Blizzard Entertainment Inc. continues to bring in big league sponsors and deep-pocketed investors for its fledgling esports league, although questions remain about the health of the Irvine-based video game giant’s core business.
The Spectrum-area company, Orange County’s largest software maker by revenue and employee count, late last month said its Overwatch League, now in its second season, had reached “prime time” in terms of advertiser recognition, with its first-ever beer sponsor.
Belgium-based Anheuser-Busch InBev SA/NV (NYSE: BUD) is the Overwatch League’s new beer sponsor and its Bud Light brand will be the official beer of the 20-team league, which is based on Blizzard’s popular team-based, 6-on-6 first-person shooter game, “Overwatch.” Most teams have between eight and 10 players on their roster.
Financial terms of the arrangement were undisclosed.
The sponsorship will include special promotions at “fan watch parties” around the world in all markets except China, as well as Overwatch League-produced and Bud Light-sponsored broadcasts on ESPN2 and ABC.
ABI and Bud Light will also participate in events at Overwatch League’s 2019 Grand Finals in Philadelphia.
ABI is one of the world’s largest adult beverage producers and sellers, posting sales eclipsing $54 billion last year. It had a recent market cap of about $140 billion. The beer company recently launched advertising campaigns highlighting its lower calorie beverages, compared to its craft competitors.
Overwatch League is the first major global professional esports league with city-based teams.
The regular season includes 28 games for each team, followed by playoffs.
The Overwatch esports league opened its 2019 season with the addition of eight teams.
Teams are competing for $5 million in prize money. The final is expected to take place in August, likely in Philadelphia.
Healthy Franchise Fees
The eight-team expansion looks to be bringing in close to $200 million in franchise fees for Blizzard’s parent company, Santa Monica-based Activision Blizzard Inc. (Nasdaq: ATVI).
Robert Kotick, Activision’s chief executive, said the 20 Overwatch teams, plus five teams from a new “Call of Duty” league that the parent company is creating, have generated more than $500 million in fees from broadcast rights, sponsors, franchise fees and licensees—that’s roughly $20 million per team.
“So from a commercial perspective, the league is doing really well,” Kotick said this month, during the company’s quarterly earnings call.
Along with the beer partnerships, several new sponsors entered the mix in Overwatch League season two including Coca-Cola, Toyota, State Farm and Intel. T-Mobile and HP are returning sponsors.
“Leading brands continue to recognize the opportunity to engage a hard-to-reach demographic,” Kotick said.
The Overwatch League kicked off last month at Blizzard Arena in the Burbank Studios, with 13 million global viewers in its opening week, a 30% increase year-over-year.
Falling Base
While the league continues to grow, Blizzard’s base of companywide paying subscribers is shrinking.
Blizzard’s counted 32 million monthly active users at the end the first quarter. That’s down from 38 million a year ago and 35 million three months ago.
In terms of Overwatch, monthly active users saw “a single-digit percentage sequential decline” the past quarter, due to a limited amount of new in-game content and other factors, company officials said this month.
Blizzard insiders have told the Business Journal its esports business is struggling to sustain profitability, a partial reason the company this year has slashed more than 200 jobs in Irvine enacted by its parent company.
The Irvine unit entered the year with an estimated 2,000 workers, about 100 of those dedicated to its “Overwatch” franchise, according to reports.
Activision’s Blizzard division reported about $344 million in revenue last quarter, a decrease of $136 million from a year ago, according to the parent company’s latest earnings report this month.
Lower revenues from its “Overwatch” and “World of Warcraft” franchises were cited as reasons for the drop.
