Browsing: Network Effects
Introduction. Freemium is an emerging business model mostly used in the online software market and mobile application market that offers a free basic version and premium version of a product or service. One of the most successful companies that uses the freemium business model is Riot Games Inc. with their multiplayer online game League of Legends. The growing number of successful freemium businesses requires scientific analysis and evidence.
Aim of the study. In this paper, first we analyze the general concept of the business model, especially focussing on the benefits of paying and non-paying customers and second, we analyze the fastgrowing and still young market of eSports which contributes to the success of the game. The finding then will be compared to the actual business model of Riot Games. The results show that Riot Games success is based on several factors that are all affiliated with the freemium business model: micropayments, sunk cost and network effects, data collection and sophisticated reward systems that foster customer retention.
Keywords: Freemium Business Model, Riot Games, Network Effects, eSports
JEL Classification: L11, L86