Richard Lewis has been doing some great behind the scenes coverage of the Overwatch League in a recent series he’s been putting together.

Now he’s come out with a second part talking with several anonymous franchise owners about revenue generation and sponsorships in the league. The results are, to put it politely, rather damning.

Blizzard Makes Bank While Teams Struggle

According to the piece, many owners were convinced to buy into the Overwatch League based on a report by Morgan Stanley entitled “Esports: An $8bn Call Option?” from 2017. The report claimed the Overwatch League would generate over $13 million in ticket sales at several events across the year, in addition to 50% of all viewers of the leagues Championship buying league-related merchandise in-game.

This in turn, in partnership with sponsorship deals, was expected to push the league’s total revenue up to the over $930 million that the WWE generates a year, a mouth-watering sum pushed to attract ownership investors like moths to a flame. Once attracted in, Blizzard expected team owners to hold their own and absorb the league’s costs for five years of unprofitability while the league worked to generate revenue. They believed they could appease them until then with the $90 million two-year broadcast deal the league signed with Twitch.

That “bottomless pit of cash” that Overwatch League owners expected never materialized, however, and many owners expressed frustration with how the league was running on the financial side. According to Lewis, many owners have complained about their inability to pick-up what should be easy sponsorships for their teams, with the league controlling who can and can’t be a sponsor. In particular, the league refuses to allow teams to pick-up sponsors that conflict with the league-wide ones, such as getting sponsorship from another soda company like Pepsi when Coca Cola already sponsors the league.

Furthermore, many have shown skepticism about that deal in particular with the league, with several seemingly suggesting a conflict of interest by Activision-Blizzard CEO Bobby Kotick. He happens to be on Coke’s board of directors. He alleged that deal provides little to no revenue for the teams.

Revenue has been a major desire for these teams, too. Many are running huge debts with massive rosters, team houses, and now hosting events and flying their players around the world for matches.

It’s a lot to cover. The money coming in from the league with its nearly $100 million in sponsorship deals from the first year seemed like they should help mostly cover those costs. But, even then, according to Lewis, that doesn’t appear to be the case, especially not soon. Many of these sponsors have yet to renew their deals with the league.

Also, Activision-Blizzard reportedly has been taking 50% of all revenue from these deals before dividing the other 50% amongst the league’s 20 teams. This means that $100 million in sponsorships works out to just $2.5 million per team, an absolutely paltry sum for teams whose player salaries can achieve that alone.

Merchandising was supposed to help provide additional revenue. However, that appears to be faltering as an update to profit distribution from Activision-Blizzard. This now means teams are forced to split all merch revenue amongst all the other teams, meaning one highly successful like New York or Philadelphia generates as much income from their sales as a team like the Florida Mayhem or Houston Outlaws do.

Coupled with rumors that Twitch will not be renewing their broadcast rights deal at the original price, which the company reportedly called “their biggest mistake ever,” there are fears that the league’s teams could quickly find themselves in even worse financial positions. However, some Overwatch League owners have remained optimistic after being promised a profit cheque for the second season.

The third part of this series is expected to launch sometime in the coming weeks. We’ll keep you all updated with any information gleaned from its continuation.

Isaac’s Take: A Damning Piece that Sparks Major Concerns

I thought the first piece Richard Lewis did on the OWL was already damning, but this takes the disappointment cake. Activision-Blizzard seems solely focused on getting as much money out of this league as they can with little regard to Overwatch League owners, fans, talent, and players alike. It’s building a bubble of tension beneath the surface that could soon burst.

The Twitch deal part of the article was disgusting to read, with Blizzard being so bold as to ask for a share of Twitch’s sale to Amazon, something that in and of itself is laughable to see. It was even worse when the company threatened to remove all their games from the platform if they didn’t get a good deal with Twitch, honestly seeming closer to blackmail than an actual negotiation for a broadcasting rights contract.

I’ve never been one to be quiet about my hesitancy over the Overwatch League. While I was initially hyped on the game, its struggles following launch and the rapid decline in popularity led me to believe that an esports league based around it may not be the best option. Especially with seven-digit buy-ins for something completely unproven as a concept.

I’d warned many to be wary and not to throw their eggs into one basket with this project, though I secretly had hoped it would prove me wrong and succeed, for the good of all esports. Now, though, with declining viewership, interest, and a seeming mass retirement or layoff of players and talent every year, I’m starting to feel my fears were justified.

Blizzard seems keen on getting what they, honestly wrongly, believe is owed to them with the explosion of esports. I’m afraid they and the combination Activision-Blizzard are going to hurt the esports industry for a long time with their blind pursuit of profit.

I hope things turn around for the Overwatch League. Its success would be so instrumental in helping bring further investment and stability into esports. But the way it’s going right now, I fear it’s going to pop the bubble many believe has been growing in the industry for the past several years, and more than just their scenes are going to be negatively impacted by this. We must wait to see how this all plays out in the long-term, but the prospects are not looking great right now.