The birth of League of Legends proves how innovation can be a losing strategy

Every game has winners and losers.
Every game has winners and losers.
Image: Reuters/Kham
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As Abraham Lincoln famously said, “The best way to predict the future is to create it.”

It’s been uttered countless times, because it’s true—especially for industry innovators and disruptors. Sure, large companies are able to predict incremental changes, but the really big changes and innovations are extremely hard to identify before they happen.

What’s even more fascinating is when the companies that invent the future don’t realize they’re doing it. In these cases, innovation can solve a problem in the market even as it ultimately fails to benefit the people who initiated the change.

Twenty-one years ago, Blizzard Entertainment released StarCraft, a groundbreaking sci-fi real-time strategy game that would quickly become (at the time at least) the best-selling PC game in history.

With StarCraft, Blizzard developers were on the cusp of creating an entirely new form of gaming—but they weren’t yet aware of it.

They also did not actually create it so much as design the framework that facilitated its creation by someone else.

This was not the StarCraft series. It was the Multiplayer Online Battle Arena, or MOBA, a huge industry in its own right today, boasting hundreds of millions of users across multiple properties and billions in yearly revenue.

A quick history of MOBAs

For the uninitiated, MOBAs are one of the most popular gaming genres in the world. They typically consist of two teams of five players (5v5 in gamer vocabulary). The teams start at opposite ends of a square map and work amongst their group in a capture-the-flag-like scenario to destroy an objective, which is housed in their opponent’s base.

Players control a single character (a “champion”) with unique abilities that they use to fight through computer-controlled minions, monsters, turrets, and enemy champions to reach their objective.

There’s a lot more complexity here, and for those who want to dig in more, this is a good primer.

But to explain why this is relevant—whether or not you play video games—we have to back up even more.

As I mentioned, the MOBA genre did not exist 21 years ago in 1998. Blizzard Entertainment hadn’t even conceived of the idea when they released StarCraft, which emphasizes building structures, units, and mining resources. But the company did release a map editor along with the game, allowing users to create their own maps and scenarios, which were shared on old forums and reposted on other sites, all for free.

And that’s where things got more interesting.

One “modder” (a player who customizes a given game), called Aeon64, created Aeon of Strife, a map and scenario nearly identical to the one I described above. This map was shared extensively online and became one of the most popular maps in StarCraft. There were a few differences in the pre-MOBA era, such as the fact that early StarCraft maps were played by four people versus the computer’s team of four players, since maps were limited to eight total players. But it laid an important foundation for what was to come.

Aeon of Strife was inevitably ported to Blizzard’s next newest game, Warcraft III (a game nearly identical in mechanics to StarCraft but with a fantasy theme), in 2002. There it was updated to become a competitive 5v5 game and given the name Defense of the Ancients, or Dota. Dota added player levels, item purchasing, and nearly every element of modern MOBAs.

With that, the MOBA genre was truly born.

At this point, one user’s creation had become a product class all its own.

For the next seven years, Dota was the MOBA market. It became the most popular map subset in Warcraft III, spawning dozens of variants.

Blizzard had a stranglehold on this market. Dota ran on Blizzard’s servers, required Blizzard’s Warcraft III software, and players had to have a Blizzard account in order to play.

Since this was a free extension of the existing product, however, it didn’t make Blizzard any additional money. So maybe it’s forgivable that Blizzard ignored its own data on the explosive growth of Dota and never developed its own MOBA product.

But others did.

Riot Games’s League of Legends (LOL) was released in 2009 as one of the first formally MOBA-focused games on the market. Sales skyrocketed, and it became one of the most popular games in the United States, then globally. In 2011 Riot Games was acquired by Chinese holding company Tencent for $400 million. Tencent remains by far the biggest player in the MOBA market today.

Riot and Tencent also turned LOL into an extremely popular e-sport, with the 2018 World Championships garnering nearly the same viewership as the Super Bowl.

The lesson

Blizzard Entertainment is doing just fine, of course—it pulled in $7.5 billion in revenue in 2018. Still, the estimated $1.4 billion that Riot pulled in in 2018 would have significantly increased that amount, not to mention other MOBA games that have been released since, like Dota 2, which are still quite popular globally.

While Blizzard did eventually release its own MOBA game called Heroes of the Storm in 2015, it essentially stopped development of the format in 2018. It had cornered the MOBA market for more than seven years, but ultimately missed its chance to lead a multi-billion-dollar industry.

As more businesses release customization options for users, this pattern will inevitably recur. In games like Super Mario Maker 2, Roblox, and Dreams, users have the power to create their own unique games, many in ways the original publishers did not anticipate.

But it’s not just games that follow this course. Slack, for example, allows users to create their own apps on its platform. The productivity platform Laboratik provides a collaboration analytics tool within Slack, and Standuply is a Slack-based automated scrum master. Salesforce allows similar integrations with apps such as KnowledgeTree and Conga Composer enabling fundamentally new functionality around messaging success prediction and automated document generation, respectively

As we saw with MOBAs, this is a great feature for users, and a lot of these applications will no doubt become immensely popular.

When innovation is costly

The lesson from Blizzard Entertainment implies that it’s more complicated than that, of course. The MOBA genre, after all, didn’t even exist before Aeon of Strife was created by an outside party, and no one predicted that.

It’s especially complicated if, like we saw with Aeon of Strife and then Dota, an application becomes so unique and compelling it breaks away and become its own product, or inspires an entirely new genre—a genre that Blizzard Entertainment facilitated, but failed to profit from.

The truly compelling breakaway products may not even be decipherable to the platforms from whence they came.

But even if these future markets are invisible to an existing platform, user data can and should be used to gauge those markets and drive investment.

One of the first investors in Riot was Tencent, itself originally a game developer. The Chinese tech giant acquired the entire company in a deal that seems like a bargain today.

Imagine if Blizzard used its own data to proactively invest in other MOBA companies as the genre grew?

This would likely have turned out to be a better investment even than internal development. If two applications are too different, for example, it is extremely expensive to spin up teams to build out a completely new type of product. And investing a few million dollars in a few candidate companies may yield far greater financial rewards.

The final lesson here, unteachable as it may be, is that while tens of thousands of people endlessly strategize and talk about how to innovate the most to create the next multi-billion-dollar industry, innovation alone is not enough. The best answer may come from an anonymous internet user, who decided to make something for fun and ended up changing industry history in the process.