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Activision Blizzard Buys MLG for $46M, Aims to Build "The ESPN of eSports"

This acquisition follows the recent creation of an Activision eSports Division. It also seems like it could be a bad move.

Is this eSports?
Is this eSports?

Back in October, Activision Blizzard announced its intentions to make a splash in the growing eSports industry by establishing a discrete eSports division, hiring former ESPN president Steve Bornstein and Major League Gaming co-founder and then president Mike Sepso. Now it's taking another step in that direction by acquiring the rest of Major League Gaming.

Activision-Blizzard announced the purchase in a press release posted yesterday, and though no figure is given in the release itself, an early report from the eSports Observer cites a stockholder letter indicating that that Activision Blizzard is spending $46M on the acquisition.

In a statement included in the press release, Activision Blizzard CEO Bobby Kotick re-iterated the company's eSports plans:

“Our acquisition of Major League Gaming’s business furthers our plans to create the ESPN of esports. MLG’s ability to create premium content and its proven broadcast technology platform – including its live streaming capabilities – strengthens our strategic position in competitive gaming. MLG has an incredibly strong and seasoned team and a thriving community. Together, we will create new ways to celebrate players and their unique skills, dedication and commitment to gaming.”

While there's no disputing that eSports is continuing to grow, I can't help but see this as an incredibly bold claim for a number of reasons.

First, as of the time of this announcement, Activision Blizzard has no public deal allowing them to broadcast footage from major eSports like League of Legends or DOTA2. Put simply, being unable to cover LCS or The International would be like ESPN being unable to cover the Super Bowl. That's not to say that Activision Blizzard doesn't have its own eSports properties. Heroes of the Storm, Starcraft, and to a lesser degree Call of Duty have established competitive scenes (EDIT: And, as GotFrag co-founder and former COO of Evil Geniuses Scott Smith correctly reminds me, so does Hearthstone!) Looking forward, I can Activision Blizzard's share of the eSports market continuing to grow (especially if Overwatch does well), but so long as eSports coverage remains fractured and company-run, it's hard to imagine anyone becoming "the ESPN of eSports."

Building off of this problem is the fact that MLG just may not be the best way to build this sort of network. When eSports was first kicking off, MLG positioned itself uniquely as the place to go to for competitive gaming. But as game companies began running their own major tournaments, MLG's importance started to fade. This is reflected in the purchase price: When you look at Activision Blizzard's balance book, $46M isn't that much. After all, this is the company that (sort of) spent $5.9B on King last fall. In speaking with our own Brad Shoemaker about the deal earlier, he said it incisively: "$46M is probably more than MLG is worth, but it's also less than it should have been worth."

For what it's worth, this purchase doesn't make me any less excited for Overwatch. That's... something, right?
For what it's worth, this purchase doesn't make me any less excited for Overwatch. That's... something, right?

There's also the matter of shareholder response to this purchase. The report from the eSports Observer reveals that this acquisition was a “corporate action taken without a stockholders’ meeting by less than unanimous written consent of our stockholders." Among the group of stockholders who did decide to make this purchase was Legion Capital Investments LLC, a group managed by Mike Sepso--Yes, the Mike Sepso who recently left MLG and joined Activision Blizzard. That's not really enough to get conspiratorial about, but things get worse when you look at the current state of MLG. Again, from the eSports Observer report:

Stockholders not in these categories are largely meeting the decision in disbelief. Some speculate that the majority of the sale will go towards paying off MLG’s debts, leaving little to go around for the remaining stockholders. MLG has filed for multiple debtfinancing rounds this year alone, for a sum of over $6 million. “I got fucked on stock,” said an affected stockholder, who wanted to remain anonymous.

Yikes.

Look, we just don't know enough to say that anything shady happened here, but it's pretty easy to see why an investor not involved in voting on this purchase might wonder about the motivation. At best, it makes an already questionable decision look worse. At worst, well... it's a bad, bad look.

At this point, it's hard to know how all of this will shake out. Activision Blizzard joins a number of other companies in the hunt to be the top spot for eSports coverage--including ESPN itself. While eSports can be just as exciting and dramatic as traditional sports, eSports brings unique challenges that mean that it needs to be covered in genuinely new ways. I think someone will figure that out eventually, but I'm just not sure that this purchase indicates that Activision Blizzard will be addressing those challenges. Time will tell if I'm proven wrong.