Customer Effort - Firewall, Lag, NA Down, etc., etc. and Lifetime Value
Riot,
I'd like to start by thanking you for making an incredible game, which you provide to me and other Leaguers with no upfront charge. However, since you operate a for-profit business that depends on revenue generating customers, I would like to draw your attention to something referred to as Lifetime Value (LTV).
LTV measures the value of revenue streams (average amount spent on champions, skins, wards, boosts, etc.) that you will receive from each player over their expected life (how many months they will play, measured in monthly churn). You make a great game with great content and there's no shortage of awesome stuff to buy in the store. People (60 million+) love the game and it will last for many many years. Sounds great if you own shares of Riot, right? Probably, but what about that little thing called expected life? Is it a problem if the average expected life goes up or down by a few months? It turns out the answers is yes. Even a seemingly small increase in monthly churn rate can translate into massive swings in LTV.
To keep the math simple, let's leave out all of that fancy discounting stuff that your Finance team can explain in greater detail. Let's assume that you previously had a monthly churn rate of 2%, that equates to an average life of 50 months (1/.02) and that your average player spends about $5/month over those 50 months. That's $250 for a free game! Awesome business model, sign me up.
Oh no, there's been a series of events including firewall problems, server downtime, and issues disconnecting from ranked queues. All of this has led to increased customer effort, which ultimately increases churn. Let's say this drove churn from 2% to 2.5%, that means expected life has dropped from 50 months to 40 months and our $250/player just got chomped down to $200/player. That $50 doesn't seem like a big number until you multiply it by 60M customers...now I'd start to worry if I were Ryze. Of course my assumptions might be wildly inaccurate, so feel free to run this simple analysis using the actual numbers.
I love the game and appreciate all that you do for the community. I'd just like to make sure you're aware of the massive amount of value on the table if you aren't properly investing in your development, your hardware, and your connectivity.
Best,
XclWizard
