Activision Blizzard (ATVI) has made some recent changes to its Overwatch League, designed to stabilize the fledging Esports ecosystem for game publishers, owners, players and sponsors. Permanent city-based franchises (plans for at least 28 world-wide), revenue sharing agreements and franchise fees ($20 million) are among the concepts ATVI has borrowed from the NFL, NBA, MLB & NHL. Moving forward, the development of a players’ union will be necessary to ensure gamers are compensated fairly. The league has announced 9 franchises, with Patriots owner Bob Kraft, Mets COO Jeff Wilpin, Rams owners Stan & Josh Kroenke and Sacramento Kings co-owners Andy Miller/Mark Mastrov among the pro sports owners that have purchased teams.
Howie Long-Short: Unlike pro sports leagues which are a collection of individually owned franchises with an elected commissioner overseeing the league, ATVI is a publicly traded company who must act in the best interests of their shareholders and they’ve done a great job of it. Company shares are up 82% YTD (500% over the last 5 years) as ATVI has proven capable of generating revenue growth without having to release new game titles. The potential for in-game advertising, creation of the Overwatch League and soaring in-game revenues (up 100% YOY to $3.6 billion in 2016) have the company well positioned for future growth. The recent release of Destiny 2 and the upcoming blockbuster release of Call of Duty: WWII, should give the company a revenue boost in the Q4.
Fan Marino: As Howie noted last week, Comcast Spectacor’s (CMCSA) acquisition of an NLL franchise made sense because the company’s strength is in hosting events and building businesses around pro sports teams. The same can be said about pro sports team owners investing in Esports franchises. The revenue model for Esports is based on sponsorships, advertising, merchandise, ticket sales and media rights; areas which pro sports teams can leverage established relationships. In the short-term, these acquisitions seem like a no-brainer; I have long-term concerns though. I can’t envision any scenario in which a game that is popular today, remains popular in 2030. Technology evolves quickly and attention spans are short. What happens to the value of these franchises when the next big game comes along?