Overwatch and NA LCS have finalized their inaugural franchises. What does that mean for esports?

After months of speculation, the lineup for the two largest franchising leagues in esports, Riot Games’ North American League Championship Series and Activision Blizzard’s Overwatch League, have been finalized. As the battle for media rights in esports heats up, the competition between the two mega-leagues is likely to define the shape of the industry for years to come.

Which teams will be competing where, and why? And what can these lineups teach us about the state of esports today?

As this diagram from TNL Media shows, twelve teams will compete in the inaugural season of Overwatch League, which is expected to begin early next year, and ten will compete in the next season of the North American League Championship Series. Only two organizations, Cloud9 and Optic Gaming, have managed to secure a spot in both leagues. Many established organizations, including Dignitas, which was acquired by the Philadelphia 76ers in 2016, failed to earn a spot in either, a devastating blow to their long-term ambitions in esports.

Riot and Blizzard took different approaches to filling out their respective franchising leagues. Because Overwatch League has yet to play its first match, Activision Blizzard sought new investments of $20 million from both longstanding esports organization (Cloud9, TeamEnVy, etc.), as well as new investors, especially major American sports franchises, interested in getting into an esports league on the ground floor. Riot, by contrast, allowed organizations to submit applications for review, which Riot judged according to a series of publicly available guidelines, including financial health. Accepted teams will pay a $10 million franchising fee, and participate in revenue sharing.

We should be wary of drawing any firm conclusions when examining which teams will compete in which leagues. Some, for example, have suggested that Immortals, a prominent VC backed team, was denied a spot in the NA LCS because it was among the first organizations to invest in Overwatch League. Yet both Cloud9 and Optic Gaming will compete in both leagues, so merely participating in Overwatch League isn’t inherently disqualifying as far as Riot is concerned.

Still, there are some trends that emerge when looking closely at where certain organizations have ended up. On average, the NA LCS will feature older, more established esports organizations that have a long-term relationship with League of Legends, like Team Liquid, CounterLogic Gaming, and Team Solo Mid. These organizations date from the beginning of the current esports boom, and began their lives as small, grassroots organizations that only later attracted investment. Virtually every organization in Overwatch League, by contrast, began either as a venture-backed esports organization (e.g. Team NRG, Immortals), or is connected to a major sports franchise.

Both leagues are a major bet for investors, and, of the two, only the North American LCS is a proven entity. Despite its enormous popularity, Overwatch is still working hard to convert its massive player-base into an active audience. League of Legends, on the other hand, is the #1 esport in the world, drawing in an estimated 43 million viewers during its 2016 World Championships. For every esport that succeeds, 10 others fail, and perhaps it’s unsurprising that many of those who have been around esports the longest are putting their money down on a game whose capacity to energize fans is not in doubt.

Disclaimer: Itzik Ben-Bassat was a C-level executive at Activision-Blizzard and during his time with the company, has been in charge of its esports strategy.

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