eSports: Reading between the lines with the OWL news

Last week, Blizzard announced further information about the financial arrangements for its Overwatch League (OWL) franchisees. The announcement covers a range of details largely focused on the Teams’ relationships with their players and new rules for drafting players. The document is pretty straightforward, for a good summary you can read ESPN’s always solid eSports coverage.

At first blush, the terms seem fairly reasonable – minimum salary for players, revenue share with the players, healthcare, housing facilities, etc. These terms look fairly similar to what Riot is proposing for its NA LCS League – minimum salary of $50,000 to Riot’s $75,000, plus a large share of “performance bonuses” (whatever those are) 50% for players as opposed to Riot’s 35%. As we pointed out a few weeks back, OWL’s and Riot’s franchise terms are likely going to become benchmarks for the wider industry, and will likely evolve around each other.

So our first read left us with the impression that there were no surprises in the announcement. But after a little time passed, we could not escape the sense that there was something a little odd about Blizzard’s announcement. It is hard to put a finger on what that something is, but a worm wiggled away in the back of our head.

After some reflection, and a few conversations, we came up with the following speculation about the real role of this document. And please note, this is pure speculation, we have not spoken to anyone at Blizzard or any of the investing groups about this.

First, the tone of the document reads like a contract, or a very detailed term sheet. It is very matter of fact and dry. Nothing wrong with that, but contrast the Blizzard document with Riot’s. Riot is filled with language about feelings – helping fans, building the community, growing players. It is a marketing document. Blizzard’s is a legal one.

This led to the question of who is the intended audience for the Blizzard document? Riot’s is positioned as a document to the wide League of Legend (LoL) community, even if it largely concerns only players and potential franchisees. They are trying to convey a message of transparency. Blizzard’s is different, and seems to be targeting people with whom they are negotiating.

After re-reading it a few times, we now have a suspicion that Blizzard put out these terms to send a message to team owners. They have now effectively drawn a line in the sand about the terms of being an OWL Franchisee. If you own a team – 50% of revenue that comes via Blizzard now has to be shared with players. Franchisees need to take care of their players. There is nothing wrong with the terms, but it is still a bit odd to disclose them in this fashion to a broad public audience.

We get the sense that Blizzard is in fact negotiating with franchisees in public. They are not the first to use this tactic, but it does leave open the question of who exactly are they negotiating with? As we said above, who is the audience here?

The fact that they are disclosing these terms in public implies that they are negotiating with multiple parties. It is far simpler to negotiate these things one on one, brining it into the public domain really only works as a negotiating tactic when there are multiple counter-parties involved.

This leads to two possibilities. They are either in the process of nailing down a second batch of franchisees, or they are negotiating with the seven franchisees that have already been announced.

Both options open more questions. If they are trying to reach the former, potential new franchisees, why bother to announce what the other seven teams have already agreed? By this point, Blizzard can tell new franchisees that the other seven have already signed on for these terms. Take them or leave.

The far more intriguing possibility is that they have not actually finalized the agreements with the seven teams already announced. Again, we have no knowledge of anything about this. This is pure speculation on our part. However, if this turns out to be the case, it would imply that one or more of the announced teams has not firmly committed to participation. In our experience, when negotiating big, complex contracts, nothing is finalized until everything is signed. And reading between the lines from Blizzard, it is hard to escape the conclusion that there are still a few more twists to this tale.

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