Activision Blizzard (NASDAQ:ATVI)
Historical Stock Chart
2 Months : From Feb 2020 to Apr 2020
By Sarah E. Needleman | Photographs by David Williams for The Wall Street Journal
Tribalism has long been the backbone of sports, with fans embracing teams that represent their communities. Now, owners and investors behind teams in three nascent videogame leagues are banking on people forming similar bonds by attending matches in their home markets.
The rise of city-based esports leagues supports a growing bet that publishers such as Activision Blizzard Inc. can entice people to shell out cash to see star gamers compete locally -- and more frequently than tournaments with large prize pools.
Before this year, the 20 teams in Activision's Overwatch League spent their first two seasons competing mainly at a studio that formerly housed NBC's "The Tonight Show" in Burbank, Calif., which meant most fans could only watch the action online. This season, teams are competing in concert halls, sports arenas and other venues around the world.
Activision's Call of Duty League launched last month with 12 teams representing cities such as Toronto and Atlanta. Each team is expected to host at least one homestand weekend this year. The NBA 2K League, a joint venture between Take-Two Interactive Software Inc. and the National Basketball Association, held tournaments in Las Vegas and Orlando, Fla., last year and plans to host more this year. Its third season starts in the spring with 23 teams.
If any competition might be expected to transcend geography, it would be esports. Amateur videogame teammates often play together from multiple places, sometimes without ever meeting in person.
"Our fans are digital first, but gathering in real life to celebrate and cheer on teams is as high a priority as it is for a traditional sports fan," said Rohit Gupta, co-founder of esports company Andbox, which owns Overwatch team New York Excelsior and Call of Duty team New York Subliners.
Ian Livica of New York spent last weekend cheering on the Excelsior at Manhattan's Hammerstein Ballroom, counting himself among 1,600 fans who viewed matches each day. The 20-year-old college student watched as the six-person squad battled the London Spitfire and Boston Uprising teams. The New York team defeated both opponents.
"The first match was close and we were on the edge of our seats," said Mr. Livica, while wearing a varsity-style jacket with the Excelsior's logo and the letters "NYXL." "Everybody was jumping and screaming when we caught the first win. It was incredible."
Though esports revenue is a fraction of what is generated from videogame sales each year, according to analysts, proponents expect the market to grow in the years ahead.
Esports teams typically make money by striking deals with advertisers, selling their own merchandise and winning prize money. In some cases, leagues share with teams revenue gained from sales of sponsorships and virtual items inside videogames.
Activision, Take-Two and the NBA are going a step further, enabling teams to also make money through sales of tickets and concessions. "Over time we see these as profitable local businesses for sure," said Pete Vlastelica, head of esports at Activision. "This is the first inning."
Activision launched "Overwatch," a team-based shooter game, in 2016. Chief Executive Bobby Kotick set out to build a competitive league around it the following year, convincing sports executives including New England Patriots owner Robert Kraft and New York Mets operating chief Jeff Wilpon to buy in. The company formed an esports league for its nearly two-decade-old Call of Duty franchise last year, drawing in many team owners from the Overwatch League.
Take-Two launched its NBA 2K franchise in 1999 and the company partnered with the NBA to form a competitive league around it nearly two decades later.
Backers of the three leagues have invested in marketing while working to sell the rights to broadcast their competitions to live-streaming services such as Google's YouTube and Amazon.com Inc.'s Twitch. Activision signed a deal in January for YouTube to become the exclusive broadcast home for its Overwatch and Call of Duty Leagues. Terms of the deal weren't disclosed.
Still, it is unclear how long it will take, if ever, for teams to prosper financially. Buyers of teams in the Overwatch and Call of Duty leagues agreed to pay Activision between $20 million and $30 million apiece, according to people familiar with the matter. There are also startup and operating costs, from hiring talent and coaches to providing housing and transportation for players and staff.
"The revenue coming in from esports right now doesn't support the cost associated with these teams," said Gene Munster, managing partner at venture-capital firm Loup Ventures. "It will undoubtedly take longer than people expect for esports to become mainstream, with some teams folding along the way."
University of Northern Iowa senior Jacob Haag drove 3 1/2 hours to the Call of Duty League's opening weekend in Minneapolis. The league doesn't have an Iowa team so he settled for one of the nearest options, the Minnesota RøKKR.
"You're supporting them and they're supporting you," said Mr. Haag, 22, who paid about $100 for season tickets that cover two weekend-long competitions.
Such fandom is why Drew McCourt, whose company c0ntact Gaming owns both an Overwatch and a Call of Duty team, is betting the city-based model will pay off. "I feel pretty good if ticket sales are any indicator," said Mr. McCourt, whose Paris-based teams are hosting games this year at The Zénith arena and La Seine Musicale performing arts center.
To develop a fan base, team owner Andbox, whose investors include actor Michael B. Jordan and venture-capital firm Sterling VC, has spent the past two years hosting "watch parties" at Manhattan restaurants and other events.
As a supporter of the Excelsior, Mr. Livica attended watch parties, where he got to know other fans, including 30-year-old Marc Padro of Verona, N.J., and 15-year-old Yunhee Chi of New York, who came to the opening weekend competition with her mother, Reeran Kim. All four hugged when they saw each other at one of the New York matches earlier this month.
"Esports is all about community," said Mr. Padro. "It's very New York in here."
Write to Sarah E. Needleman at firstname.lastname@example.org
(END) Dow Jones Newswires
February 15, 2020 10:14 ET (15:14 GMT)
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