Why Activision-Blizzard just launched a new eSports division

October 22, 2015, 7:24 PM UTC
left to right-Darshan (ZionSpartan) Upadhyaya, Josh (NintendudeX) Atkins, Danny (Shiphtur) Le, and
left to right-Darshan (ZionSpartan) Upadhyaya, Josh (NintendudeX) Atkins, Danny (Shiphtur) Le, and Brandon (DontMashMe) Phan, members of the eSports team going by the name of Team Coast, play a match in the League Championship Series for League of Legends, a tournament for a PC-based video game at Riot Studios in Santa Monica on July 25, 2013.
Photograph by Mel Melcon — LA Times via Getty Images

Activision-Blizzard is intensifying its focus in the eSports area.

The company, on Oct. 21, announced the formation of a new division, which will be focused on professional gaming. Steve Bornstein, former CEO of ESPN and the NFL Network, will serve as chairman of the unit.

Activision (ATVI) isn’t revealing a lot of details about its plans at present, but says the new unit will focus on creating new ways to deliver eSports experiences for players and fans across a variety of platforms, games and territories.

“Celebrating our players and their unique skill, dedication and commitment is the essence of our eSports initiatives,” said Bobby Kotick, CEO of Activision Blizzard in a statement. “We intend to … make certain this remains an important growth driver for Activision Blizzard.”

Joining Bornstein in running the unit is Mike Sepso, co-founder and, until recently, president of Major League Gaming. He will serve as senior vice president.

Analysts say the hires point to a broad media strategyand cite Bronstein as an especially strong addition, given his experience in creating powerful networks. His connections could aid the unit in gaining distribution with cable, satellite, and over-the-top broadcasters.

(That could be especially useful, as Frank Skinner, the current president of ESPN, said last year that he didn’t consider eSports to be legitimate sporting events, instead comparing them to competitions like chess and checkers.)

“We see eSports as a top new growth initiative for Activision,” said Colin Sebastian, of R.W. Baird. “eSports represents one of the four key pillars of emerging growth in online media for Activision, driving user engagement and retention in the near term, while also expanding monetization in the long term. Overall, we believe eSports could become a meaningful revenue and profit contributor to Activision within 2-3 years, as the company monetizes its IP and product portfolio across alternative distribution channels.”

Sebastian expects eSports revenues to reach $1.8 billion by 2020a big leap from an expected $200 million this year. There are significant opportunities with tournaments, advertising and sponsorships, broadcast contracts, and wagering.

Bornstein, in a statement, echoed these expectations.

“I believe eSports will rival the biggest traditional sports leagues in terms of future opportunities,” he said.

Activision has had its eye on the eSports market for some time. Starting in the 1990s, Blizzard’s StarCraft was one of the first titles to be featured in televised tournaments, mostly in South Korea. The company has only increased its focus in the eSports market since that time. Earlier this year, the division’s “Heroes of the Dorm” collegiate eSports event was televised on ESPN 2, despite Skinner’s comments.

eSports has also become an important part of the marketing strategy for each new installment of its Call of Duty franchise. This year, it is overseeing the new Call of Duty world league, which has a prize pool of over $3 million.

The new division will operate as a separate unit at Activision-Blizzard, but should have an impact on future game titles. As the company works on new multiplayer modes for franchises like Destiny, Call of Duty, and new Blizzard games, those will likely be developed with the goals of the eSports unit in mind.

Activision’s latest investment in eSports might be timely, but it’s not without strong competition. PC games like Riot Games’ League of Legends and Valve’s Dota 2 have significant presences among fans.

But there is a solid customer baseand it’s growing steadily. According to Newzoo, there are 226 million eSports fans around the globe today and that number will increase to 323 million by 2018.

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