Activision Blizzard lays off around 50 esports staff amid a potential Overwatch League overhaul

Amid the pending takeover of Activision Blizzard by Microsoft, the former has laid off around 50 employees from its esports division. The company is also preparing for some potential huge changes to the Overwatch League (OWL), which may bring an end to its city-based franchise format.

Employees were informed of the layoffs on Tuesday, according to The Verge. One now-former member of the team told the publication that the layoffs came out of nowhere and suggested that a skeleton crew could close out the OWL and World Series of Warzone seasons. However, they added that "in my eyes, they are completely unequipped to internally support anything esports after that.” Activision Blizzard also laid off around 50 people from its esports teams in March 2021.

The company noted in an earnings report released today that it modified its agreements with Overwatch League team owners last quarter. "According to the amended terms, following the conclusion of the current Overwatch League season, the teams will vote on an updated operating agreement," the report reads. "If the teams do not vote to continue under an updated operating agreement, a termination fee of $6 million will be payable to each participating team entity." The company added that OWL's total revenue accounts for under one percent of its consolidated net revenues.

Reports recently suggested that the Overwatch League waived its remaining franchise fees, with teams still owning between $6 million and $7.5 million after payments were deferred due to the COVID-19 pandemic. A spot in the league was originally said to cost $20 million, and that reportedly jumped to over $30 million for expansion teams that joined in the second season in 2019.

Although it got off to a strong start, OWL has been on shaky ground for some time. In its first two seasons, many matches aired on ESPN and other networks and the season-ending Grand Finals were shown on ABC. After two seasons of OWL hosting almost every match from a television studio, the third season was supposed to be when the ambitious grand vision of OWL came together, with players competing in each team's city every week.

However, that was in 2020 and the format only lasted a few weeks before the COVID-19 pandemic shut everything down. The forced change to an online-only format in 2020 closed off a key and long-promised revenue stream to OWL team owners, as they were unable to generate income from live events. Live events gradually started returning in 2021.

There have been many other hiccups. When OWL moved from Twitch to YouTube in 2020, viewership dropped substantially. While there have been some significant peaks in viewership over the last few years, the league still appears to be struggling to attract eyeballs. Sponsors such as Coca-Cola, T-Mobile and Kellogg's fled the ship in 2021 following a lawsuit that included allegations of widespread sexual harassment and discrimination at Activision Blizzard.

China has been one of the strongest markets for OWL viewership over the last few years. However, Overwatch 2 and most other Blizzard games are not currently available in the country after a partnership with NetEase, which published the games there, came to an end. That could have impacted interest in the Overwatch ecosystem in the country overall. (In its earnings statement, Activision Blizzard noted that "engagement and player investment in Overwatch 2 declined sequentially" in the second quarter of the year, but hopes a soft relaunch with a major update next month will bring players back.)

Blizzard tried to bolster excitement around OWL this year by opening a pathway for teams from the second-tier Contenders division to compete in the highest level of Overwatch esports for the first time. In June, after failing to field a team in the first half of the season, it emerged that the Chengdu Hunters became the first franchise to leave the Overwatch League for good.

OWL team owners have long claimed that they're not making enough money from the league. Earlier this year, esports journalist Jacob Wolf reported that OWL teams brought in a law firm to negotiate with Activision Blizzard for some kind of economic relief "after years of high operating costs and continually missed promises on revenue." Sports Business Journal noted that teams receive around $1 million from OWL but it costs between $3 million and $5 million a year to run a competitive team, meaning that most are running at a loss.

Given the financial implications, it would not be surprising if OWL teams vote to end their agreement with the league. While that would certainly end the Overwatch League in its current format, Activision Blizzard is still planning to support Overwatch esports.

“I want to be clear on one thing in particular, that Overwatch remains committed to a competitive ecosystem in 2024 and beyond,” OWL commissioner Sean Miller told The Verge. “And we’re building toward a revitalized global scene that prioritizes players and fans.” Miller noted that Blizzard was looking at various options for the future of Overwatch esports and added he was very optimistic: "We are doing all we can to make the player experience and the fan experience one that people want to return to, want to be a part of and get excited about to turn on.”

All the same, the Overwatch esports ecosystem could look very different next year. This year's Grand Finals in Toronto could be the end of OWL as we know it.