Entertainment

Activision Blizzard's next esports bet hinges on the power of the Call of Duty franchise

Key Points
  • Even 17 years after the first Call of Duty game release, the franchise is still one of the biggest sales drivers for Activision Blizzard.
  • The publisher is hoping to leverage the game's legacy in its upcoming Call of Duty esports league.
  • The Call of Duty League kicked off Friday afternoon, ringing in a weekend that will feature 12 city-based teams going head-to-head. 
A scene from "Call of Duty Modern Warfare."
Source: Call of Duty Modern Warfare

Even 17 years after the first Call of Duty game release, the franchise is still one of the biggest sales drivers for Activision Blizzard.

And now the publisher is hoping to leverage the game's legacy in its upcoming Call of Duty esports league. The Call of Duty League kicked off Friday afternoon, ringing in a weekend that will feature 12 city-based teams going head-to-head in professional play at the Armory in Minneapolis. For the season, a $6 million prize pool is at stake. 

Activision Blizzard also announced Friday a multiyear partnership with Google to have YouTube Gaming be the exclusive livestreaming partnership for all of Activision's esports leagues.

The new league is Activision's most recent entry into a billion-dollar industry that publishers have increasingly eyed for its potential to reach a younger audience hooked on digital entertainment. That includes a gaming industry that has ballooned in value to $150 billion thanks to the rise of non-console-based games.

"As the games industry transitions from a hit-driven model to 'games-as-a-service,' companies like Activision will look to promote their esports to derive recurring revenues in the form of media rights deals, sponsorships, and long-tail in-game monetization," said Will Hershey, CEO of Roundhill Investments and creator of the NERD esports ETF.

The growth of Activision's esports leagues is a priority, with CEO Bobby Kotick and other executives laying out the importance of esports in driving in-game and advertising revenue in various earnings calls and interviews.

So far, its success has been mixed.

In 2018, the publisher launched the Overwatch League, a competitive league based on its Overwatch game. It was the first global city-based esports franchise league that featured teams owned by traditional sports owners who reportedly paid $20 million to buy a slot in the league. (By comparison, ESPN reported that each of the 12 teams in the Call of Duty League could have paid $25 million for their slot.)

But two years later, the company hasn't reported any substantial player or revenue growth for Overwatch. Meanwhile, viewership has dropped throughout the past season until the finals, and key talent and staff that had helped build Overwatch League departed.

Call of Duty League could end up being a different story.

While video game sales fell in 2019, Call of Duty: Modern Warfare – the most recent entry in the franchise – still ended the year as the top-selling game, according to the NPD Group. The title topped 172 million in downloads and raked in almost $87 million in global player spending in the first two months following its release, according to Sensor Tower.

The strength of the franchise can only help Activision, said Wedbush Securities analyst Joel Kulina. He expects a successful Call of Duty League could add to the longevity of the franchise by creating a multigenerational fan base while driving monetization for the game.

But even if the league ends up underperforming, Call of Duty's lasting popularity – exemplified by its consistent sales numbers – will ultimately shield the franchise and Activision from any substantial downside, he said.

Call of Duty League Commissioner Johanna Faries, who was previously a vice president at the National Football League, said the league is an extension of the Call of Duty franchise, which has been a "cultural phenomenon."

"You're just talking about such a storied franchise that means so much to so many people," she said. "We wanted to plant the seeds of a foundation for an esports league that could grow at scale."

But Hershey cautions that despite the game's fame, the most recent Call of Duty iteration is tailored for the casual player in a way that could hinder its transformation into a competitive experience. Not only could the fast pace of the game chip away at its watchability, the competitive mode featured in Call of Duty League will differ from what the players are used to.

"As a result, competitive Call of Duty is a different game from what most of its players are used to playing themselves. This creates an additional challenge when converting a player to viewer," said Hershey.

All of this means that while Hershey expects Activision's new league to succeed, it could also be simply too early to tell.

"Activision is shaping these leagues to look and feel like traditional sports," he said. "This strategy has been very successful from a commercial standpoint, getting buy-in from high-profile investors, sponsors, and media partners. However, esports are by their very nature, targeting a younger, digitally-native audience. Will this audience show up in numbers to support their local team in person for a regular season match?"

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