Free Games Make Money

League of Legends (leagueoflegends.com) is one of the most popular PC games in the world and the linchpin of a thriving business. It is also free to play. Boasting a player base of 32 million, it invites gamers to select from a roster of more than 100 fantasy-themed champions and duke it out in teams.

Players can succeed at the game without spending a cent. But money unlocks new champions and "skins" (to change a champion's appearance). A regular flow of new characters and skins brought Riot Games, the Los Angeles developer of League of Legends, enough cash to hold a tournament with a $2 million prize pool last October.

While the free-to-play economic model is not new (especially in Asia), League of Legends is the first freebie to create the kind of gaming culture in the U.S. normally associated with $50-to-$60 offerings. Its massive success shows the economics of free can work for producers as well as consumers.