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Volume 21 No. 6


Said one executive,“It’s a great experiment.”
The boldest gamble yet in esports starts this week, and the entire gaming industry and those still on the sidelines are watching closely. But despite the hype, Overwatch League executives and team owners are pleading for patience.

They expect audience growth and well-run competitions in season one, but otherwise say the league should be evaluated as a long-term growth play with sustainability — not an immediate splash — the top priority.

“We’re approaching the starting line, not the finish line,” said Pete Vlastelica, president and CEO of Major League Gaming, the division of Activision Blizzard that operates the Overwatch League.

Nevertheless, the stakes for this first season are high.

Overwatch is the first attempt to craft esports into the traditional U.S. league sports structure, and will be viewed as an early indicator for the entire concept, said BTIG Research tech and media analyst Brandon Ross. A hit for Overwatch League could drive Blizzard to accelerate work toward an organized “Call of Duty” league, and also influence “League of Legends” developer Riot Games and other game publishers and tournament organizers.

“It’s a great experiment that’s had a lot of thought put behind it in developing what a sustainable esports ecosystem would look like,” Ross said. “If it’s successful, it will be copied internally and externally.”

Since the league secured 12 buyers of charter team franchises last year, further business deals have been slow to develop. The league has signed two league-level sponsors, Intel and HP, but just one of 12 teams, the Dallas Fuel, has announced a jersey logo sponsor.

Furthermore, no U.S. third-party media distribution deal had been signed as of Jan. 3, complicating sponsorship efforts. Vlastelica insisted in a Jan. 2 interview that a deal would be done by the Jan. 10 opening night. At a minimum, the games will be streamed on in-house

Sacramento Kings co-owner and San Francisco Shock OWL team owner Andy Miller said the lack of a media deal has hindered sales efforts. “I’ll be honest, it would have been easier to get sponsors if we could have said ‘this is our distribution partner’ a month ago, but it is what it is,” he said.

But he, like Vlastelica, believes non-endemic sponsors will quickly respond once a product is in market. Despite the short list of deals announced so far, monetization efforts are actually ahead of schedule, according to a December research note Ross published.

“The company is a very methodical long-term planner, more along the lines of the big tech platforms you see, who have two-year plans, five-year plans and 10-year plans as opposed to just trying to survive, as we’ve seen in traditional media for some time,” Ross said in an interview.

Team owners, who paid Activision Blizzard approximately $20 million for their franchises, were sold on a model showing them breaking even in five years, according to sources, and the HP and Intel revenue (along with deals they believe to be close at hand) exceed the model’s pre-launch benchmarks. Sponsorship industry sources say their asking price has been higher than expected, but Miller said he’s confident Blizzard executives won’t sacrifice value or brand alignment for short-term revenue.

“That’s the reason why Bobby [Kotick, Activision Blizzard CEO] wanted to have the deep-pocketed traditional sports owners as well as the endemics that he felt fit this structure,” Miller said. “He felt this is a marathon. We’d love to have the revenue, and all of this is costly, but we’re building something for the future.”

Viewership is the most important metric out of the gate. Miller said he’d be very pleased if OWL can match ELeague’s early audience figures, which in its first season in 2016 ranged between 20,000 and 55,000 average concurrent viewers on Twitch and 247,000 viewers on TBS.

League officials won’t disclose a target number for viewers. Their focus, Vlastelica said, is converting a growing share of the game’s 35 million worldwide players into spectators, and being able to show a steady increase in awareness.

“We think that over the course of the season we’ll start to attract a broader audience than just the players of the game, and by the end of the season, by the finals, we’ll have a culturally quite relevant event,” Vlastelica said.

No matter what the numbers are, the 2018 season won’t live up to the full promise of the league because all competitions will be at the Blizzard Arena. League planners initially targeted 2019 as the season to launch a full home-and-away schedule, with local revenue opportunities, but now acknowledge it may not happen that quickly. In the meantime, teams have been making some revenue off merchandise sales and will share in in-game purchase revenue.

Miller acknowledged the risk of going first. This is the first time many corporate marketers and possible viewers will see esports in earnest, and early stumbles could be damaging.

“There’s a lot riding on this,” he said. “I don’t think esports is going to die if Overwatch League doesn’t work, but it would definitely put a dent in its universe.”

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2018 will be the year hype gives way to sober questions in esports, predicts Tobias Sherman, former IMG global head of esports and co-founder of the Foundry IV game development shop.

First, Overwatch League and Riot Games’ reconstituted League Championship Series will kick off this month, with major traditional sports figures as team investors and media and sponsorship arrangements meant to mimic successful sports leagues. Then in May, the NBA 2K League will start.

In short, Sherman said, the market will start to learn what’s working and what’s not. With real evidence and data coming, investors will demand progress on live event viewership growth, online audience growth and the corresponding value of media deals, and some evidence that profitability is coming, if not actually turning the corner.

“2017 was governed by a fear of missing out, and some halfway decent marketing,” Sherman said. “In 2018, the cream’s really going to have to start to rise to the top. By 2020, you’d better be starting to get your head around those buckets.”

Elsewhere in esports, third-party tournament organizer ESL has moved to standardize all of its events with a 16-team format. The Riot-BAMTech media deal will likely generate a new way of viewing League of Legends action. Riot also may move toward selling semi-permanent team slots in its European League series, and has settled on a long-term format for its collegiate series. And Facebook, YouTube, Twitter and Amazon will continue to pursue esports competitions and programming.

Ben Fischer

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NASCAR is finalizing an esports venture that would stage racing-themed video game competitions during event weekends across the sport starting this season, according to sources.

The sanctioning body was still working on completing the project as of last week, and it was unclear when it would be announced. However, sources said an announcement could come in the next several weeks. The season-opening Daytona 500 is Feb. 18.

The effort is based around holding tournaments for two racing games — iRacing and the “NASCAR Heat” franchise — at NASCAR venues. It’s seen as a fresh way to get involved in the esports movement, bring younger fans to races, and provide extra value to racing video game enthusiasts who may already be attending. iRacing, a subscription-based racing simulator, is a more advanced and technical offering for hard-core race fans and actual racers themselves, while “NASCAR Heat” is seen as a hybrid between a rudimentary arcade-style offering and a more in-depth offering.

Exactly how many tracks would hold the events this season was unclear, but sources said that International Speedway Corp., which owns 12 tracks, and Speedway Motorsports Inc., which owns eight venues, are both involved in the effort. It was unclear whether the three independently owned tracks that host NASCAR premier series races — Dover International Speedway, Pocono Raceway and Indianapolis Motor Speedway — were involved.

A source said the events could involve using mobile trucks to host the tournaments. It was not known whether or how much tracks would have to pay to bring the mobile display to their venues, or whether corporate sponsors have been secured. Blake Davidson, NASCAR’s vice president of licensing and consumer products, is helping head up the effort for NASCAR.

NASCAR declined comment.

Last season, Richmond Raceway became the first venue in the sport to host a tournament for the “NASCAR Heat” game, which is owned by 704Games, now headed up by former NASCAR executive Paul Brooks. The 64-person tournament in September was sponsored by GameStop and Aaron’s.

Many in racing believe the sport is primed to take advantage of the esports craze, because it’s one that has long used simulators as an actual element of training. For example, SMI-owned Las Vegas Motor Speedway is upgrading its premium grandstand seating, and one of the upgrades is a new indoor/outdoor lounge with banks of TVs that aims in part to attract esports events.

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In our First Look podcast this week, SBJ’s Abe Madkour, senior writer Bill King, and staff writer Ben Fischer discuss this week’s issue, including the latest esports news as well as the #MeToo movement in sports.