November 6, 2024 • 21 mins
With the long-awaited second season of the Emmy-winning Netflix series "Arcane" debuting Nov. 9, producers Riot Games may be better known for videogame phenomena like "League of Legends," but they've proven they can make great entertainment, too. But the company has struggled to expand further into scripted entertainment as inexperience has kept anything else from getting off the ground.
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Episode Transcript
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Speaker 1 (00:07):
Welcome to another episode of Strictly Business, the podcast in
which we speak with some of the brightest minds working
in the media business today. I'm Andrew Wallenstein with Variety.
We're doing something a little different this week, revisiting a
previous episode of Strictly Business from two years ago with
some new information that will make for an interesting reconsideration
(00:28):
of what we heard then from my guests, a pair
of top executives at Riot Games. But the conversation was
less about the state of video games and more about
their ambitions than to produce TV and film. They were
coming off the successful launch of their first animated series
on Netflix, and we're signaling they wanted to do more
now that series is back for a second season, which
(00:50):
got me wondering why we hadn't seen any other entertainment
from this company. Well, now that I've done some asking around,
I've got plenty to share. Stick around. We'll be back
in just a moment with an exclusive update that goes
inside Riot Games. Welcome back to Strictly Business. November ninth
(01:19):
marks the return to Netflix of the animated series Arcane.
To return Piece to the City, you Must Declare Martial Law,
top side is the real enemy.
Speaker 2 (01:35):
You have the chance to rally the under city together
your symbol, So what.
Speaker 1 (01:45):
Are you planning? Arcane turned out to be a hit
back in season one, reaching number one among TV shows
and eighty five Netflix markets around the world. It also
swept awards in its category in twenty twenty two, including
the Emmy for Outstanding Animated Series. So when I sat
(02:07):
down almost exactly two years ago with Riot Games co
founder and chief product officer Mark Merrill, as well as
its lead entertainment executive Shanna Spenley to talk about their
ambitions in the entertainment space, I was not surprised to
hear they had big but preliminary plans to do more productions,
even outside in animation and even in movie form. But
(02:31):
two years later, yours what did end up surprising me?
Nothing seemed to come of all that ambition. So I
got to checking back with sources in and around the
company to understand just why that was. And that's what
I'll explore in great detail today, along with some excerpts
from that twenty twenty two interview with Riot Games. First,
(02:52):
let me just hit some of the key points we'll
be exploring further in this episode. What I learned about
Riot's efforts and entertainment was that despite hiring a team
of executives experienced in the ways of entertainment to focus
on building out a slate of programming based on Riot
intellectual property, just like Arcane, not a single project beyond
(03:13):
that show has been fully developed. Riot is no closer
to putting project into production as season two of Arcane
begins than when season one ended, and by the way,
there won't be a season three of Arcane either. Why
did Riot Games not end up making good on its ambition, Well,
there's a number of key reasons. When the CEO who
(03:36):
was driving the entertainment effort back then, Niccolo Laurent, unexpectedly
stepped down last year, new leadership pulled back on its
entertainment plans. The entertainment division also faced plenty of skepticism
up and down a company that had many who preferred
to keep Riot focused on its core competency in video games.
(03:57):
That entertainment division was also practically dissolved as part of
a broader restructuring that the company announced last year under
a new CEO. But in an interview with Mark merrill
I conducted recently over me email, he defended Riot's track
record in entertainment and said the company was still very
much committed to producing for TV and film, but on
(04:20):
its own timeline. Now, before we dig in any further,
let's provide some background about Riot Games, for which beating
Hollywood at its own game is really far from a
first priority. The bread and butter is its video game business,
responsible for driving an estimated three billion dollars in top
line revenue last year, and the allion's share of that
(04:43):
comes from the game that put Riot on the map
back in two thousand and nine when it first launched,
called League of Legends. Now, for those living under rocks
who have never heard of this gaming behemoth, here's Mark
Merrill from my twenty twenty two interview explaining what League
of Legend is all about.
Speaker 3 (05:01):
The easiest way to contextualize what League Legends is is
really to compare it to a sport, because the game
itself is relatively simple, and that there's essentially what you
do as a player is you join up with another
four players, and you play against another team of five players,
and you essentially are choosing what we call a champion
to be for that game session, which lasts anwhere from
(05:22):
thirty to forty five minutes, and then the depth of
engagement really comes from the fact that you're leveling up,
you're trying to kill other players. Essentially, if you it's
sort of mode analogous to say basketball, where you know
the court and the rules are relatively simple, but every
game is different because there's so much player express creativity
(05:43):
and so League has you know, little over three billion
monthly hours of engagement, you know, just playing the game.
And so one of the things that's also important to
understand about League is that it is a very hardcore game,
and that it is you know, we always thought about
it as a targeting niche, and it turned out that,
especially on a global stage, you know, that niche was
(06:05):
much larger than we ever anticipated. And so the game
operates as a service. It's completely free, and you know,
you never have to spend any money in the game
if you don't want to. And our business has really
premised upon actually selling cosmetic virtual goods, and so it
was incredibly difficult to raise money back in two thousand
and six and thousand and seven when Brandon and I
are twenty four and twenty five start in the company,
(06:26):
because you know, as one VC put it. They're like, wait,
you're going to have a multiplayer online battle arena game
where college age kids are killing each other online. And
then the way you're gonna make money, they're gonna playdress
up all and we're like, kind of but not really,
and they're yeah, good luck with that, and so you know,
but it turned out to work.
Speaker 1 (06:47):
So now that you understand the business model, you have
the context for understanding Arcane, a TV show adapted from
the League of Legends intellectual property. The show was the
brainchild of Christian Link and Alex Yee, members of Riot's
players support team, who had no experience producing a TV show,
(07:11):
but they drew from the Legends mythology, and in twenty sixteen,
Riot took a flyer on them and gave them permission
to create a pilot with a company called Fortisch, which
was a Paris based animation studio that the company had
worked with on previously, but for nothing as big as
a television show, and they were lucky enough to strike
(07:35):
gold right out of the gate. Our Kane was a
hit for Netflix. We're going to take a quick break,
but when we're back more on Riot Games, Our Kine
and the entertainment strategy that hasn't quite gotten off the ground.
(07:59):
We are back and I am going to continue my
exploration into riot games. With the success of Arcane putting
riot games on the Hollywood map, it's a no brainer
that ambition soon kicked in for more. The company recruited
some experienced entertainment executives from Disney, Paramount, HBO, Max, and
(08:19):
most notably Netflix, which is where SHAWNA. Spenley came after
fifteen years as a marketing executive there. She was named
president of Global Entertainment at the end of twenty twenty,
and she in turn brought other Netflix executives in to
work on this new slate of programming. Back in twenty
twenty two, I talked with Spenley and Merrill about what
(08:42):
it took to put together a successful team in entertainment.
Speaker 2 (08:46):
So you talk about the team, I'm curious what the
infrastructure is. Do you have now a separate TV division?
Are you bringing in lots of Hollywood types or you're like,
you know, we don't want to be infected by the conventional.
Speaker 3 (09:00):
Well we we if they want to learn from the
tremendous expertise. So we brought in a lot of great
people who have great backgrounds in Hollywood as well. But
getting the blend right of course is very important.
Speaker 4 (09:12):
But yeah, look, I think it's funny. I remember being
in a position being in a tech company and then
bringing in a whole bunch of Hollywood, and so it's
sort of weird joining another company and being the Hollywood
running in Like that was weird for me. But I
think our focus is really clear. Games right now are
(09:32):
such a massive part of the entertainment ecosystem, and we
all signed up to be a part of that ecosystem.
So I think from our perspective, we're really excited to
learn and develop together with game executives, and we're coming
into it with a partnership frame of mind. So it's
not it doesn't feel odd at all, does it. I mean,
(09:54):
it feels like we are building a really strong team
that partners together across both.
Speaker 3 (09:59):
Dimensions well, and when we're creating scripted entertainment, it's like
our players' expectations, of course, and the audience expectations aren't
just set by what we do. I mean they watch
lots of TV and great movies, and so they're set
by what everybody in this room does. And what the
whole industry does. And so you know, our challenge has
been how do we create something that can you know,
stand shoulder to shoulder with these other incredible properties, which
(10:20):
of course is just is really hard. And so that's
where you know, again, I think the luxury of being
able to take time and find the right team and
sort of experiment and learn has been tremendously helpful.
Speaker 1 (10:31):
Spenley made clear she saw Riot as ground zero for
the inevitable intersection for entertainment in games, but pledged patients
and properly exploiting the Marvel scale trove of hundreds of
game characters at her disposal. She and Mark Merrill discussed
the incredible potential they saw in all that ip back
(10:53):
in that twenty twenty two.
Speaker 2 (10:54):
Interview, and just a few days ago we learn in
a Variety exclusive that you has hired a live action executive.
Speaker 1 (11:02):
Man and pitch her.
Speaker 2 (11:07):
So clearly there's some broader ambitions here. I know you're
not necessarily going to speak to particulars, but do you
guys have a sense now like, Okay, we're we're going
to ramp up a whole slate in the next ten years,
Like what are you thinking.
Speaker 3 (11:18):
Well, one of the things that's exciting is ourcane takes
place in one area in our world and with eight characters,
and we have close to one hundred and sixty characters
now in a much larger world, and so the storytelling
possibilities to develop who these characters are and the relationships
and sort of the timeline is, you know, we think
are vast and immense, and part of our challenge is,
(11:40):
you know, how do we do that well? And it's
been really exciting for us to cultivate this again incredibly
rich animation pipeline. But that's that's one medium, and you
know there are other, of course mediums that may be
able to do an incredible job of telling these stories also,
and those are things that we're committed to exploring.
Speaker 2 (11:58):
You say that, and I immediately think of two words,
cinematic universe or marvel this field of characters, like are
you looking to companies like that in terms of like, Okay,
we've got to build this bible over X number of
characters and wine number of years.
Speaker 4 (12:15):
We hear that phrase a lot inside our company too,
and I think we try to just stay patient and
pace it because we're obviously inspired by Marvel and Lord
of the Rings and and Harry Potter and Game of Thrones.
They're they're incredibly inspiring and and clearly audiences are asking
for these interconnected, intertwined universes. So we can only aspire
(12:41):
to tell you know, phenomenal and great stories with this
vast world that we've that you know, they've created that
I get the pleasure of working inside of our team.
It's interesting. It's like we're not trying to tell too
big of a story too quickly. We really like these
little pockets of the universe. But I think, I think
(13:04):
we have a very long runway with IP like this.
As you all know, Star Wars is forty fifty years old,
Lord of the Rings older, and so multi generational IP
like this should go on for fifty to one hundred years,
and so we want to be really patient and treat
it with care.
Speaker 3 (13:24):
And a lot of that goes into cultivating the internal
organizational competency around how to have so many different creators
and teams work effectively in a coordinated way within the IP.
And that's quite a challenge, and you know, as we
continue to grow, you know, find in different ways to
do that. But you know, I think we're benefited again
by the ability for us to really think long term
(13:45):
and try to be focused on again investing in the
IP rather than exploiting the IP for sort of a
short term benefit.
Speaker 4 (13:54):
There's no immediate plan for you know, three pictures in
a year kind of a thing. I mean, we're we're
not in a pipeline way of thinking we want yet, No,
we really want high quality, excellent, and it were okay
if it takes time.
Speaker 1 (14:11):
So after all that planning, what did happen to the
best laid plans in terms of the ambitions that Riot
had in entertainment. Well, first thing some context. What was
notable regarding Riot's approach in terms of what they wanted
to do in entertainment was the company held onto the
(14:31):
intellectual property it wanted to develop and bet that whatever
it lacked an experience of producing long form video content
could be compensated for by hiring that expertise from the outside.
And that strategy was a notable deviation from an era
of video game inspired entertainment that preceded the current hot streak.
This subgenre, if you'll call it, is enjoying from everything
(14:55):
from Max's The Last of Us to the twenty twenty
four were hit in cinemas this year. Five Nights at
Freddy's Studios were often criticized for their ham handling, handling
of properties they didn't really understand well enough to translate
to entertainment. Prince of Persia comes to mind, Super Mario
(15:16):
Brothers from nineteen ninety three, and do you remember those
Dwayne Johnson that Doom movie in two thousand and five.
I barely do myself. However, what made sense and theory
didn't work as well in reality at Riot. For one thing,
there was a disconnect between the entertainment team brought in
to bring Lorentz Laurent's vision to reality and the rest
(15:38):
of the company. Multiple sources I spoke to noted that
there were many skeptics who never bought in from a
management team with which the entertainment division never really gelled
to the Riot rank and file, many of whom were
hardcore gamers who largely saw entertainment as a distraction. By
(15:58):
May twenty twenty three, the CEO of Riot announced he
was leaving, and he was replaced by President Dylan Jadeja,
who insider say immediately began to reverse course on Laurent's
entertainment expansion, citing a renewed focus on the core gaming business.
(16:19):
The entertainment division, which was once one of five Riot
operating divisions with the company called Pillars, was essentially disbanded.
Leaders of various parts of the entertainment business scattered to
other parts of the company. In August of this year,
the company announced a restructuring that basically split development work
(16:39):
on its live action and animation efforts. At the same time, SHAWNA.
Spenley stepped down, referring to her exit in a memo
as a bittersweet decision. Just weeks later, she was rehired
at HBO Max, where she is now the CMO looking elsewhere.
It is interesting to note that the cost of Arcane
(17:05):
was two hundred and fifty million dollars, which is far
and away making it the most expensive animated series ever
on linear TV or streaming that covers eighteen episodes over
two seasons. Now, Arcane will certainly, almost certainly, I should say,
(17:26):
not be profitable for Riot. It's next impossible the company
is going to be able to make up for the
fact that despite a three million dollar per episode license
fee that Netflix paid for worldwide distribution rights and another
three million that Riot's parent company, ten Cent brought in
(17:47):
for China. The fact is all sorts of ancillary revenue
streams that weren't available during the first season of Arcane
will probably not come up, will probably come up short
in its attempt to help recoup the deficit of season two,
though company. The company does believe that break even is
(18:07):
a potential scenario as well. Now in terms of that
two hundred and fifty million dollars, that is something that
is covered across programming and marketing. Sources familiar with details
of the production said that the cost of the first
nine forty minute episodes ran north of eighty million, and
(18:29):
the second batch of nine that are beginning to air
now on Netflix cost nearly one hundred million. That's not
even the most eyebrow raising part. It is estimated that
Riot spent sixty million dollars of its own money to
just promote the first season of Arcane, which is exponentially
(18:51):
more than a studio would typically spend for a show
it isn't distributing, certainly more than what Netflix spent itself.
The company reason that it was going to have to
find audiences outside of the typical places that TV watchers
discover television as much of the turbulence as Riot has
(19:13):
experienced in recent years trying to get entertainment off the ground.
It hasn't discouraged the company. Mark Merrill, who did agree
to respond to questions via email, did reaffirm his commitment
to continuing in entertainment, and I'll read the quote he
gave me quote. Our ambitions in entertainment haven't changed. We
(19:35):
were never attending to operate like a traditional studio with
traditional timelines. What did change as we learned more was
our expectations of ourselves. We realized that getting it right
takes a lot more time than we did originally expected,
and so we recalibrated our development, output goals and teams
with that in mind. And as for that two hundred
(19:56):
and fifty million price tag, could not get the comment,
could not at the company to confirm, but Merrill himself
did say, we're more than comfortable with the spend it
took to deliver a show that was worthy of our
player's time. So there you have it, the story of
Arcane and Riot Games and what has gone on with
(20:17):
an entertainment strategy that has gone basically a wall over
recent years. Who knows what the future will bring. For
more on Riot Games than Arcane, I would refer you
back to Variety dot com, where a feature story includes
many of the elements we covered in this podcast, but
also some things that we did not, including an early
(20:39):
negotiation gone wrong with the famous Russo Brothers, the architects
of the Avenger franchise, and more commentary from Mark Merrill
addressing all the different allegations made in this story. Thanks
for tuning in, appreciate the time, Thanks for listening.
Speaker 3 (21:03):
Be sure to leave us a review at Apple Podcasts.
Speaker 2 (21:06):
Or Amazon Music.
Speaker 3 (21:08):
We love to hear from listeners.
Speaker 2 (21:09):
Please go to Variety dot com and sign up
Speaker 1 (21:12):
For the free weekly Strictly Business newsletter, and don't forget
to tune in next week for another episode of Strictly
Business
Welcome to another episode of Strictly Business, the podcast in
which we speak with some of the brightest minds working
in the media business today. I'm Andrew Wallenstein with Variety.
We're doing something a little different this week, revisiting a
previous episode of Strictly Business from two years ago with
some new information that will make for an interesting reconsideration
(00:28):
of what we heard then from my guests, a pair
of top executives at Riot Games. But the conversation was
less about the state of video games and more about
their ambitions than to produce TV and film. They were
coming off the successful launch of their first animated series
on Netflix, and we're signaling they wanted to do more
now that series is back for a second season, which
(00:50):
got me wondering why we hadn't seen any other entertainment
from this company. Well, now that I've done some asking around,
I've got plenty to share. Stick around. We'll be back
in just a moment with an exclusive update that goes
inside Riot Games. Welcome back to Strictly Business. November ninth
(01:19):
marks the return to Netflix of the animated series Arcane.
To return Piece to the City, you Must Declare Martial Law,
top side is the real enemy.
Speaker 2 (01:35):
You have the chance to rally the under city together
your symbol, So what.
Speaker 1 (01:45):
Are you planning? Arcane turned out to be a hit
back in season one, reaching number one among TV shows
and eighty five Netflix markets around the world. It also
swept awards in its category in twenty twenty two, including
the Emmy for Outstanding Animated Series. So when I sat
(02:07):
down almost exactly two years ago with Riot Games co
founder and chief product officer Mark Merrill, as well as
its lead entertainment executive Shanna Spenley to talk about their
ambitions in the entertainment space, I was not surprised to
hear they had big but preliminary plans to do more productions,
even outside in animation and even in movie form. But
(02:31):
two years later, yours what did end up surprising me?
Nothing seemed to come of all that ambition. So I
got to checking back with sources in and around the
company to understand just why that was. And that's what
I'll explore in great detail today, along with some excerpts
from that twenty twenty two interview with Riot Games. First,
(02:52):
let me just hit some of the key points we'll
be exploring further in this episode. What I learned about
Riot's efforts and entertainment was that despite hiring a team
of executives experienced in the ways of entertainment to focus
on building out a slate of programming based on Riot
intellectual property, just like Arcane, not a single project beyond
(03:13):
that show has been fully developed. Riot is no closer
to putting project into production as season two of Arcane
begins than when season one ended, and by the way,
there won't be a season three of Arcane either. Why
did Riot Games not end up making good on its ambition, Well,
there's a number of key reasons. When the CEO who
(03:36):
was driving the entertainment effort back then, Niccolo Laurent, unexpectedly
stepped down last year, new leadership pulled back on its
entertainment plans. The entertainment division also faced plenty of skepticism
up and down a company that had many who preferred
to keep Riot focused on its core competency in video games.
(03:57):
That entertainment division was also practically dissolved as part of
a broader restructuring that the company announced last year under
a new CEO. But in an interview with Mark merrill
I conducted recently over me email, he defended Riot's track
record in entertainment and said the company was still very
much committed to producing for TV and film, but on
(04:20):
its own timeline. Now, before we dig in any further,
let's provide some background about Riot Games, for which beating
Hollywood at its own game is really far from a
first priority. The bread and butter is its video game business,
responsible for driving an estimated three billion dollars in top
line revenue last year, and the allion's share of that
(04:43):
comes from the game that put Riot on the map
back in two thousand and nine when it first launched,
called League of Legends. Now, for those living under rocks
who have never heard of this gaming behemoth, here's Mark
Merrill from my twenty twenty two interview explaining what League
of Legend is all about.
Speaker 3 (05:01):
The easiest way to contextualize what League Legends is is
really to compare it to a sport, because the game
itself is relatively simple, and that there's essentially what you
do as a player is you join up with another
four players, and you play against another team of five players,
and you essentially are choosing what we call a champion
to be for that game session, which lasts anwhere from
(05:22):
thirty to forty five minutes, and then the depth of
engagement really comes from the fact that you're leveling up,
you're trying to kill other players. Essentially, if you it's
sort of mode analogous to say basketball, where you know
the court and the rules are relatively simple, but every
game is different because there's so much player express creativity
(05:43):
and so League has you know, little over three billion
monthly hours of engagement, you know, just playing the game.
And so one of the things that's also important to
understand about League is that it is a very hardcore game,
and that it is you know, we always thought about
it as a targeting niche, and it turned out that,
especially on a global stage, you know, that niche was
(06:05):
much larger than we ever anticipated. And so the game
operates as a service. It's completely free, and you know,
you never have to spend any money in the game
if you don't want to. And our business has really
premised upon actually selling cosmetic virtual goods, and so it
was incredibly difficult to raise money back in two thousand
and six and thousand and seven when Brandon and I
are twenty four and twenty five start in the company,
(06:26):
because you know, as one VC put it. They're like, wait,
you're going to have a multiplayer online battle arena game
where college age kids are killing each other online. And
then the way you're gonna make money, they're gonna playdress
up all and we're like, kind of but not really,
and they're yeah, good luck with that, and so you know,
but it turned out to work.
Speaker 1 (06:47):
So now that you understand the business model, you have
the context for understanding Arcane, a TV show adapted from
the League of Legends intellectual property. The show was the
brainchild of Christian Link and Alex Yee, members of Riot's
players support team, who had no experience producing a TV show,
(07:11):
but they drew from the Legends mythology, and in twenty sixteen,
Riot took a flyer on them and gave them permission
to create a pilot with a company called Fortisch, which
was a Paris based animation studio that the company had
worked with on previously, but for nothing as big as
a television show, and they were lucky enough to strike
(07:35):
gold right out of the gate. Our Kane was a
hit for Netflix. We're going to take a quick break,
but when we're back more on Riot Games, Our Kine
and the entertainment strategy that hasn't quite gotten off the ground.
(07:59):
We are back and I am going to continue my
exploration into riot games. With the success of Arcane putting
riot games on the Hollywood map, it's a no brainer
that ambition soon kicked in for more. The company recruited
some experienced entertainment executives from Disney, Paramount, HBO, Max, and
(08:19):
most notably Netflix, which is where SHAWNA. Spenley came after
fifteen years as a marketing executive there. She was named
president of Global Entertainment at the end of twenty twenty,
and she in turn brought other Netflix executives in to
work on this new slate of programming. Back in twenty
twenty two, I talked with Spenley and Merrill about what
(08:42):
it took to put together a successful team in entertainment.
Speaker 2 (08:46):
So you talk about the team, I'm curious what the
infrastructure is. Do you have now a separate TV division?
Are you bringing in lots of Hollywood types or you're like,
you know, we don't want to be infected by the conventional.
Speaker 3 (09:00):
Well we we if they want to learn from the
tremendous expertise. So we brought in a lot of great
people who have great backgrounds in Hollywood as well. But
getting the blend right of course is very important.
Speaker 4 (09:12):
But yeah, look, I think it's funny. I remember being
in a position being in a tech company and then
bringing in a whole bunch of Hollywood, and so it's
sort of weird joining another company and being the Hollywood
running in Like that was weird for me. But I
think our focus is really clear. Games right now are
(09:32):
such a massive part of the entertainment ecosystem, and we
all signed up to be a part of that ecosystem.
So I think from our perspective, we're really excited to
learn and develop together with game executives, and we're coming
into it with a partnership frame of mind. So it's
not it doesn't feel odd at all, does it. I mean,
(09:54):
it feels like we are building a really strong team
that partners together across both.
Speaker 3 (09:59):
Dimensions well, and when we're creating scripted entertainment, it's like
our players' expectations, of course, and the audience expectations aren't
just set by what we do. I mean they watch
lots of TV and great movies, and so they're set
by what everybody in this room does. And what the
whole industry does. And so you know, our challenge has
been how do we create something that can you know,
stand shoulder to shoulder with these other incredible properties, which
(10:20):
of course is just is really hard. And so that's
where you know, again, I think the luxury of being
able to take time and find the right team and
sort of experiment and learn has been tremendously helpful.
Speaker 1 (10:31):
Spenley made clear she saw Riot as ground zero for
the inevitable intersection for entertainment in games, but pledged patients
and properly exploiting the Marvel scale trove of hundreds of
game characters at her disposal. She and Mark Merrill discussed
the incredible potential they saw in all that ip back
(10:53):
in that twenty twenty two.
Speaker 2 (10:54):
Interview, and just a few days ago we learn in
a Variety exclusive that you has hired a live action executive.
Speaker 1 (11:02):
Man and pitch her.
Speaker 2 (11:07):
So clearly there's some broader ambitions here. I know you're
not necessarily going to speak to particulars, but do you
guys have a sense now like, Okay, we're we're going
to ramp up a whole slate in the next ten years,
Like what are you thinking.
Speaker 3 (11:18):
Well, one of the things that's exciting is ourcane takes
place in one area in our world and with eight characters,
and we have close to one hundred and sixty characters
now in a much larger world, and so the storytelling
possibilities to develop who these characters are and the relationships
and sort of the timeline is, you know, we think
are vast and immense, and part of our challenge is,
(11:40):
you know, how do we do that well? And it's
been really exciting for us to cultivate this again incredibly
rich animation pipeline. But that's that's one medium, and you
know there are other, of course mediums that may be
able to do an incredible job of telling these stories also,
and those are things that we're committed to exploring.
Speaker 2 (11:58):
You say that, and I immediately think of two words,
cinematic universe or marvel this field of characters, like are
you looking to companies like that in terms of like, Okay,
we've got to build this bible over X number of
characters and wine number of years.
Speaker 4 (12:15):
We hear that phrase a lot inside our company too,
and I think we try to just stay patient and
pace it because we're obviously inspired by Marvel and Lord
of the Rings and and Harry Potter and Game of Thrones.
They're they're incredibly inspiring and and clearly audiences are asking
for these interconnected, intertwined universes. So we can only aspire
(12:41):
to tell you know, phenomenal and great stories with this
vast world that we've that you know, they've created that
I get the pleasure of working inside of our team.
It's interesting. It's like we're not trying to tell too
big of a story too quickly. We really like these
little pockets of the universe. But I think, I think
(13:04):
we have a very long runway with IP like this.
As you all know, Star Wars is forty fifty years old,
Lord of the Rings older, and so multi generational IP
like this should go on for fifty to one hundred years,
and so we want to be really patient and treat
it with care.
Speaker 3 (13:24):
And a lot of that goes into cultivating the internal
organizational competency around how to have so many different creators
and teams work effectively in a coordinated way within the IP.
And that's quite a challenge, and you know, as we
continue to grow, you know, find in different ways to
do that. But you know, I think we're benefited again
by the ability for us to really think long term
(13:45):
and try to be focused on again investing in the
IP rather than exploiting the IP for sort of a
short term benefit.
Speaker 4 (13:54):
There's no immediate plan for you know, three pictures in
a year kind of a thing. I mean, we're we're
not in a pipeline way of thinking we want yet, No,
we really want high quality, excellent, and it were okay
if it takes time.
Speaker 1 (14:11):
So after all that planning, what did happen to the
best laid plans in terms of the ambitions that Riot
had in entertainment. Well, first thing some context. What was
notable regarding Riot's approach in terms of what they wanted
to do in entertainment was the company held onto the
(14:31):
intellectual property it wanted to develop and bet that whatever
it lacked an experience of producing long form video content
could be compensated for by hiring that expertise from the outside.
And that strategy was a notable deviation from an era
of video game inspired entertainment that preceded the current hot streak.
This subgenre, if you'll call it, is enjoying from everything
(14:55):
from Max's The Last of Us to the twenty twenty
four were hit in cinemas this year. Five Nights at
Freddy's Studios were often criticized for their ham handling, handling
of properties they didn't really understand well enough to translate
to entertainment. Prince of Persia comes to mind, Super Mario
(15:16):
Brothers from nineteen ninety three, and do you remember those
Dwayne Johnson that Doom movie in two thousand and five.
I barely do myself. However, what made sense and theory
didn't work as well in reality at Riot. For one thing,
there was a disconnect between the entertainment team brought in
to bring Lorentz Laurent's vision to reality and the rest
(15:38):
of the company. Multiple sources I spoke to noted that
there were many skeptics who never bought in from a
management team with which the entertainment division never really gelled
to the Riot rank and file, many of whom were
hardcore gamers who largely saw entertainment as a distraction. By
(15:58):
May twenty twenty three, the CEO of Riot announced he
was leaving, and he was replaced by President Dylan Jadeja,
who insider say immediately began to reverse course on Laurent's
entertainment expansion, citing a renewed focus on the core gaming business.
(16:19):
The entertainment division, which was once one of five Riot
operating divisions with the company called Pillars, was essentially disbanded.
Leaders of various parts of the entertainment business scattered to
other parts of the company. In August of this year,
the company announced a restructuring that basically split development work
(16:39):
on its live action and animation efforts. At the same time, SHAWNA.
Spenley stepped down, referring to her exit in a memo
as a bittersweet decision. Just weeks later, she was rehired
at HBO Max, where she is now the CMO looking elsewhere.
It is interesting to note that the cost of Arcane
(17:05):
was two hundred and fifty million dollars, which is far
and away making it the most expensive animated series ever
on linear TV or streaming that covers eighteen episodes over
two seasons. Now, Arcane will certainly, almost certainly, I should say,
(17:26):
not be profitable for Riot. It's next impossible the company
is going to be able to make up for the
fact that despite a three million dollar per episode license
fee that Netflix paid for worldwide distribution rights and another
three million that Riot's parent company, ten Cent brought in
(17:47):
for China. The fact is all sorts of ancillary revenue
streams that weren't available during the first season of Arcane
will probably not come up, will probably come up short
in its attempt to help recoup the deficit of season two,
though company. The company does believe that break even is
(18:07):
a potential scenario as well. Now in terms of that
two hundred and fifty million dollars, that is something that
is covered across programming and marketing. Sources familiar with details
of the production said that the cost of the first
nine forty minute episodes ran north of eighty million, and
(18:29):
the second batch of nine that are beginning to air
now on Netflix cost nearly one hundred million. That's not
even the most eyebrow raising part. It is estimated that
Riot spent sixty million dollars of its own money to
just promote the first season of Arcane, which is exponentially
(18:51):
more than a studio would typically spend for a show
it isn't distributing, certainly more than what Netflix spent itself.
The company reason that it was going to have to
find audiences outside of the typical places that TV watchers
discover television as much of the turbulence as Riot has
(19:13):
experienced in recent years trying to get entertainment off the ground.
It hasn't discouraged the company. Mark Merrill, who did agree
to respond to questions via email, did reaffirm his commitment
to continuing in entertainment, and I'll read the quote he
gave me quote. Our ambitions in entertainment haven't changed. We
(19:35):
were never attending to operate like a traditional studio with
traditional timelines. What did change as we learned more was
our expectations of ourselves. We realized that getting it right
takes a lot more time than we did originally expected,
and so we recalibrated our development, output goals and teams
with that in mind. And as for that two hundred
(19:56):
and fifty million price tag, could not get the comment,
could not at the company to confirm, but Merrill himself
did say, we're more than comfortable with the spend it
took to deliver a show that was worthy of our
player's time. So there you have it, the story of
Arcane and Riot Games and what has gone on with
(20:17):
an entertainment strategy that has gone basically a wall over
recent years. Who knows what the future will bring. For
more on Riot Games than Arcane, I would refer you
back to Variety dot com, where a feature story includes
many of the elements we covered in this podcast, but
also some things that we did not, including an early
(20:39):
negotiation gone wrong with the famous Russo Brothers, the architects
of the Avenger franchise, and more commentary from Mark Merrill
addressing all the different allegations made in this story. Thanks
for tuning in, appreciate the time, Thanks for listening.
Speaker 3 (21:03):
Be sure to leave us a review at Apple Podcasts.
Speaker 2 (21:06):
Or Amazon Music.
Speaker 3 (21:08):
We love to hear from listeners.
Speaker 2 (21:09):
Please go to Variety dot com and sign up
Speaker 1 (21:12):
For the free weekly Strictly Business newsletter, and don't forget
to tune in next week for another episode of Strictly
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