Mentioned in this article Games: Hearthstone, Overwatch Teams: Splyce

Activision Blizzard has finally come out with some information on the Overwatch League after a long period of silence.

Now, multiple sources have said that Activision Blizzard thinks the cost of a franchise and spot in the league could cost between $2 million and $5 million in smaller markets and estimates for places such as Los Angeles may be in the vicinity of $30 million. This has team owners worried as experts say the game is simply too young to support that kind of investment. Todd Merry—CEO of Delaware North Cos.—acquired a stake in the Splyce franchise in February:

“This is the first game that Blizzard’s come out and said, ‘we want to make this the next esports phenomenon.’ I don’t think you can tell the market this is going to be a phenomenon. You have to let the market decide that.”[perfectpullquote align=”right” cite=”” link=”” color=”” class=”” size=””]This has team owners worried as experts say the game is simply too young to support that kind of investment.[/perfectpullquote]

A great deal is hinging on Activision Blizzard making this league a success as it is one of the highest profile actions it is currently undertaking from an investor view. Activision Blizzard—ATVI on NASDAQ—is currently at a 12 month high following the success of Overwatch as a retail product and the success in the mobile markets of Candy Crush and Hearthstone. Hearthstone is also continuing to increase it’s revenues with a total figure in 2016 just short of $400 million.

Investment advice site Seeking Alpha is now suggesting investors short Activision stock citing the decline of Call of Duty as being a reason for the conservative approach the company is taking as a whole. The site suggests that the spotlight on Overwatch is obscuring the areas of the company strategy that are failing and advises earnings-per-share numbers can be misleading as a measure of a company’s values.

This is relevant as the EPS numbers of Activision Blizzard were higher than anticipated—partially due to a lower tax rate than estimated—but the publisher’s full year revenue for 2016 was significantly lower than expectations. If Activision Blizzard can make the franchising of the Overwatch League as lucrative as it is claiming for both themselves and team owners, this will further increase the overall good feeling of the market towards Activision. Should it fail to do so, this could result in the rose-tinted glasses being removed as investors focus on the 50% sales decline of Call of Duty: “Infinite War” when measured against it’s predecessor.

The reality of this situation is that while esports teams are balking at the reported investment requirements for the franchise buy-in, traditional sports team owners may see the figures as low compared to the Forbes estimated average cost of an NBA franchise at $1.36 billion or the average cost of an NFL franchise at $2.34 billion. Blizzard have stated that they are looking to create a sports league and appealing to the bigger players in the sports market with an environment analogous to the one they already operate in, could be all that’s needed to make this a reality.