Overwatch players might experience fewer disconnections while playing online, after Activision Blizzard (NASDAQ:ATVI) tapped Alphabet's (NASDAQ:GOOGL) (NASDAQ:GOOG) Google Cloud to be its preferred provider of game-hosting infrastructure. The multiyear deal, announced on Jan. 24, promises to deliver "new player experiences," including "low-latency" server connections and other in-game enhancements.
What's more, YouTube will now be the exclusive streaming partner worldwide, excluding China, for Activision Blizzard's esports leagues and events, including Overwatch League, Call of Duty League, Hearthstone Esports, and more.
Here are three immediate benefits this deal provides for the Overwatch maker.
1. More than 200 million YouTube Gaming viewers
At first glance, the switch to YouTube doesn't look like an upgrade for Blizzard. For the past two years, Amazon's (NASDAQ:AMZN) Twitch, which is regarded as the most popular video game streaming site, has been the exclusive streaming partner for Activision's esports leagues.
Twitch has dominated the game streaming content market. In 2019, viewers spent nearly 10 billion hours watching content on Twitch, compared to just 2.9 billion hours for YouTube Gaming, according to data from Streamlabs.
While Twitch still dominates, its growth is slowing, as YouTube, Microsoft's Mixer, and Facebook Gaming poach some of the biggest streaming personalities from Twitch.
YouTube Gaming saw a 46% increase in total hours watched from the first quarter to the fourth quarter last year. In the last quarter, YouTube's market share of hours watched jumped seven percentage points to 27.6%.
Twitch lost another big draw for viewers with Activision Blizzard moving its popular esports events over to YouTube. YouTube claims to have 200 million viewers on its gaming channel. Plus, there are 1 billion users across all of YouTube. That's a massive immediate addressable market for Activision Blizzard's esports events.
YouTube may not look like an upgrade, but with Google's technology, brand, and marketing know-how, it could be a smart move in the long run.
2. Better analytics and infrastructure technology
Many of Activision Blizzard's games are built for multiplayer gameplay. These games are dependent on the cloud to connect players, gather data, track player statistics, and create leaderboards, among other things. There are a few enhancements Google Cloud will bring to the hundreds of millions of players who play Activision Blizzard's games.
One of the issues that hurts the playing experience that may improve with Google Cloud is online disconnections. It's all too common that a player is in the middle of an intense team battle in Overwatch, but that player suddenly loses connection, and gets dropped out of the game. It's frustrating for the player, and the team is let down since they must try to win while short one player in a six-versus-six team match.
Finding a cloud solution that could "deliver superior, low-latency player experiences" is one of the reasons why Activision chose Google Cloud. "Players will benefit by experiencing premium network quality-of-service, including low latency and packet loss when playing high-fidelity games on any device," as the company explained in a statement.
Additionally, Google Cloud may bring benefits to Activision Blizzard's player engagement. Google Cloud's superior artificial intelligence capabilities will allow players to have "optimal personalized interactions" while playing, such as "curated recommendations for in-game offers and differentiated gaming experiences."
3. Cashing in on broadcasting rights
Selling broadcast rights to streaming partners is one of the ways Activision Blizzard is monetizing its esports leagues. Two years ago, Activision Blizzard reportedly signed a $90 million deal with Twitch, which recently expired.
The value of the YouTube deal was not disclosed, but it's a good bet that it was worth a lot more than $90 million based on the growth of Overwatch League since its first season, as well as the addition of Call of Duty League, which launched its inaugural season on Jan. 24.
There are a few indicators that Activision's Overwatch League has increased in value over the last two years. The second season of Overwatch League saw some major brands, including Coca-Cola and Anheuser-Busch Inbev, join as sponsors. Also, Blizzard reported that viewership for season two increased by a third over the inaugural season in 2018.
Moreover, Blizzard sold the initial 12 teams of Overwatch League in 2018 for $240 million, or $20 million per team, according to ESPN. It was reported that the sale price went up to $30 million-$60 million for each of the eight new expansion teams introduced for season two.
It's apparent that the value of Overwatch League has substantially increased in the eyes of team owners, advertisers, and broadcast partners over the last two years, which likely sweetened the deal with YouTube.
Other benefits could emerge over time
Getting cozy with one of the top tech giants like Google is obviously a plus for Activision Blizzard. While the recent deal may not move the needle much in the short term for this growth stock, Activision Blizzard now has a valuable partner with the leader in online search and advertising, which could help Activision market its gaming franchises and esports leagues to a wider audience over the long term.
All said, there could be further benefits over time with this relationship that are not completely clear right now.