Activision Blizzard Touts Overwatch League In Earnings Call, But Cautions Patience On Revenue

Written By Dustin Gouker on August 4, 2017 - Last Updated on February 3, 2023

[toc]The pending launch of the Overwatch League was a major part of the Q2 earnings call for Activision Blizzard Inc., although the company warned investors not to expect meaningful revenue in the short term.

Blizzard bullish on Overwatch League

CEO Bobby Kotick touched on the first franchise sales for Overwatch League in his opening remarks for the earnings call. Last month, the league announced where the first seven franchises would be located, and who bought them. (It also recently divulged some details about players and salaries.)

The executives on the call didn’t give us any new sense of when the league will launch. One executive simply said it would happen “later this year.”

Here’s what Kotick had to say:

We also announced the first team sales for the Overwatch League, the first major global city-based professional esports league. We have the very best teams with the very best resources dedicated to celebrating and rewarding the world’s best professional Overwatch players.

Overwatch, with more than 30 million players has captured imaginations and driven strong global engagement. We organized our league around major cities, taking a proven model from competition in traditional sports. Our announced team owners and their locations, New England, New York, Los Angeles, Miami, Orlando, San Francisco, Shanghai and Seoul and the many more we expect to announce, represent the very best in esports and traditional sports.

“We made strong progress this quarter on the Overwatch League as Bobby already mentioned,” COO Collister Johnson added. “That progress was a meaningful milestone toward establishing a league-based professional competition as a standalone business. We now have a sustainable structure, in which to invest for the long term, with the very best partners from traditional sports and from esports.

But don’t get too excited…

Others were touting the future of Overwatch. But CFO Spencer Neumann made sure that investors realize that Overwatch isn’t expected to turn into a cash cow right away.

Here’s what Neumann said:

Before I turn to our 2017 outlook, I’d like to provide some detail on the impact of the Overwatch League. With the recently-announced sale of seven teams, we do expect some revenue upside to Q4, but it will be modest given the recognition of team sale proceeds over multiple years. Further, from an operating income perspective, the revenue recognition of team sales will be partially offset by the investment required to launch the league including inaugural season marketing.

As we look ahead to the first season, we see a number of important upcoming milestones, including standing up league operations, supporting team’s development of player rosters, attracting sponsors, elevating the viewer experience and securing media distribution. We’re investing in this league for the long term. Over time, we expect to recognize additional revenues related to both more team sales and multiple league revenue streams. We see this as a substantial long-term value driver for the business.

More on Overwatch League economics

Neumann also got more into how exactly the company plans to monetize the league, and how revenues will work. As reported earlier, the leagues and team owners will share in the revenue, 50-50.

But what are those revenue streams?

“So we were really deliberate in structuring this business to attract the best owners and players in order to position the Overwatch League for long-term success,” Neumann said. “And that starts with optimizing alignment between the league which we own with the teams and our players. So at the league level, we’re establishing a pool of shared league-wide revenues composed of media rights and consumer products, league-level sponsorship and a portion of league-related digital in-game merchandise.”

Blizzard is also leaving room for teams to make their own money at the local level via “ticket sales and concessions and local sponsorships and local merch sales,” Neumann added. “But they’ll also have more unique opportunities such as the ability to host certain nonprofessional Overwatch matches.”

Also of note from the earnings call

  • Despite no new full game releases in the quarter, Blizzard’s monthly active users (MAUs) hit a record of 46 million. That’s up 38 percent from last year and up 12 percent from the last quarter
  • Overwatch MAUs are up every quarter since launch.
  • Hearthstone MAUs increased to an all-time record for the franchise, fueled by the new expansion Journey to Un’Goro.
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Dustin Gouker

Dustin Gouker has been a sports journalist for more than 15 years, working as a reporter, editor and designer -- including stops at The Washington Post and the D.C. Examiner. You can also find his work at Legal Sports Report.

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