Houston, We May Have a Problem – A Perspective on the Overwatch League

Wednesday, June 12th, 2019, was a big day. As a Canadian, you may be thinking that I’m talking about the St. Louis Blues winning their first ever Stanley Cup but believe it or not, that’s not it. No, Wednesday, June 12th was the day that the Immortals Gaming Club (IGC) announced their acquisition of Infinite Esports & Entertainment, the parent company of OpTic Gaming.

On the face of it, one might think that the Stanley Cup is a much bigger story but hear me out when I say that this acquisition will go further and have a much wider impact in the world of esports than a Stanley Cup win will have in the world of traditional sports.

What’s the Big Deal?

In buying Infinite Esports & Entertainment, IGC has added OpTic Gaming alongside its current Immortals and MIBR esports brands, as well as the Los Angeles Valiant in the Overwatch League (OWL). This transaction is the largest ‘change of control’ transaction in esports history and now values Infinite Esports & Entertainment at more than $100 million in enterprise value.

But aside from the money, this move may be exposing a much bigger issue…   

OpTic Gaming is a seasoned American esports organization. Founded in 2006, OpTic Gaming currently fields teams in Call of Duty, Counter-Strike, Halo, Gears of War, Dota 2 and most importantly for the purpose of this discussion Overwatch, and the Houston Outlaws franchise.    

IGC’s current Overwatch franchise is the Los Angeles Valiant. IGC’s newly acquired Overwatch franchise is the Houston Outlaws. IGC finds itself the owners of two teams that compete within the same league. It doesn’t take a genius to see the potential conflict of interest here. Overwatch League rules prohibit a single organization from owning two teams, so IGC is looking for a buyer for the Outlaws.

In an effort to reassure all involved, IGC has said,

“On an interim basis, IGC will manage the Overwatch League’s Houston Outlaws franchise as a distinct entity with its own dedicated staff, pending the sale of the franchise to a third party. The Overwatch League will provide oversight and monitor the team operations to ensure competitive integrity during the transition period.”

So IGC will need to unload the Houston Outlaws OWL franchise and – to make things even more interesting – the sale comes at a critical time for the OWL, as the league moves to ‘geolocated’ matches in 2020.

OWL Geolocated Matches in 2020

Earlier this year, OWL announced that it will become the first major esports league to feature a city-based, home-and-away model for its competitions in 2020. OWL was the first league to attach teams to a geographic location, so the announcement is, seemingly, a natural progression for the League.  Where most esport leagues hold competitions online or at neutral venues, the OWL model would add a massive expense to each franchise’s books…travel. Teams and players will literally travel around the world to make the matches happen.   

While this is something that Blizzard, the Developer of Overwatch, has talked about since the inception of the OWL as a way of creating new interest and expanding audience, what’s curious is the timing.  In the context of the Houston Outlaws sale, a potential buyer would now have to deal with a price tag of purchasing franchise AND the added expenses and logistics of having geolocated matches.

So, the question is, what does a potential buyer think about the next phase Blizzard is entering with the OWL?

 

OWL Red Flags or Growing Pains?

Slipping Viewership

Last season, OWL saw a steady decline in viewership each stage leading to Stage Three of the 2019 season.  In May 2019, Overwatch was ranked 9th in most watched content on Twitch. That translates to 18.3 million viewing hours which is down from the 24.5 million hours watched in May of 2018.

Overwatch was initially released in May 2016 and was largely successful.  Fast forward to 2019 and Overwatch’s popularity is arguably dwindling. Its community has also grown so toxic that it can be exhausting to play. The toxicity has been so prevalent that Blizzard has made announcements regarding ‘toxicity reduction’. They seem to be struggling with keeping the game current and cultivating a positive and growing competitive space.

Blizzard’s Business Behaviour

Blizzard has been very busy restructuring and downsizing their business. In January of 2019, it was reported that Blizzard had been,

“…Offering incentives to employees to voluntarily resign from their jobs. The report claims the incentive has been offered on numerous occasions in recent months, with anonymous sources saying they’ve taken up to a year’s worth of pay in order to leave and pursue other career opportunities.”

Over 100 employees took Blizzard up on the January offer which is presumed to reduce overhead, support and production costs. More layoffs came in March of this year.

OWL Commissioner Leaves for Another Developer

In another interesting move, OWL Commissioner Nate Nanzer announced his departure from the League to join Epic Games as their Head of Esports. Nanzer was a key part of building the OWL, so his departure is somewhat unexpected.  It comes as a real surprise when you consider the ambitious phase (Geolocated matches) the OWL is undertaking in less than a year.  To fill the hole left by Nanzer, Blizzard announced that Pete Vlastelica will step in as his replacement.

Reported Low Morale at Blizzard’s Esports Department

Unfortunately, Vlastelica seems to be the source of more problems as it’s been reported that his influence is negatively affecting employee morale at Blizzard,

“Right now, there’s a feeling that a lot of the senior management just don’t understand esports,” another source close to the situation said, “but there is no room for negotiating with these people. They are convinced their vision, which is more in line with televised sports, is the right way to go and it has just made people miserable.”

In another turn of events, Kim Phan, who was the Global Product Director of Blizzard Esports, has announced she is leaving after 13 years with the company.  It’s a peculiar time for someone like Phan to up and leave, especially considering the investment Blizzard is making in the esports space, and the major changes occurring in the OWL next season. Perhaps an indication that Blizzard’s shiny shell may be beginning to crack?

So, what about that Houston OWL franchise sale again?

It will be fascinating over the next few weeks and months to see how the Houston OWL franchise sale proceeds. How Blizzard and IGC handle the sale of the Houston Outlaws will speak volumes about the state of the OWL and whether there is still the level of interest and following that there once was from third parties.  It will also have a massive influence and impact on the esport industry as a whole.

Thanks for reading my blog. The above content is not legal advice but observation about the vast esports field. If you have any questions or comments or would like to schedule me to speak at your event, head over to my website www.ecesports.gg