MLG Acquisition: A dent in ESL’s market share and a new streaming platform?
As we all chimed in 2016 (Happy New Year!), it wasn’t just the calendars that changed. North American tournament powerhouse Major League Gaming (MLG) had been acquired by Activision Blizzard, Inc. (Nasdaq: ATVI).
Prior to the official announcement, we heard some speculation from the likes of Esports Observer, stating that C.E.O. Sundance DiGiovanni was out and that “MLG, as we know it, is over.” While that was a great scoop, there were many details missing from that original report, and I want to commend Ferguson Mitchell on his terrific follow-up article which took a more detailed look at the SEC filings. I don’t want to regurgitate Mitchell’s article(I will insist that you take the opportunity to read it yourself) but in it, we note that MLG raised $69 million in equity funding. Despite that, Activision Blizzard acquired it for just $49 million!
When looking at this how this unfolded, it’d be fair to assume that this was a fire sale of MLG’s assets. Many parties involved, especially the long-term employees that’ve been with MLG through thick and thin over the past decade, most likely didn’t get the payday that they’d been hoping for. That really sucks. And while few people will ever know the full truth of what happened in this sale, I believe in the end that Activision Blizzard buying MLG will be good for North American esports and here’s why.
Since its inception in 2002, MLG has made some dubious decisions, and the people with influence there didn’t always seem to be steering the ship in the right direction. However, it provided thousands of jobs in North America for an industry we love, both directly and indirectly.
Outside of Electronic Sports League (ESL), there are few organisations in the industry that have the wealth of history, experience, and brand recognition that MLG has. Running large events is no easy feat — especially LAN events, in which attendance can fluctuate drastically.
Monetisation has always been a problem for MLG, and it’s been hard to find themselves in the green without significant capital injection. But that’s not unique to them. Everyone in esports feels these growing pains and it’s gradually changing with more monetisation avenues opening up to businesses, coupled with interest from non-endemic parties.
We’ve seen many esports organisations fall by the wayside in the past. Most notably is own3D, which was at one time the largest competitor of Twitch and, to this day, still owes hundreds of thousands of dollars. More comparable is IPL, which was bought by Blizzard back in 2013. IPL 5 was one of my favourite events; it had some of the best international teams, double elimination bracket and set in Vegas! After qualifying for IPL 6, I was eagerly anticipating the event. Myself and the team were all disheartened by news that it was cancelled before Blizzard acquired it.
Thankfully, it doesn’t seem like MLG will see the same fate as IPL. Instead, it will now have to worry less about monetisation and focus on what they are good at: providing a platform for gamers to compete on. It seems that all of the employees of MLG have been offered new full-time positions, with much more stable jobs at a larger and very reputable company. All while still keeping the family together. That’s great!
What Exactly is Activision Blizzard getting?
MLG is, or was, the largest North American tournament platform before being acquired — even if they were quickly losing ground to competitors. Losing ‘white-label’ deals with the likes of Riot Games for the LCS was quite a big blow for MLG. Especially since ESL had better luck and managed to keep that contract in Europe for the 2013/2014 season. But now Activision Blizzard has an in-house team capable of running large and small events for all of their esport titles (Hearthstone, Starcraft 2, Overwatch, and Heroes of the Storm) and will no longer need to use third parties such as ESL, Gfinity, Dreamhack, etc if they don’t want to. Arguably, there are some benefits in maintaining these partnerships for overseas events.
The name! Major League Gaming is such a kick ass name and Activision-Blizzard will now own the trademark. As esports continues to grow, having such a widely recognizable and self explanatory name could prove to be a very valuable asset. Especially as it draws parallels to traditional sports; MLB, NBA, NFL, etc.
It is still up in the air what’s happening with the $3 million prize pool for Call of Duty: World League and whether or not ESL will be the ones to continue producing that. There have been no updates on that front since the announcement of the MLG acquisition, other than that the tournament will be going ahead.
What does the future hold for MLG.tv?
Interestingly, MLG had one of the first video-streaming platforms in the gaming space with MLG.tv. And while it has received mixed reactions from the community, it reported a 253% increase in viewership after Q1 2015. It was a big bet for the guys at MLG and they believed it could be the key to monetising more effectively as a tournament platform.
With its new in-house media studio, Activision Blizzard Studios, coupled with some of the high profile recruiting that Activision has been doing in recent months, it wouldn’t be too farfetched to assume that Activision Blizzard could put significant resources towards the MLG.tv platform and take the fight to the likes of Twitch and YouTube. Having all of their tournaments hosted on their own platform and directly using the games themselves to market their new platform would be a very interesting move that could shake up the streaming space in the West.
Twitch will most probably continue to dominate the community aspect of streaming which focuses on the individual’s ability to broadcast to many other individuals. Although I would be surprised if tournaments didn’t start to gravitate to alternative platforms or creating their own.
It could also help give them an the edge over Riot Games, which has dominated the esports landscape in recent years and currently relies on third party platforms. It’d require significant manpower and resources to make it a competitor, but Activision Blizzard is very cash-rich and is clearly prepared to make big moves like their $5.9b acquisition of Candy Crush in 2015.
How about ESL?
2015 looked to be the year that ESL would absolutely dominate esports — and it’s fair to say they’ve made some incredible accomplishments over the past year. I believe they’ll continue to dominate Europe and some parts of Southeast Asia, but that the North American market is going to be much harder to crack than was previously anticipated. The joint venture between Turner Broadcasting (TBS) and William Morris Endeavours (WME), sounds promising and certainly has a lot of potential. However, it remains to be seen whether they can execute to achieve that potential. With MLG being acquired, Activision-Blizzard has little reason to use ESL for its North American events. Although I think they’d be foolish to not continue the partnership with ESL in some capacity for Europe and Asia in 2016.
Creating the “ESPN of Esports”
The co-head of Activision Blizzard’s new esports division Steve Bornstein very openly proclaims that they are building the “ESPN of Esports” and, as a former CEO of ESPN, he’s more qualified than most to say that. However, this phrase has become a point of frustration in the esports community — and rightfully so! Only ESPN can be the ESPN of esports and they just launched an esports vertical on January 14th.
I think Activision-Blizzard will make some waves in Q3/Q4 of 2016, although I wouldn’t hold my breath for anything significant until 2017, when the team is more established and has had some time to iron out their plans for the space.
We knew that 2016 was going to be a big year for esports and it doesn’t look like that has changed — we’re already off to a great start! The announcement of Activision Blizzard Studios has the potential to shake things up. Also ESPN launching an esports vertical is awesome. I’m excited and you should be too.
Tell me your thoughts! I would love to hear them. The intention of this article is to inspire discussion. If you enjoyed it, please ♥ and share.
Thanks Josh Augustine (@jaugustine) for editing!