Correction to Overwatch League Backers Article on July 12

By Sarah E. Needleman Features Dow Jones Newswires

Activision Blizzard Inc. on Wednesday plans to unveil a roster of sports-team owners and videogame-industry veterans involved in an esports league it pledged to launch before the end of the year.

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The company is building a league around "Overwatch," betting on a year-old shooter with a cartoonish bent that has more than 30 million registered players but lacks the lineage of a franchise such as "Call of Duty."

Activision Blizzard, which reported $6.61 billion in revenue last year, is looking to build on a growth streak that has led its stock to nearly quadruple in the past five years to around $58 a share.

"They've aggressively sold this story to Wall Street and the expectation is that at some point in the next three to five years, esports will be a meaningful profit contributor," Cowen & Co. analyst Doug Creutz said.

The rollout of Overwatch League is being closely watched as a signal for whether publishers can win control of the multimillion-dollar competitions sprouting around their biggest games. Two big rivals -- Electronic Arts Inc. and Take-Two Interactive Software Inc. -- are developing their own leagues.

They are looking to capture a market whose average fan, according to Newzoo BV, is between the ages of 21 and 35 -- a coveted demographic for advertisers. Roughly 191 million people world-wide this year are expected to watch an esports competition at least once a month, more than double the number in 2012, the research firm estimates.

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In an interview with The Wall Street Journal, Activision Blizzard Chief Executive Bobby Kotick said the rollout was going according to plan. The company is banking on city-based teams, a structure typical of traditional sports leagues, to drive growth.

"We wanted to introduce that to esports," he said.

Seven teams are on board so far. The buyers paid $20 million apiece, the going rate this year, according to people familiar with the matter. The launch draws on a roster of executives, athletes and locales familiar to sports fans.

Groups backed by New England Patriots owner Robert Kraft and Mets operating chief Jeff Wilpon bought the rights to teams in Boston and New York, respectively.

Mr. Kraft said he considers his bet on esports on par with his backing of Major League Soccer in the 1990s. It took about five years for his New England Revolution to become profitable, and it remains so today, he said.

"We're thinking long here," Mr. Kraft said.

Mr. Wilpon said he didn't follow esports until his venture-capital firm, Sterling.VC, began looking into the industry.

"We wouldn't make the investment if we didn't think it would be profitable," he said. There are "good advertisers out there looking to get in on this demographic."

NRG Esports, an established esports outfit founded by members of the Sacramento Kings ownership group, has the rights to a team in San Francisco. NRG counts Alex Rodriguez, Shaquille O'Neal and Jimmy Rollins among its investors.

Their involvement "absolutely lends credibility," said Tim O'Shea, an analyst at Jefferies. "They have arenas, local marketing muscle and know-how to excite a fan base."

Activision Blizzard's publishing partner in China, NetEase Inc., will operate a team in Shanghai, and a startup led and self-funded by game-industry veterans purchased a team in Seoul.

Other teams will be based in Los Angeles and Miami-Orlando.

ESPN previously reported details of the league's launch.

There aren't multiple new sports leagues launching annually, but dozens of leagues can be created around individual games. As more esports leagues launch, it could become more difficult to stand out, said Michael Pachter, an analyst at Wedbush Securities.

The Overwatch League calls for broad revenue sharing between Activision Blizzard and team owners for local and global advertising, merchandising, ticket sales, broadcast rights and other avenues. Teams can host up to five amateur events a year, keeping all revenue.

Additionally, owners will receive half of revenue from sales of team-branded virtual goods sold inside "Overwatch."

Many details of the league still aren't known, including other possible team owners and locations, or the launch date. Activision Blizzard said it isn't planning to launch at BlizzCon, its annual showcase in November.

The company expects the league to ultimately field 28 teams. The first season will be played in a Los Angeles-area venue, though at some point future contests will take place in teams' respective cities, Activision Blizzard said. It hasn't yet disclosed its plans for when or where it will broadcast league events, including online, television or both.

Activision Blizzard Inc. on Wednesday plans to unveil a roster of sports-team owners and videogame-industry veterans involved in an esports league it pledged to launch before the end of the year.

The company is building a league around "Overwatch," betting on a year-old shooter with a cartoonish bent that has more than 30 million registered players but lacks the lineage of a franchise such as "Call of Duty."

Activision Blizzard, which reported $6.61 billion in revenue last year, is looking to build on a growth streak that has led its stock to more than quadruple in the past five years to around $58 a share.

"They've aggressively sold this story to Wall Street and the expectation is that at some point in the next three to five years, esports will be a meaningful profit contributor," Cowen & Co. analyst Doug Creutz said.

The rollout of Overwatch League is being closely watched as a signal for whether publishers can win control of the multimillion-dollar competitions sprouting around their biggest games. Two big rivals -- Electronic Arts Inc. and Take-Two Interactive Software Inc. -- are developing their own leagues.

They are looking to capture a market whose average fan, according to Newzoo BV, is between the ages of 21 and 35 -- a coveted demographic for advertisers. Roughly 191 million people world-wide this year are expected to watch an esports competition at least once a month, more than double the number in 2012, the research firm estimates.

In an interview with The Wall Street Journal, Activision Blizzard Chief Executive Bobby Kotick said the rollout was going according to plan. The company is banking on city-based teams, a structure typical of traditional sports leagues, to drive growth.

"We wanted to introduce that to esports," he said.

Seven teams are on board so far. The buyers paid $20 million apiece, the going rate this year, according to people familiar with the matter. The launch draws on a roster of executives, athletes and locales familiar to sports fans.

Groups backed by New England Patriots owner Robert Kraft and Mets operating chief Jeff Wilpon bought the rights to teams in Boston and New York, respectively.

Mr. Kraft said he considers his bet on esports on par with his backing of Major League Soccer in the 1990s. It took about five years for his New England Revolution to become profitable, and it remains so today, he said.

"We're thinking long here," Mr. Kraft said.

Mr. Wilpon said he didn't follow esports until his venture-capital firm, Sterling.VC, began looking into the industry.

"We wouldn't make the investment if we didn't think it would be profitable," he said. There are "good advertisers out there looking to get in on this demographic."

NRG Esports, an established esports outfit founded by members of the Sacramento Kings ownership group, has the rights to a team in San Francisco. NRG counts Alex Rodriguez, Shaquille O'Neal and Jimmy Rollins among its investors.

Their involvement "absolutely lends credibility," said Tim O'Shea, an analyst at Jefferies. "They have arenas, local marketing muscle and know-how to excite a fan base."

Activision Blizzard's publishing partner in China, NetEase Inc., will operate a team in Shanghai, and a startup led and self-funded by game-industry veterans purchased a team in Seoul.

Other teams will be based in Los Angeles and Miami-Orlando.

ESPN previously reported details of the league's launch.

There aren't multiple new sports leagues launching annually, but dozens of leagues can be created around individual games. As more esports leagues launch, it could become more difficult to stand out, said Michael Pachter, an analyst at Wedbush Securities.

The Overwatch League calls for broad revenue sharing between Activision Blizzard and team owners for local and global advertising, merchandising, ticket sales, broadcast rights and other avenues. Teams can host up to five amateur events a year, keeping all revenue.

Additionally, owners will receive half of revenue from sales of team-branded virtual goods sold inside "Overwatch."

Many details of the league still aren't known, including other possible team owners and locations, or the launch date. Activision Blizzard said it isn't planning to launch at BlizzCon, its annual showcase in November.

The company expects the league to ultimately field 28 teams. The first season will be played in a Los Angeles-area venue, though at some point future contests will take place in teams' respective cities, Activision Blizzard said. It hasn't yet disclosed its plans for when or where it will broadcast league events, including online, television or both.

Corrections & Amplifications

This story was corrected July 13, 2017 at 10:01 a.m. ET because it incorrectly stated in the third paragraph that Activision Blizzard's stock has nearly quadrupled in the past five years. The stock has more than quadrupled over that period.

"Overwatch League Backers Come From Football, Baseball," which ran at 8:14 a.m. EDT on July 12, incorrectly stated in the third paragraph that Activision Blizzard's stock has nearly quadrupled in the past five years. The stock has more than quadrupled over that period. (July 13, 2017)

(END) Dow Jones Newswires

July 13, 2017 10:12 ET (14:12 GMT)