know, companies to grow their player base even when the industry itself isn't growing, right? Everyone's a pretty small piece of the pie. But, it's definitely been tougher for new games to break through because, you know, so much player engagement is going to existing live service games. Every year, it still happens. Some awesome and unexpected games do break through. So, that dream is is still alive, you know, both for companies like Riot and as well as indie developers. Like, this week I've been checking out War Dogs, which has innovated in some very fun ways, if you if you haven't looked at that game. But, you know, there's also been a tough time for game developers and startups, right? Many studios have closed or shrunk. External funding for new games and startups has declined pretty dramatically.

And that's unlikely to change anytime soon. And so, you know, in that environment, we do think our culture is a competitive advantage, right? We've hired a lot of great talent, including actually many ex-Rioters who took a shot with their own startups during the VC funding boom, and you know, have now come back and appreciate Riot all the more because of that experience.
There's a lot of boomer rings. Like, seriously, that's
That's a very political way of saying something that I clearly would agree with, is that like the opportunity for Riot and the bigger publishers is huge now because there's just a lot of people that are looking for work. And so, you guys can kind of pick who you want to come back as opposed to worrying about people fleeing, you know, to Sorry, I won't go there, down that road. But, anyway, yeah, I think that's a really good good lesson, is that like when I talk to the big publishers like EA or people at Activision, it's like, yeah, I mean, you guys are in in the driver's seat in terms of staffing cuz there's a lot of people out there that are looking for work to build teams, to build new stuff, you know? And so, yeah, it's a great opportunity for Riot,

I would imagine.
How has the culture shifted after COVID? A lot of people want to know. I I think you're hybrid. Is that Is that the case? What's the current work situation?
We are hybrid um for the vast majority of of Rioters, we do expect them to come into the office, you know, for at least a a modest amount of time, right? There's There's a lot of Rioters that come in 3 days a week. There's some that come in more. There's some that come in one or two. We actually leave the specific requirements up to the team, right? Some game teams have a more of an in-office culture, others have more of a hybrid, you know, culture spread across studios and and regions. And so, there's a lot of flexibility for leaders to, you know, set their own standards within that. You know, there's no perfect answer, right? We have people that want to come in more and wish everyone else was in there more, too. We have people that want to be remote. Um so, we just try to strike a balance that uh maximizes the effectiveness of the teams, but also the the culture and the morale. And yeah, there's pros and cons to both, for sure.

If you had to give any kind of advice to other CFOs out there of, you know, what are your kind of key learnings that you've had? Cuz you've had the journey from being small as a startup, going now to being one of the largest game companies there is. What are some of the the things you've learned along the way you would pass on to other CFOs?
Yeah, I mean, every company's different, so it's it's hard to be too generic about that kind of advice. I think, you know, Riot has been my first and only CFO role. And, you know, most of the roles I've I've had at Riot have been have been that as well. So, definitely customize my approach to to what makes makes Riot successful, but really, it's yeah, it's like I I guess I'd say that, you know, financial health is is important and critical, but it's a it's a means to an end, right? It's it's creating that financial health so that the teams can invest and be creative and dream and and make big bets. And, you know, you can go way too far down the path of trying to maximize margin, maximize profitability, when really, you

know, for the long-term health of the company, it's more about the creativity and the and the taking bets that are that are thoughtful and and have a good chance of success, but no guarantees, and and failure is not, you know, to be punished, right? Failure is to be learned from, and um and so that's probably the advice I would give.
All right, that feels like a good place to to end it. Chris, did we miss anything on your your list of stuff?
I really do appreciate you coming on and chatting, Riot. I think really honestly you guys should do a little bit more PR as to what you guys are doing. [laughter] Like I don't we don't really see much news from Riot these days, but maybe it's just me. Maybe I'm not in the right circles. I'm not I'm not cool enough or nerdy enough, one of the two.
No, you're right. I mean, I think some of that is just as we've gotten bigger and our words have more impact, and we get players excited about what we might do, but things change, and you know, our path might change, and so so we try to be a little more careful, and yeah, I do think like you know, the next games you see from Riot or hopefully people will be

surprised that oh wow, how did they keep that a secret for so long? And I think that's In some ways that's better than talking about it for 5 years, and things change, or it does maybe it doesn't ship, and and you get all these expectations that don't get met. So, maybe that'll change someday, but but that is the the current mindset. But we appreciate your uh you know,
Clearly a different approach. Clearly been a different approach than Tim Sweeney, right, at Epic.
[laughter]
Yeah, no, we respect him. We love what he's done for the the industry in terms of things like mobile fees, but yes, it is very different.
There's a phrase that you probably still use at Riot, which is keep it secret, keep it safe.
We do.
Which is a lot of why a lot of the uh the projects go hidden for so long. When we worked on L10, which was the 10th anniversary in 2019 when we came out with the announcement, everyone was shocked. Everyone was like, "Oh my god, it it actually led to some of the largest pre-order campaigns on Google Play that they had ever seen at the time." Because when we came out, we came out with TFT, Wild Rift, and Legends of

Runeterra all at the same time, and said you can pre-order now, and like I just remember the world being like, "What? Wait, what? There's not just one more game? There's like all these other games. So I think I'm curious to see what's coming next. I I know friends that are working a lot of great games and well, let me just ask and see what you can say. Is there anything on the horizon for licensing or for M&A that we could be on the the lookout for?
No, from a licensing standpoint, I think we've you know, we believe that we are the only stewards of our IP that will ever be really happy with with how it gets used. And so we tend to shy away from from licensing. But yeah, nothing major in terms of letting letting other companies, you know, build games with our IP is on the table at the moment. And yeah, I mean you know, M&A is something we always look at at least on a on a small scale, you know, we we've never done any any major M&A, right? We've never bought revenue. All of our growth has been organic. We always do look at

opportunities, especially if it's a company that we work very closely with and do well in. If it would make sense to put those companies together, we're always open to that conversation. But it's not a it's not an imperative.
Mark Sadosante, CFO of Riot, thank you for joining Deconstructor of Fun.
Yeah, thank you so much. Enjoyed it.
You did it. You made it to the end of the episode. As a fan of the show, it would help us out if you'd subscribe and leave us a review on the podcast service of your choice. [music] Those stars and likes, while a small action on your part, mean a lot to us and help to grow the show. More importantly, [music] are you a member of the Deconstructor of Fun Slack group? If you have five years or more of games industry experience, go to deconstructoroffun.com/slack [music] and apply to join. Join the games industry's best professional community filled with peers always willing to lend a hand. Or subscribe to our newsletter [music] to get all the latest insights from the Deconstructor of Fun content creators. Thanks for listening.

Mhm.