With the launch of the League of Legends World Championships less than a month away, publisher Riot Games’ licensing and partnerships teams have been working at full tilt. In the past few weeks alone, Nike revealed a set of LoL jerseys, apparel, and footwear (including a limited-edition Air Jordan 1) and both Honda and Buffalo Wild Wings inked sponsorships. Yet of the numerous deals announced so far, one stands out. On August 24th, Spotify became “the official—and exclusive—audio-streaming partner for League of Legends global events.”
Spotlit sources suggest that this partnership was valued in the low 7 figures – no paltry amount but a drop in the bucket compared to LoL’s overall revenue (~$1.5B in 2019) and Spotify’s recent acquisitions in the podcasting space ($600M+ since February 2019). So, what makes this deal particularly interesting? While Nike collabs and brand sponsors may drive more immediate revenue, we believe that a Riot Games x Spotify partnership will drive outsized value for both companies in the years to come. Let’s look at the advantages that both companies stand to gain and where this tie up may lead:
From Video Game Characters to Pop Stars: Riot has regularly commissioned original music in support of its eSports events, and this music - featuring globally recognized talent such as Imagine Dragons and Zedd – has resonated deeply with fans worldwide. Take “Pop/Stars,” a song “performed” by a virtual band of LoL’s characters. After debuting at the 2018 World Championships, “Pop/Stars” topped both the iTunes and Billboard charts and the corresponding music video has since accumulated 368M+ views, making the song one of the most successful K-Pop debuts in the history of the genre. While fan service is surely an important factor in this strategy, elevating Riot’s characters into …forgive the pun…. pop stars has had an incredible impact on Riot’s digital ecommerce business. Tapping into the same basic instinct that concert merch appeals to, Riot often pairs its music releases with in-game character skins (virtual apparel that accounts for an estimated 40% of the publisher’s revenues) to enormous response. Moving forward with the support of Spotify’s hit-making editorial helps de-risk this content investment. Thus, expect Riot to double down, shifting from singles to full length albums before years end and potentially even moving into Fortnite style in-game concerts in 2021.
The Podcasting Sponsor Bait: While LoL inspired music will steal headlines in the months to come, the more immediate value will come from the podcasting component of this partnership. As podcast advertising growth continues to rebound, brand sponsors looking for a mid-tier price point to experiment with eSports will find an attractive combination in the forthcoming, Spotify produced shoulder content. We’ve only had one of these shows (Untold Stories: Top Moments from Worlds) announced so far, but the next will assuredly have a sponsored by… in the opener.
A Spotify South Korean Launch is Imminent: Spotify has been eyeing a move into South Korea - the world’s leader in podcast consumption and sixth largest music market – for some time. Reports in February suggested that the music platform was expected to launch by EOY 2020. However, the onset of COVID-19 delayed crucial rights negotiations with local music companies (~80% of music listened to in Korea is from local artists). In light of this, Spotify’s tie up with Riot takes on a new dimension. Unsurprisingly – LoL is HUGE in South Korea. Riot’s Korean league, the LCK, boasted an average of 225K viewers for any single match in the 2020 Spring season (+78% YoY Growth), second only to China in terms of viewership. Going to market with exclusive LoL content won’t be enough to usurp established platforms in the long run, but exclusive content during the World championships could be enough to gain a toehold in a competitive market. Our hunch? Expect to see a Spotify South Korean launch before months end that heavily features LoL in its launch narrative.