Activision is bringing esports franchises to a city near you
Attendees play Activision Blizzard Inc.
Attendees play Activision Blizzard Inc.’s Overwatch computer game at the AOC Open e-Sports event in Tokyo, Japan, on Saturday, July 1, 2017 Credit: Akio Kon/Bloomberg

Overwatch League, the competitive video-game endeavor that Activision Blizzard Inc. launched last year, continues to model its future on traditional organizations like the National Football League and National Basketball Association.

Starting in 2020, most of the league’s 20 franchises will leave Los Angeles, their home for the first two years, and decamp for New York, Paris, Shanghai and other cities. Nate Nanzer, the league’s commissioner, made the announcement Friday at the South by Southwest conference in Austin, Texas.

This has been the plan all along, though it’s happening earlier than some expected. When Activision originally sold investors on franchises, some of which cost more than $30 million, each team got the exclusive rights to a major city or region. When the move happens, Overwatch League, based on Blizzard Entertainment’s video game of the same name, will be a truly global enterprise.

“This is a step that brings the business model for esports teams closer to the business model of traditional sports teams,” Nanzer said in an interview.

Though it doesn’t provide specifics, the Overwatch League shares revenue similarly to the NFL, just on a much smaller scale. That league splits national money, from things like league-wide sponsorships and media-rights deals, among the teams. Each team also keeps most of its local revenue, which includes VIP ticket sales, local sponsorships and merchandise sold at its home venue. The Green Bay Packers, for example, received $255 million in 2018 as their league slice and generated a further $199 million in local revenue, according to a financial disclosure by the team.

It’s that kind of opportunity — at team-owned venues, with local businesses and a community of home fans — that Overwatch League hopes to grow. Here’s the business case for moving teams from a studio in Burbank, California, to permanent homes in six countries across three continents:

Venues

Each franchise will have a home venue. Some will move into existing theaters; others will build their own. Nanzer estimates that franchises will eventually settle on spaces with 3,000 to 5,000 seats that can also host small concerts or grassroots esports events.This is a set-up that’s familiar to Overwatch franchise owners, many of whom come from traditional sports, where teams are increasingly becoming anchor tenants in real estate empires. Overwatch venues obviously won’t rival the Packers’ Lambeau Field, but they will provide a home base for fans and possibly another avenue for owners to make money.

Tickets

This is perhaps the biggest unknown about the city-based Overwatch model. Though traditional sports teams see a tremendous amount of money from ticket sales, esports generates much less. That said, Nanzer is optimistic. Teams have been successful with watch parties in their home cities, and the Dallas Fuel has already sold thousands of tickets to its first home games, a weekend trial at the end of April.

Sponsorships

Right now, corporate partnerships and monetized video content are the main revenue sources for Overwatch League teams. While they’re based in Los Angeles, all 20 teams compete for many of the same global deals. Moving to their own cities opens the door for local sponsors, a hallmark for other professional sports teams.”Local sponsorship is not really a thing that exists in esports today,” Nanzer said. “That’s a pool of money that’s going to open up to teams now.”

Merchandise

Nanzer said each team’s ability to cultivate local fans around a central venue should also help them with merchandise sales. The league has a new partnership with e-commerce giant Fanatics Inc. that should increase the number of items available.”If you look at the business model of traditional sports teams, so much of the value is driven by the fact that, if I’m an L.A. Dodgers fan, no matter where I’m from in the world, there’s a place I can go to celebrate that team with other fans,” Nanzer said. “Bringing that to esports, we think, is not just a huge step for Overwatch League, but a huge step for esports.”

—Bloomberg News

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