Riot and Wildlight Didn't Pray to the ARPDAU x DAU Gods
With the layoffs at Wildlight and for 2KXO, I think it’s time to revisit the famed DAU x ARPDAU x Run Rate Matrix. Teams don’t spend enough time praying to this God, and once again it has smote them.
The idea is simple: the combination of ARPDAU and DAU produces an annual run rate. Consider each of these dimensions: what is the expected DAU you think you can get based on marketing, market conditions, etc., and what is the ARPDAU you think you can get based on your monetization model and genre norms?
It wasn’t rocket science to see that 2KXO was going to be dead on arrival. The top DAU for fighting games across all platforms is Brawlhalla (platform fighter!), and while that’s a low benchmark, it’s a starting place to think about “hey, what would it mean to 4x or 5x this in terms of DAU?”
Of course, the other dimension is ARPDAU. And it becomes a clearer strike against this game. Even at crazy 3x–4x DAU numbers, ARPDAU still needs to be embarrassingly high to get to the type of results that Riot would expect from such a product. A project doesn't need that sort of entry velocity, but it should at least be benchmarked against average variable cost (opportunity cost is for another day). The burn must have been high, especially in Santa Monica!
The people I’ve spoken with who were at Riot during the game’s development had the same concerns, and the warning flags were ignored. I’ve developed a strong distaste for Riot, and arrogance seems to have bitten them once again.
Whether it was ignoring Tencent’s call to port League of Legends to mobile because their IP was too “esteemed”, or blowing $250 million on Arcane, which I’m now hearing is a number that doesn’t include all costs. Similar to early Blizzard, these firms have become lifestyle companies where there isn’t just an office; there’s a “campus”, and socialization past the end of the workday is encouraged and subsidized. There’s nothing wrong with it, but it fosters a cult mentality.
High Guard’s first problem was sustaining a player base. Still, there needed to be reasonable expectations about when DAU would hit equilibrium, and ARPDAU needed to support that equilibrium given a constant team size. It’s again possible to cover average variable costs, but you need sufficient ARPDAU to support it. With strong design and internal choices, I still believe it's possible to run a high-quality, free-to-play HD game with fewer than 100 developers.
No one I’ve seen has talked about High Guard’s monetization, and as a new IP, this is a perfect opportunity to go back to loot boxes in the same way Apex did, or to move in the Warbond direction of Helldivers. Teams should start choosing monetization models that allow them to operate at lower platform rankings, rather than assuming they can hit the top 10.