Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Overwatch League Expansion Could Bring in $480 million for Activision Blizzard

By Travis Hoium - Sep 16, 2018 at 3:02PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

There's real money in esports today, especially internationally.

Activision Blizzard Inc. ( ATVI 1.17% ) is going to be cashing some large checks in the third quarter after announcing six more expansion teams for Overwatch League. In 2019, the league will grow from 12 teams to 20 and will include franchises in Chengdu and Hangzhou in China, Paris, Toronto and Vancouver in Canada, and Washington. 

The expansion could prove the potential for esports as an international business. For Activision Blizzard, it isn't bad for the balance sheet, either. 

Man playing a video game in a stadium.

Image source: Getty Images.

The cash grab

Earlier this year, ESPN reported that Activision Blizzard expected to charge $30 million to $60 million per new Overwatch League franchise, depending on the location. Based on this estimate, Activision Blizzard could generate between $240 million and $480 million in expansion fees this off-season. 

This money will go directly into Activision Blizzard's coffers, which differs from revenue that franchises might share, like tickets and advertising. Long term, Activision will also benefit from these league revenue streams, and it often lines up the deals. But this week's news is more about the short-term benefit of franchise fees. 

An international business

Nine of the 20 Overwatch League teams will be outside the U.S., unlike the case with traditional sports leagues, which are generally limited to one country or region. 

For Activision Blizzard, the appeal is easy to understand. It's selling advertising for Overwatch League all around the world, and international markets make for a bigger audience and more revenue opportunities. 

The player dynamic shouldn't be overlooked, either. The more exposure Overwatch gets around the world, the more people are going to play the game. That's how Activision Blizzard makes most of its money, and the awareness and engagement that Overwatch League brings can only be positive for the company. 

The esports boom

Esports could be the future of gaming given the money involved, and video game companies are certainly taking notice. Call of Duty, League of Legends, and Halo are a few of the games that have made a play at esports, but Overwatch has had the most success and is showing how to make this into a business built to last. 

What I'm intrigued to watch is the advertising and content deals Overwatch League can sign with more teams and an even wider international audience. Twitch signed a $90 million two-year deal to be the exclusive streaming home of the league last year, and given the league's success, we could see those numbers get larger. HP, T-Mobile, and Sour Patch Kids also signed advertising deals that reached into the tens of millions of dollars, a level that could rise. 

Given the young age of Overwatch League, it's possible we're only seeing the beginning of the esports industry. And that bodes well for Activision Blizzard long term. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Activision Blizzard, Inc. Stock Quote
Activision Blizzard, Inc.
ATVI
$58.77 (1.17%) $0.68

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
633%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/07/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.