In the midst of Microsoft’s impending takeover of Activision Blizzard, the gaming industry is abuzz with news of significant changes within the company’s esports division. Recently, approximately 50 employees were laid off from the division, raising concerns about the future of its beloved Overwatch League (OWL) and its city-based franchise system.
The Unexpected Layoffs
As reported by The Verge, affected employees were informed of the layoffs unexpectedly on a Tuesday. The announcement came as a surprise to many, leaving them speculating about the company’s ability to sustain esports operations internally.
There are doubts about whether a skeleton crew will oversee the conclusion of the current OWL and World Series of Warzone seasons. Unfortunately, this isn’t the first time such layoffs have occurred, as around 50 employees were also let go from Activision Blizzard’s esports teams in March 2021.
Overwatch League’s Shifting Landscape
Recent modifications in agreements with Overwatch League team owners have added to the uncertainty. After the current Overwatch League season concludes, teams will vote on an updated operating agreement. Failure to reach a consensus on continuing with the updated agreement could lead to each participating team entity incurring a hefty termination fee of $6 million. The latest earnings report also revealed that OWL’s total revenue accounts for less than one percent of Activision Blizzard’s consolidated net revenues.
Financial Challenges and Changes
Financial challenges have been a recurring concern for Overwatch League team owners. The league initially charged a hefty franchise fee, which later led to teams owing between $6 million and $7.5 million each. Payments were deferred due to the impact of the COVID-19 pandemic on live events, leaving teams facing substantial financial burdens.
The Impact of the Pandemic
The COVID-19 pandemic heavily disrupted the Overwatch League’s ambitious plans. Initially, the league intended to have players compete in their respective team cities every week during the third season. However, the pandemic forced a shift to an online-only format, eliminating a significant revenue stream from live events. Although live events gradually returned in 2021, the move from Twitch to YouTube in 2020 resulted in a drop in viewership, and the league struggled to maintain a consistent audience.
Sponsorship and Market Impact
The league’s reputation took further hits as major sponsors like Coca-Cola, T-Mobile, and Kellogg’s withdrew their support in 2021 due to allegations of widespread sexual harassment and discrimination at Activision Blizzard.
Additionally, the Overwatch ecosystem’s strong market in China faced challenges due to the unavailability of Overwatch 2 and other Blizzard games after the end of their partnership with NetEase, the publisher in China.
Struggles and Attempts to Revitalize
To boost interest in OWL, Blizzard allowed second-tier Contenders division teams to compete at the highest level. Despite these efforts, some teams faced difficulties, and the Chengdu Hunters became the first franchise to permanently leave the Overwatch League.
Owning and Running an Esports Team
The financial burden of running a competitive team has been a point of concern for OWL team owners. Despite receiving around $1 million from OWL, the cost of operation ranged from $3 million to $5 million annually, leading to financial losses for most teams.
The Future of OWL and Microsoft’s Acquisition
Given the financial challenges and uncertainties surrounding the league, it wouldn’t be surprising if OWL teams decide to end their agreements with the league. However, despite the setbacks, Activision Blizzard remains committed to supporting Overwatch esports. OWL Commissioner Sean Miller expressed optimism for a revitalized global scene that prioritizes players and fans.
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published: Friday, July 21, 2023, 12:09 [IST]