Blizzard lays off 50 employees from its esports division as future of Overwatch League seems vague

Blizzard Entertainment has been hit with layoffs at its esports team. Although the company recently reported record quarterly revenues, the future of the Overwatch League is currently uncertain, with sources worrying that the entire division might be closed.

What happened?

• As reported by The Verge, around 50 employees at Blizzard’s esports department were laid off on July 19.
• Job cuts came without warning, with one former employee describing the news as a “complete shock to everyone.” On top of that, Blizzard reportedly didn’t offer any of the laid off staff to switch roles or teams.
• “I can’t really fathom what the benefit is to lay people off when your company is posting record profits and your stock price is quite literally capping out with a looming acquisition,” one source told The Verge. “This move isn’t helping the shareholders, it’s not helping the business, and it’s not helping the remaining employees.”
• The cuts came right after Activision Blizzard reported that Diablo IV helped Blizzard reach $1 billion in quarterly revenue for the first time ever. The company’s overall revenue also grew 34% year-over-year to $2.2 billion.
• Despite the news, Activision Blizzard’s senior director of global communications told The Verge that the company remains committed to the future of esports, adding that it regularly “assess how our staffing aligns with our business goals to ensure we can evolve with changing trends and best deliver for our teams, players, and fans.”

What caused the layoffs?

• In its latest quarterly report, Activision Blizzard provided an update on the Overwatch League, a professional esports league that unites several Overwatch teams from different US cities and other countries.
• “According to the amended terms, following the conclusion of the current Overwatch League season, the teams will vote on an updated operating agreement,” the text 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 (total fee of approximately $114 million).”
• Last year, esports journalist Jacob Wolf reported that Activision Blizzard was owed $400 million in deferred franchise payments from Overwatch and Call of Duty leagues. Each of the 20 teams in the Ovewatch League owed around $6-7.5 million.
• There is a chance that franchise owners will eventually vote to part ways with the Overwatch League. However, its commissioner Sean Miller told The Verge that the game “remains committed to a competitive ecosystem in 2024 and beyond.”
• According to one of the laid off employees, Blizzard’s esports team has been working on a new tool to run Overwatch tournaments. It was supposed to replace the old one, which is expected to shut down in the coming weeks.
• However, work on the new tool wasn’t finished. That made The Verge’s source speculate that Blizzard is “closing its esports division.”
• Although Blizzard’s revenue hit a new high in the second quarter, it is worth noting that the Overwatch League only accounts for less than 1% of Activision Blizzard’s consolidated net revenues.