Activision Blizzard Trims Esports Workforce by 50 Amidst Possible Overwatch League Revamp

In the midst of Microsoft’s ongoing acquisition of Activision Blizzard, the latter has downsized its esports team by around 50 employees. The company is also considering major alterations to the Overwatch League (OWL), potentially terminating its city-based franchise structure.

The Verge reported that employees were made aware of the layoffs on Tuesday. A former team member revealed to the publication that the staff reduction was unexpected, hinting that a minimal team might conclude the OWL and World Series of Warzone seasons. They added, however, that “from my perspective, they are completely underprepared to internally maintain any esports beyond that.” Activision Blizzard had previously downsized its esports teams by approximately 50 members in March 2021.

The company shared in a recently released earnings report that it revised its contracts with OWL team owners in the previous quarter. “Under the revised terms, following the end of the current OWL season, teams will vote on an updated operational agreement,” the report detailed. “If the teams choose not to continue under the revised agreement, each participating team will be owed a termination fee of $6 million.” The company further stated that the total revenue from OWL accounts for less than one percent of its overall net income. 

Recent reports suggested that OWL had waived remaining franchise fees, with teams owing between $6 million and $7.5 million after payments were delayed due to the COVID-19 pandemic. The initial league entry fee was reported to be $20 million, which reportedly surged to over $30 million for teams that joined during the second season in 2019.

Despite a promising start, OWL has been unstable for some time. Its first two seasons were aired on ESPN and other networks, with the season-ending Grand Finals shown on ABC. The league’s grand vision was expected to materialize during the third season, with matches held in each team’s city every week.

Unfortunately, this initiative only lasted a few weeks in 2020 before the COVID-19 pandemic forced a halt. The transition to an online-only format that year cut off a critical revenue stream for OWL team owners, who couldn’t generate income from live events. Live events only began to resume gradually in 2021.

Further setbacks included a substantial drop in viewership when OWL transitioned from Twitch to YouTube in 2020. Despite some significant spikes in viewership over the past few years, the league appears to be battling to attract viewers. High-profile sponsors like Coca-Cola, T-Mobile, and Kellogg’s withdrew in 2021 following a lawsuit alleging widespread sexual harassment and discrimination at Activision Blizzard.

China, a major market for OWL viewership in recent years, is currently without Overwatch 2 and most other Blizzard games after a partnership with NetEase, the game’s publisher in China, ended. This may have affected interest in the Overwatch ecosystem in the country. (Activision Blizzard noted in its earnings statement a sequential decline in “engagement and player investment in Overwatch 2” in Q2, but expressed hope that a major update next month will revive player interest.)

In a bid to increase enthusiasm around OWL, Blizzard created an opportunity for teams from the second-tier Contenders division to participate in the highest level of Overwatch esports for the first time this year. In June, following its failure to field a team in the first half of the season, the Chengdu Hunters reportedly became the first franchise to permanently exit the Overwatch League.

OWL team owners have long expressed concerns about inadequate revenue from the league. Earlier this year, esports journalist Jacob Wolf revealed that OWL teams hired a law firm to negotiate with Activision Blizzard for financial relief, citing high operational costs and unfulfilled revenue promises. The Sports Business Journal reported that while teams received around $1 million from OWL, the cost of managing a competitive team ranged from $3 million to $5 million annually, resulting in a net loss for most.

Given these financial challenges, it wouldn’t be a surprise if OWL teams choose to terminate their agreement with the league. Although this would effectively end the current iteration of the Overwatch League, Activision Blizzard is still committed to supporting Overwatch esports.

“Let me be clear about one particular point: Overwatch is dedicated to a competitive ecosystem in 2024 and beyond,” OWL commissioner Sean Miller informed The Verge. “We’re developing a rejuvenated global scene that places priority on players and fans.” Miller stated that Blizzard is considering different possibilities for the future of Overwatch esports and added that he was very hopeful: “We’re doing everything possible to create a player and fan experience that people are eager to return to, be a part of, and feel excited to switch on.”

Nonetheless, the landscape of the Overwatch esports ecosystem could significantly transform next year. This year’s Grand Finals in Toronto may mark the end of the Overwatch League as we currently know it.

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More about Overwatch League overhaul

• Activision Blizzard Layoffs
• Overwatch League Revamp
• Overwatch Franchise Fees
• Impact of COVID-19 on Esports
• Chengdu Hunters Exit Overwatch League
• Overwatch Esports Future