One season after the Overwatch League held its franchise expansion, its seen a massive exodus of many personalities and pro players. Just in the past couple days, both caster Christopher "MonteCristo" Mykles and host Chris Puckett announced their departure. Before that, multiple pros retired and/or changed roles from player to personality, and there have been murmurs of other pros sharing distaste with the new league format and localization.
According to ESPN, Activision Blizzard sold those expansion slots for up to $60 million dollars, an exorbitant amount of money for such a new and relatively untested market. For comparison, the original OWL franchise slots were $20 million, and the original League of Legends LCS franchise slots were $10 to $13 million. Even the most recent LCS slot sold for ~$30 million. Blizzard has always priced the OWL slots higher than Riot priced the LCS, and it's hurting OWL and the entire esports ecosystem.
Interestingly, MonteCristo has ~15 years of endemic experience with esports across multiple titles and multiple countries. Not only has he been a caster and analyst, he has also been a founder and co-owner of an org. Most recently he co-founded a sort of consulting agency to help newcomers discern how they should spend their money and build their infrastructure. He claims he was in active conversations with Blizzard, yet they disagreed on some structural fundamentals.
People have rambled about esports being a potential bubble for some time now. As it is with all rapidly growing businesses or other fads, like Bitcoin or new startup companies, there is potential that the incredible initial investment can't be returned. For Bitcoin, the fear is others will stop investing, and then market stalls and crashes. For other businesses, the problem comes when they take too much funding and don't have a big enough operation to make good on that. Overvaluation is a dangerous problem.
Esports has both of those symptoms. It is a business, so it requires payoff, but it could also be considered a fad, and something that dies the second people start pulling their funding/canceling their sponsorships. In this case, the big businesses who paid $60 million for a slot expect to be able to make that back and more over the course of their time in the league. But if viewership decreases and sponsors disappear, it becomes a lost cause. And with so many pros and personalities leaving, it already looks pretty rough.
The main problem isn't that all of esports, or even OWL specifically, was or is a bubble, it's just how decisions were made. When run well and honest to the numbers and growth potential, esports do well. The LCS, for example, has had bad quality games for a long while, but the audience is still there, and the scene is still growing.
OWL is doing too much before they're able to. They're trying to run before they walk. They have struggled to balance the game well enough for pro and casual play, causing a need for a role lock. Then they went all in on the localization to capitalize on local markets, but didn't allow enough time for teams to establish themselves there first. Whereas they used to play all in one studio in LA, they now play in conferences across the world, requiring relocation and travel, a lot of travel.
Esports needs to learn how to grow slowly. The scene is largely run by young professionals, many without much formal business experience. While passion and dedication are nice traits to have, many lack experience to make strong decisions. Similarly, when big companies outside of esports join the scene, they often don't make smart decisions based on the nuances of this industry compared to their own.
The LEC has shown its capability for growth, especially during their own franchise. They handled the changes well, found incredible sponsors, and put out relevant content for the target audience to keep them engaged with the scene and its sponsors. Others, like 100 Thieves and Cloud9, also do this well. But some still have trouble spending money appropriately and finding the proper channels to connect with their audience.
If esports orgs, publishers, tournament organizers, and new investors want to grow and find success in this industry, they need to start paying attention to their speed and listening to esports veterans. Calculated growth is better than taking more than deserved. Accurate valuation is extremely important. Esports is not a bubble yet, but it could become one. And the Overewatch League needs to be careful that they aren't the ones to pop it.
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