SBJ/March 6-12, 2017/Leagues and Governing Bodies

Road show on for new esports league

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Editor’s note: This story is revised from the print edition.

Blizzard Entertainment’s road show for potential franchise buyers in its top-tier Overwatch League is finally getting started, just as complaints in the esports world over the publisher’s lack of communication reach a fever pitch.

Four months ago, Blizzard made headlines by promising to launch a worldwide league of city-branded teams in the third quarter of 2017. At the time, executives said they’d present the opportunity to established pro sports owners and other possible bidders for teams over the next three to four months.

In an interview March 2, Nate Nanzer, Blizzard’s global director of Overwatch esports, said the Overwatch League is still on schedule to launch by September and the road show is “now underway.”

In the preceding days, esports insiders had expressed mounting frustration and skepticism over that time frame, saying they’d heard nothing since the original pitch at Blizzard’s annual fan gathering, BlizzCon, and doubted there was enough time to make it happen.

“We’re totally on schedule,” Nanzer said. “In terms of the actual nuts and bolts of the league in 2017, and content production, all that, there’s no delays there at all. You probably understand the amount of legal work that goes into doing this, and that time between BlizzCon and today has been spent finalizing legal documents.”

The radio silence has put the frenetic esports marketplace in a bind. Jason Lake, founder of compLexity Gaming, said investors have approached him about a strategic deal, but they’re hesitant to act without more clarity from Blizzard. A transaction for a permanent, regional OWL franchise would reset the market for existing teams and talent overnight because as publisher, Blizzard owns the game’s intellectual property and could eventually make it the only licensed competition.

“The drought of information since the initial announcement has investor interest in a holding pattern, which is a difficult position when we continue to have burn rates to sustain the team,” Lake said.

Initially, multiple sources said, top Activision Blizzard executives hoped to solicit multiple bids in key markets, and believed a franchise could sell for $2 million to $5 million in smaller markets and three times that in Los Angeles, a focal point of esports activity. However, another source says that valuation is incorrect and is closer to $30 million on the high end. Nanzer declined to address the cost or process for awarding franchises.

But experts say those prices are far too high for “Overwatch,” still less than one year old. Launched just last May, the first-person shooter game is a bona-fide retail hit with 25 million registered players, according to parent company Activision Blizzard’s last SEC filing. But as a spectator property, it has not yet proved it can sell out major arenas or draw tens of millions of viewers to online streams.

Video games that have accomplished that, such as Riot Games’ “League of Legends” or Valve Software’s “Counter-Strike: Global Offensive,” took years to gain a following organically. Esports organizations with top-level teams in those games have traded at prices ranging into the mid-eight figures, but an “Overwatch” franchise would come along with a startup risk not present in those games.

“This is the first game that Blizzard’s come out and said, we want to make this the next esports phenomenon,” said Todd Merry, CMO of Delaware North Cos., which acquired a stake in the Splyce franchise in February. “I don’t think you can tell the market this is going to be a phenomenon. You have to let the market decide that.”

Potential investors are especially keen to hear more from Blizzard about revenue sharing. In November, executives laid out a vision of a league in which most of the revenue ultimately was generated at the local level — a tantalizing prospect, but one that demands far more detail before a franchise price can possibly be determined. In particular, Blizzard has not yet committed to sharing earnings from in-game digital transactions.

Also, would-be buyers and others in “Overwatch” communities want to know more about how teams will be developed. A “combine” featuring players available for selection was mentioned in November, but many of the world’s best “Overwatch” players are under contract with existing teams. Nanzer also said those details would be discussed in the near future.

“We’re making a ton of progress,” he said. “Building a sports league from scratch, it turns out, is a ton of work. We’re making a lot of progress and I think we’re going to be talking a lot more about this soon.”

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