Esports Business Insights #1
Week 1, November 2021
Hello everyone! AFK Gaming has created a new weekly newsletter focused on sharing and dissecting the latest developments from the business side of the esports industry. Our goal is simply to inform our readers and share our insights about the most interesting and relevant content we have discovered this week. The intention is to make this as rich and valuable for everyone, so feel free to share your thoughts and feedback to help us curate our content.
- Vignesh Raghuram, Supervising Editor, AFK Gaming
Activision Blizzard and Overwatch League in dire straits after earnings call
Following an earnings release on Tuesday (Nov.2), shares of Activision Blizzard fell 14% after the announcement that both Overwatch 2 and Diablo IV, which were expected to launch in 2022, would be delayed. This overshadowed the company posting a revenue of $2.07 billion USD and a profit of $639M, both of which represented year-over-year gains.
Other factors that have contributed to the company’s stock plummeting include COO Daniel Alegre’s acknowledgement of the "departure of a number of individuals," "increased competition in the market" for its talent, and "higher voluntary turnover" rates across the company.
This week also saw Blizzard’s co-lead Jen Oneal announcing her departure from the company, just three months after she was appointed to a leadership role alongside Mike Ybarra to help the company deal with its diversity problems. The two were pushed to the top as co-leaders after the company was put in the spotlight for sexual harassment and discrimination against women.
The Overwatch League (scheduled to start in April 2022) previously announced that it will be played on an early unreleased version of the game. This means that the public will be watching a game that they can’t play, and won't be able to play for a long time, possibly alienating them from the game. Pro players will also be unable to practice Overwatch 2 outside of professional scrims, which may lead to lower quality gameplay and potentially lower viewership as a result.
Key Takeaway: Activision Blizzard appears to be trying to set itself up for a strong 2023 across multiple properties, but it is unclear just how bad a hit the company will have to take in 2022 to make that happen. Using the OWL as marketing for Overwatch 2 is a big risk as it will become the most public, highly scrutinized closed beta test in video game history.
BMW partners with Rocket League developer Psyonix
Psyonix and car manufacturer BMW have collaborated to add new content to the Rocket League this month. In addition, the Germany-based carmaker will be the title sponsor for the European Rocket League Championship Series (RLCS) featuring a $100K USD prize pool. The collaboration will also see a two-day freestyle event called the “BMW Freestyle Tournament” happening alongside the RLCS event, featuring a $25K prize pool.
Interestingly, a new car will be added to Rocket League before it is actually available in real life: BMW's M240i is expected to be released in the real world in January, but it is available now in Rocket League. The new car will cost 1100 credits (~$10) and comes with a number of customizable options.
This development is part of BMW’s increasing marketing activities in the esports industry. The company recently signed on to sponsor six of the world's leading esports teams including Cloud9, FNATIC, FunPlus Phoenix, T1, G2 Esports, and OG as part of its ‘United in Rivalry’ marketing campaign aimed at reaching a younger generation of consumers.
Key Takeaway: Brands such as BMW and Lamborghini investing in Rocket League esports - an ecosystem with no franchise league structure and substantially lower viewership than League of Legends or Valorant - shows just how far esports has come in recent years. The deal also highlights Rocket League’s unique advantage in the esports space as a non-violent game with a real-world analogue to a key component of its gameplay. Expect automotive brand partnerships to continue in the scene for the foreseeable future.
Washington Esports Ventures reportedly backs out of NRG CDL slot purchase
Washington Esports Ventures, the parent company of Overwatch League team Washington Justice, has reportedly withdrawn from negotiations regarding the acquisition of NRG Esports' Call of Duty League (CDL) slot. As a result, the upcoming third season of the CDL may become an 11-team season with Chicago’s slot possibly being vacant.
Chicago’s future being up in the air also continues the troubled saga of the OpTic Gaming brand. Prior to the launch of the CDL, OpTic was one of the most valuable brands in all of esports. After changing hands multiple times and now potentially relocating to its third home city in as many years, the Optic brand has certainly seen better days.
According to a report published by Sports Business Journal, the primary reason for the withdrawal was financial concerns about the cost of operating a CDL franchise. Call of Duty League franchise owners pay $25-$35M to acquire their place in the CDL, with facility and personnel costs adding to that figure.
Activision has yet to announce when the Call of Duty League will return in 2022, but we know it will be played on Call of Duty: Vanguard, which was released earlier this week.
Key Takeaway: An Overwatch League team owner backing out of buying into the other Activision Blizzard franchised league is not a great sign for the future of the CDL, especially when general consensus is that CDL is the better investment due to the strength of the Call of Duty IP, popularity of its battle royale tie-in Warzone, and the fact that next year’s CDL will actually be played on a new video game that its viewers can also play.
Quick Shots Segment
YouTube Gaming to add Twitch-like features
YouTube Gaming has revealed that it is bringing a whole host of new features to its streaming service in 2022. Some of these have raised eyebrows since they seem to have been borrowed from Twitch, particularly gifted memberships and live redirect for Gaming. The former will allow YouTube Members to be able to gift channel memberships to others, while the latter is similar to Twitch’s raid feature (which lets a streamer send their viewers into another stream). As YouTube continues to steal some of the biggest content creators from rival Twitch, it is also copying some of its most popular features in an attempt to close the gap between itself and the market leader.
League of Legends esports hasn't turned a profit, but Riot doesn't care
Earlier this week, a report from the Washington Post revealed that Riot Games' League of Legends esports division hasn't turned a profit. But the company’s Head of Esports, John Needham, told the publication that he isn't concerned by this; instead, the company is currently focussed on making sure that the teams that make up the esports ecosystem are profitable: “If I can’t make esports a great business for teams and our sponsors, then we’re not going to last long,” Needham said.
Ubisoft Workers demand change after weak response to demands
A Better Ubisoft (ABU), a pro-worker group, is demanding that Ubisoft take meaningful action against misconduct following Activision‘s recent promises to meet some of its workers’ demands. ABU is made up of current and former Ubisoft workers who are pushing for reform after a wave of serious harassment and misconduct allegations at the company. The group expressed its support for Activision workers after the latter’s company announced that it would increase its number of women and non-binary workers and that it would take all necessary measures to address any instances of harassment and/or discrimination with appropriate measures.
Immortals relocates to Great Lakes Region
North American esports organization Immortals is moving its headquarters from Los Angeles to the Great Lakes Region (GLR). This move is scheduled to take place in early 2022. The company is planning to host events geared toward the Midwest collegiate audience and will also sign a women’s VALORANT team that will be based out of the new Great Lakes Region.
Immortals CEO Jordan Sherman is a Michigan native and is well aware that the region remains largely untapped for esports. The org emphasized that its League of Legends roster in the LCS will continue to compete out of LA and there are no planned changes with the way it operates its OWL Los Angeles Valiant franchise or competitive rosters in other leagues.
On the Horizon
This weekend marks a pivotal moment in the future of esports. Following the conclusion of the League of Legends World Championship in Iceland, Riot Games and Netflix will officially launch the animated series Arcane. The line between esports and entertainment has always been blurry but never before has a game studio directly tied an entertainment property into its biggest esports event in this way. Since 2014, Riot Games has led the way in tying music to esports, and we’ve seen multiple music label partnerships and production strategies emerge as a result. Arcane could represent another important step in pushing esports into other aspects of mainstream pop culture.
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