Amidst ongoing difficulties, Activision Blizzard, the publisher of popular esports game Overwatch, has made the decision to lay off approximately 50 employees from its esports division. This news comes as the company is also contemplating significant changes to the Overwatch League (OWL), which may potentially mark the end of its city-based franchise format.
On Tuesday, employees were informed of the layoffs, which came as a surprise to many. One former member of the team told a publication that the layoffs seemed sudden and proposed the possibility of a skeleton crew handling the conclusion of the OWL and World Series of Warzone seasons. However, they expressed concerns about the company’s ability to support esports internally after that.
This is not the first time Activision Blizzard has made such cuts. In March 2021, the company laid off around 50 people from its esports teams. In an earnings report released recently, the company disclosed that it had modified its agreements with Overwatch League team owners. The amended terms stipulated that once the current season concludes, the teams will vote on an updated operating agreement. If the teams do not vote to continue under the updated agreement, each participating team would be required to pay a termination fee of $6 million. Activision Blizzard also revealed that the OWL’s total revenue accounts for less than one percent of its consolidated net revenue.
Reports have indicated that the Overwatch League has been facing financial challenges for some time. Teams reportedly still owe between $6 million and $7.5 million after deferred payments due to the COVID-19 pandemic. Originally, a spot in the league was said to cost $20 million. However, for expansion teams that joined later, the cost reportedly jumped to $40 million.
Despite having a strong start, the Overwatch League has faced various obstacles. In its early seasons, many matches and the season-ending Grand Finals were televised on ABC. The third season was meant to be a significant milestone for the league, with matches hosted at various locations around the world. However, these plans were disrupted by the COVID-19 pandemic, causing a loss of revenue from live events.
The league has also experienced a decline in viewership. The cancellation of live events in 2020 significantly impacted viewership numbers. Although efforts have been made to attract sponsors, several notable brands, including Coca-Cola, State Farm, and Kellogg’s, pulled their support following a lawsuit involving allegations of sexual harassment and discrimination at Activision Blizzard.
The Overwatch League has also faced challenges in the Chinese market. Due to a partnership dissolution with NetEase, which previously published Blizzard games in China, Overwatch and other Blizzard games are currently unavailable in the country. This has likely contributed to a decline in interest in the Overwatch ecosystem in China.
In an attempt to revitalize interest in the league, Blizzard introduced a pathway for teams from the second-tier Contenders division to compete at the highest level of Overwatch esports for the first time. However, some franchises, such as the Chengdu Hunters, have struggled to field a team and ultimately withdrew from the league.
OWL team owners have long expressed dissatisfaction with their financial returns from the league. Reports suggest that teams receive around $1 million from the OWL, while operating costs can range from $3 million to $5 million per year. This has resulted in many teams operating at a loss, leading to discussions with Activision Blizzard regarding economic relief.
While the potential end of the current Overwatch League format seems likely, Blizzard remains committed to supporting Overwatch esports. The Overwatch League commissioner, Sean Miller, has assured fans that the company is exploring various options for the future of Overwatch esports and remains optimistic about building a revitalized global scene that prioritizes players and fans.
Despite these assurances, it is clear that the Overwatch esports ecosystem may look very different next year. The upcoming Grand Finals in Toronto could indeed mark the end of the current Overwatch League format as we know it. However, fans and players can anticipate a renewed focus on creating an exciting and engaging esports experience moving forward.
