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Overwatch League – $20 million Bargain or Recipe for Disaster?

Overwatch League Tournament


Overwatch League – $20 million Bargain or Recipe for Disaster?

By Chris Jordan & Charlie Stebbings from SRi’s Global Esports Practice

There is no hotter topic in the world of Esports than Blizzard’s brand-new Overwatch League tournament and its franchise system, which required a $20 million buy-in for teams who wanted one of the coveted places in the competition.

To say the industry is divided on whether it will be a success or failure is an understatement, with many nervous about what failure would mean for the future of Esports.

Though the buy-in mechanism may not be to everyone’s taste, there are a raft of upsides to the new sponsors and expertise entering the industry through helping teams afford the entrance fee. While we shouldn’t simply dismiss the very real concerns many hold, examining the positives in more detail should help to reframe the debate.

 

Cost of OWL spot forces teams to look to new avenues for investment and consequently will bring in best practice and expertise from other industries that is sorely needed.

Counter Argument: New investors don’t understand the environment and will rupture the core values of the industry.

$20 million is a lot of money, particularly for businesses who are not yet yielding profits to allow for such a one-off outlay of capital. The entry fee has forced teams to look beyond the realms of Esports and gaming, and source investment from elsewhere.

Many will point to the potential for external investors to dilute the industry and strip it of the foundations that facilitated its meteoric growth, and worry that Esports will be transformed into just another commercial entity controlled by financially driven stakeholders.

However, new sponsors, investors and expertise entering OWL will translate a variety of skillsets, knowledge and experience across boundaries, enriching the Esports ecosystem with individuals able to add value and professionalise the environment. In Cloud 9’s $25 million series A round, they received investment from the likes of Reddit co-founder Alexis Ohanian, Golden State Warriors co-owner Chamath Palihapitiya, and the WWE.

These additions not only gave Cloud 9 the financial muscle to enter the OWL, but provided the experience and know how to further develop and professionalise the team.

The $20 million fee, contentious as it may be for some, has forced Esports teams to step outside their comfort zones, and find partners who not only understand their values but are eager to transfer best practice into each team. This should be welcomed with open arms by all.

 

Added security of OWL franchising increases the attractiveness of sponsorship/partnership opportunities for brands looking to venture into this space.

Counter Argument: Brands don’t understand the communities and audiences and see the opportunity as one of purely financial gain OR OWL won’t deliver the return on investment these businesses are accustomed to which will damage the future of all Esports investment.

The one thing that most people in the industry can agree on is the added security that comes with the OWL structure, and that it makes teams a more attractive proposition for brands looking to invest in this space.

With the threat of relegation off the table (for a few years at least), you can guarantee that a team will feature in the league for a significant amount of time; something that has not been the case previously.

Brands, whether endemic or not, can have a much clearer idea what they will be getting for their money and for how long, which in turn increases the team’s ability to set a higher price when negotiating such deals. On top of this, there should be a nod towards the importance of familiarity and the added security a more ‘traditional’ sports league structure affords brands.

The ability to plan with confidence allows brands to budget sufficiently and allocate a more significant investment into the teams and league.

Concerns centred around the focus on finance, and the lingering question many have about the lack of ‘passion’ for Esports new industry entrants might possess, are understandable but outdated.

It is the establishment of such revenue streams which enables organisations to grow and re-invest money back into the business, establishing superior infrastructure, more adventurous growth strategies, and the hiring of top talent in the process. Encouraging such development is what transforms ‘potential’ into ‘success’.

 

Improved regulation gives the players greater security and makes the industry more professional.

Counter Argument: Hard to think of one!

Whether by design or not, the OWL structure is forcing Esports teams to address one of the biggest factors that shackles Esports when compared to other established industries – Player welfare, regulation and legislation.

Regulation (or lack of) is a constant thorn in the side of the industry that hampers its growth and limits its opportunities.

The OWL is addressing this problem by insisting upon player contracts of at least one-year, league minimum salaries of at least $50,000, with healthcare and retirement savings plans included, along with a guarantee that at least 50% of all performance bonuses will be redistributed to players.

This is the type of structure essential to any business or industry championing professionalism. Ensuring player welfare is of the highest standard is an incredibly positive contribution to the Esports ecosystem and one that needs to be taken up by all competing in professional gaming.

 

Summary

It is important to state the ‘counter’ arguments addressed are all legitimate and realistic concerns. However, the opportunities provided by the inaugural OWL season and the concept of franchising in general are ones of great potential with the ability to develop and professionalise this dynamic industry. The word professionalise is one that has arisen throughout this piece, and it is one that is at the centre of discussions around the future of Esports and its ability to be recognised as an established, durable industry.

 

SRi’s Global Esports practice, spearheaded by Chris Jordan and Charlie Stebbings from the company’s London office, works with global stakeholders throughout the industry to help secure transformational talent, as well as advising on organisational structure, succession planning and partnership opportunities, helping these companies achieve their goals push the boundaries of the progressive Esports industry.

To find out more about SRi’s global Esports practice, or to have a confidential discussion, please contact Chris Jordan directly via cjordan@sriexecutive.com