FRANCHISING: RIOT GAMES VS. ACTIVISION-BLIZZARD
By Feature Writer James Kozachuk and Manny Anekal
It drew considerable press and excitement with a flurry of consistent of rumors around price points, endemic vs. non-endemic teams and cities.
And we continued to wait.
Then last month, like Prometheus gifting mankind fire, Blizzard released details on the initial 7 cities and teams that would take place in the Overwatch League.
For those keeping score at home, that's 250 days. What's happened in the world since then? Trump became President....I guess we can stop right there.
After Blizzard's city announcement, more details emerged around revenue sharing and SuperData created a great chart the same day comparing both franchises.
Since then even more insight has been revealed into both Riot Games NA LCS and Activision Blizzard's Overwatch League.
In conjunction with SuperData, The Next Level wanted to take a deeper look at how both franchise options stack up.
NA LCS VS. OVERWATCH LEAGUE
New York Yankees, Dallas Cowboys, Toronto Maple Leafs collectively have been in operation for 273 years. How have they lasted this long?
In eSports many teams rarely last a year; for example, only four teams from the first North American League of Legends Championship Series (NA LCS) are still placed in the league.
How is this solved in traditional sports? Franchising.
The Maple Leafs were a founding member of the NHL, the Cowboys were the first expansion team of the NFL, and the Yankees spent a lot of money and got lucky or something [Edit: Sorry, Mets fan]
Now both Riot Games and Activision Blizzard want to bring this concept to their two flagship competitions: the NA LCS and the Overwatch League (OWL). While each league concept is similar, there are a few fundamental differences between their approaches.
TEAM PLACEMENT COST
NA LCS: $5M due up-front, $5M paid over time.
OWL: $10M due up-front, $10M paid over time.
With a high buy-in cost for OWL, Activision Blizzard seem to be focusing entirely on bringing in big-name brands, specifically traditional sports teams, which provide a large amount of legitimacy for their league to outside viewers - along with the accretive value that eSports brings to pro sports teams.
With this in mind the best case scenario for Activision Blizzard is the one they've created: endemic eSports teams will need to raise additional outside capital to even consider OWL.
NA LCS: While focused primarily on the North American audience, 2 of the 7 teams are located in Asia and expect more teams to be confirmed soon.
Assuming the audience is primarily North American but with Global reach, this makes sense for brands looking for both, like Coca-Cola, which has partnered with Riot Games before.
Sound familiar? Hello FIFA.
OWL: Hyperlocal with Global audience potential as well. US focused brands will see a lot of benefit in OWL, especially since they can get involved in the amateur initiatives that each team is required - or allowed?- to put on. We'll see brands with a unified global strategy getting involved in OWL as well.
Is this the right approach and the right time? For another The Next Level article.
TITLE MAU/MTX REVENUE
NA LCS: League of Legends is a game with a mature audience and after almost five years of competition; the style, format, and idea of what to expect has been solidified.
OWL: With Overwatch, there's no guarantee on what will happen five years from now - hence that's the bet. During year one we believe that most of the matches will be played out of a studio in LA - we've tried to confirm this 100% - so when will we see Home/Away games and what will that look like?
An apt analogy is that investors are basically buying Ethereum (OWL) versus investing into a 401K (NA LCS). We just don’t know what the competitive Overwatch community will look like, it could be a huge flop or a massive success.
That being said, Activision Blizzard has been notoriously strict on allowing organizers the license to run Overwatch tournaments this year and the metrics might pick up once a stable competitive scene is created.
NA LCS: Riot has already locked in a media rights deal worth $300M over 5 years with MLB/Disney's BAMTech. With the platform being specifically developed with LCS eSports in mind, I'm sure they'll have access to data and analytics we just haven't had before in eSports- data and analytics that are heavily sought after by more traditional brand advertisers.
OWL: OWL is still a big bet. On the media front, Blizzard has a broadcast integration with Facebook, a 2 year deal with Twitch and you can almost guarantee will be shown on MLG.tv's platform as well.
Oh and FYI, if you want to make an exit and sell your OWL team, you owe Activision Blizzard 25% of your sale price.
With ESPN being owned by Disney, who invest in both BAMTech and axiomatic, we don't foresee them making many further media rights deals in the US; but the rest of the world is potentially open.
NA LCS: $75K Minimum Salary + Full benefits + Housing + Player Union + Salary floor at 35% of league revenues
OWL: $50K Minimum Salary + Full benefits + Housing + 50% of team performance bonuses
Blizzard needs to make it easy for OWL franchisees to find talent, because there's a very limited base of established talent. This includes scouting reports, plans for a combine, and an entire PR campaign based around "Every Overwatch player is potentially a professional!"
At the same time, Blizzard has year over year cost that each of their franchisees pay, in addition to their huge placement cost, cost of developing local infrastructure - hopefully Blizzard helps with this - and especially given that Overwatch teams comprise at least six athletes to League of Legends' five athletes.
Will the future of franchising take the form of Activision Blizzard’s strategy or will Riot’s safe and steady LCS model provide greater returns?
Place your chips.