Behind Blizzard's Overwatch League Are Five Questions the Whole Esports Industry Is Asking

How do you make money? How do you set the rules? How do you recruit the best players? Esports is an industry still growing up.

At the Park Hyatt in Shanghai's World Financial Center, Nate Nanzer, Blizzard Entertainment's esports director for Overwatch, gathered people from China's esports business for a closed-door meeting.

In the room were owners of esports team organizations, executives from streaming platforms like Douyu, Zhanqi and Panda TV, even a few people from traditional sports.

Nanzer laid out Blizzard's plan for a new Overwatch League and invited them to work with it — much as he had done a month earlier at BlizzCon in Los Angeles, in front of a crowd from the American esports industry. Blizzard wants a league unlike anything it has run before: cities would own the teams that represent them, a long off-season would leave room for third-party tournaments, and there would be a pre-season training camp.

Nanzer is not the only one thinking about this. Almost everyone working in esports anywhere in the world is thinking about the same things.

That includes Yao Ming. He sat in the second-to-last row, at the far edge of the room, and everyone knew he was there — and not only because of his height. During the questions at the end, he volunteered three of his own to Nanzer, each about a specific detail of how the league would be run.

Yao Ming's interest in esports is one small sign of a bigger shift. Traditional sports moved into esports a while ago. This September the Philadelphia 76ers became the first traditional sports franchise to buy an esports team, and before that NBA players such as Rick Fox had already bought whole esports teams in their own names.

Traditional sports is not the only sector moving in. In late March, Alisports announced it would hold the World Electronic Sports Games (WESG); in September, the Ministry of Education added a major in esports and management; in December, Tencent announced Tencent Esports, the strongest endorsement the industry has had.

Yet in an industry this young, nobody knows what doing it right looks like. Blizzard's plans for the Overwatch League happen to touch several of the most important questions: what does it actually take to build a successful esports title?

The League: Does It Need Promotion and Relegation?

For a lot of sports fans, promotion and relegation matches are one of the great pleasures of the game: in plenty of sports a relegation battle is more exciting than a league final.

Esports is no different. Take the League of Legends Pro League (LPL), China's top-tier League of Legends competition: after the spring and summer splits each year there are promotion and relegation matches, and teams fight hard to stay up. It is thrilling to watch.

But unlike most leagues in China today, the Overwatch League will have no promotion or relegation. That means you never have to worry about your favorite team being dropped to a lower division, or out of the league entirely, after one bad season. It also means some teams could lose their motivation and coast, the way some NBA teams do.

Nanzer said the reason was team survival. Esports teams cannot earn the money they need, he said, because most of their income comes from sponsors.

"With so many teams around the world chasing a limited pool of sponsors, it isn't easy. No sponsor is going to sign a two-year deal with a team that might be relegated out of the league in three months," Nanzer said.

So Overwatch chose fixed slots, hoping to give investors, fans and players more confidence.

"Promotion and relegation really is exciting — I love the Champions League, for instance… but the English Football Association has 153 years of history behind it… A system like that takes time to build. Overwatch is a game that is only six months old. To build a league system that lasts, we need to give teams, players and fans stability. We don't think promotion and relegation is a bad system. We just don't think Overwatch needs it right now," Nanzer said.

Esports has argued about promotion and relegation for years, and not every company has landed where Overwatch did.

This year Susan Tully, CEO of H2K — one of the four semifinalists at the 2016 League of Legends World Championship (S6) — objected to the North American LCS (NA LCS, the top professional league in North America, much like the LPL). She said it was deeply unfair for a team to lose its place over three or four months of poor form, and that the practice hurt players and fans alike. It also, she said, pushed teams to scramble for seasoned veterans and ignore the rookies coming up through lower-tier competition.

In early November an email sent to Riot Games by most of the teams in the North American and European LCS leaked. In it, the teams asked Riot to scrap promotion and relegation in the LCS and switch to a fixed 10-team format modeled on the NBA. Riot replied that it would not consider dropping the current relegation system before 2018.

What Overwatch is trying may offer a new answer to that argument.

Teams and Clubs: How Do They Actually Make Money?

The argument over promotion and relegation is not really about whether a young game needs a cutthroat elimination system that scares sponsors off. It is about the fact that most teams, without a sponsor, cannot make money and cannot survive at all.

Teams that folded when a sponsor pulled out are beyond counting. This year's clearest case came from Korea's StarCraft scene. StarCraft is close to a national game there, and StarCraft II is hugely popular too, played at a level far above the rest of the world. Yet this October, shrinking audiences and match-fixing scandals drove sponsors away, and Korea's StarCraft II teams almost all disbanded. Even the StarCraft II divisions of storied organizations like SKT and CJ were not spared.

Even in a country where StarCraft is close to a national sport, a team can barely survive on its own without a sponsor behind it.

Beyond prize money, the Overwatch League's answer has two parts: pay players a minimum salary and share league revenue with them; and make teams local so they can earn more on their own. Blizzard wants teams built around cities, the way Chinese football has Shanghai Shenhua and Guangzhou Evergrande.

A tie to a city binds fans more tightly and makes matches better, setting up future grudge matches like a Beijing-versus-Shanghai showdown. It would also spread the Overwatch League into more cities, instead of concentrating nearly every match in Shanghai and Beijing, as happens now. More people in more cities would then go out and watch esports in person, close to home.

Further out, Blizzard wants home venues for teams in the cities they belong to, something like esports arenas. In the ultimate version of the plan, esports teams would play home and away the way football clubs do: a Shanghai team would fly to New York to play a New York Overwatch team on the road.

All of it is meant to earn teams money. Look at Manchester United's financial reports to see how much matchday revenue matters: by selling tickets, jerseys and other merchandise at home games, and selling fans parking, food and other services, a club like Manchester United takes in more than 100 million euros a year.

Money like that can even push a team to play better: bad results mean fewer matches, and no home games means no money.

Offline home venues may sound far-fetched, but they are a real trend in esports. League of Legends made its own localization push this August, except that it settled on universities rather than cities: using the rivalries schools already have to spread the game and strengthen fans' sense of belonging.

As for those home venues — the esports arenas that look so expensive — Alibaba and Tencent are already in the business. In late July, Alisports said it would build its own esports arenas, essentially an upgraded internet café, opening 40 to start and expanding to 10,000 across the country. And when Tencent announced its Tencent Esports interactive-entertainment division earlier this month, it also said it would work with Wangzhe Huyu and Taidu Technology to build 1,000 esports arenas in small and mid-sized cities.

On the face of it, Blizzard and its teams should not struggle to find venue partners. But the details are tangled. Yao Ming asked one of them: who owns the arena, Blizzard or the team?

Others remain — how venue revenue gets split and by what standard; which Chinese cities Blizzard wants Overwatch teams and their home venues in. These are problems that will take a long time to settle.

Organizers: First-Party or Third-Party?

The 2017 Overwatch season will start around the third quarter, but after that the Overwatch League will run every year from March to August, with the finals in summer. Next to League of Legends, whose professional league runs all year, and Dota 2, with four Majors spread across the seasons, a half-year league is short.

Part of the reason is the age of Overwatch's audience. Blizzard says its player base is the youngest among its own games and its competitors', and many of them are students who have classes to attend. That makes summer vacation the stretch Blizzard cares most about. More important, it wants to use the off-season to build up a large number of third-party tournaments — events Blizzard does not run itself. Some are international; most are regional.

The Overwatch League itself will not be split into regions. Unlike League of Legends and Dota 2, which divide the world into separate regional leagues, an Overwatch League season will put teams from different countries against each other from the opening match: a Chinese team could face a Korean team in its first game.

Regional and third-party tournaments will fill in around it. This October, for instance, one of esports' traditional powerhouses got there first: the Overwatch APEX pro league, run by OGN, the tournament operator owned by Korea's CJ E&M, under license from Blizzard. In China, Banana Gaming — founded with money from Wang Sicong — held the APAC Pan-Asia-Pacific pro championship, also under license from Blizzard.

"The off-season is there to make sure there is a third-party tournament ecosystem outside of Overwatch itself. The Overwatch League is the peak of competitive play, but you need a strong ecosystem beyond it too. You can't build only the tip of a pyramid, right?" Nanzer said.

Third-party tournaments have a reason to exist. "Compared with tournaments run by game publishers, third-party events are better at showing that the competition is fair, rather than letting matches turn into entertainment and close themselves off," said Qin Yuan, chairman of Heise Shikong. His company had just held the China Top national cup, meant to be a pure, multi-game sporting event. First-party tournaments mostly feature the publisher's own game, so multi-game events are largely left to third parties — which fits the principles of fair sport and real competition better.

The reality, though, is that across most esports titles third-party tournaments keep losing ground to the first-party events publishers run.

This shows up most clearly in the most mature title of all, League of Legends, where Riot's own tournaments take up most of a viewer's year. The LPL system in China is so complete, and its events so varied, that you have to admire Tencent's operating skill; third-party events such as Nest (the National Electronic Sports Tournament) and IET (the Yiwu International Esports Tournament) count for far less by comparison. The most famous of them all, the World Cyber Games (WCG), held its final edition in 2013. The third-party events with real influence left in the world are ESL, DreamHack, MLG and the like.

The root of it is that third-party tournaments living on sponsorship struggle to turn a profit; the ESLs that survive all have rich sponsors behind them. For a publisher, the cost of running a tournament counts as part of operating the game more deeply, and the game's own pull needs no proving. Publishers can put up bigger prize pools and a bigger show to win players' attention — and influence over them.

So unless Blizzard offers third-party organizers better terms or more support, a strong third-party tournament ecosystem will be hard to build. So far, in Overwatch, Blizzard has run tournaments only by licensing them out, and it has announced no other kind of partnership.

On prize money, Nanzer said all he could reveal for now was a seven-figure pool in US dollars, and that Blizzard does not want the size of the purse to be the point of the Overwatch League. As he put it: "You know the Super Bowl, but do you know the Super Bowl's prize money?"

Esports: How Do You Balance the Competition?

The reason the Overwatch League has no regional divisions is to keep the whole thing international from beginning to end, which helps even out the strength of teams.

"In esports, a lot of the time you only play inside your own region, you get used to the patterns and habits there, and then you go somewhere else and you're completely thrown by the other side's style, tactics and skills," Nanzer said.

That causes plenty of problems: some teams look unbeatable at home and wilt the moment they go abroad, and international tournaments often turn into one side shutting the other out completely. Two sayings common in Chinese esports circles catch it: "an expert in civil war, a novice in foreign war," and "it was 3-0 anyway — even I could have done that."

"We want to close the gap between teams with international matches that run all year," Nanzer said — meaning not just the Overwatch League but third-party tournaments too.

Unlike games where a few powers already carve up the field, Overwatch is new enough that the skill gap between regions is not yet that wide (though Korea still stands out).

At the Overwatch World Cup held during BlizzCon, a country with no esports tradition, Sweden, played well enough to reach the final. Thailand also did well, reaching the semifinals, and one of its players, Mickie, was signed by the storied American team EnVyUs.

Whether the Overwatch World Cup returns next year is unknown. Nanzer said that if it does, it might become an all-star format, with each country picking its strongest players. "Country against country is still rare right now. It's something worth working toward."

But internationalization is not always good. When one region is far stronger than the rest, letting players mix freely makes matches dull to watch — most StarCraft finals end up as one Korean against another, and matchups that monotonous cost the game its players elsewhere. Riot does not allow League of Legends players to compete outside their region in third-party tournaments, which also cuts down on the exchange between players from different countries.

Every publisher has to trade off watchability, freedom and balance.

Internationalization alone cannot fix balance in esports, of course: the content of the game matters just as much. As a multiplayer online game, Overwatch has to keep adding maps and heroes to stay alive, and the difficulty of a map and the strength of a hero decide matches. No team wants to attack on a map built for defense, and no team wants to leave an especially strong hero to its opponent.

Blizzard has to fix those imbalances with patches. But frequent patches are hard for pro players to adjust to, and they can make matches hard for viewers to follow at all.

Blizzard's answer is to keep the tournament build slightly behind the version on live servers, and to avoid big balance changes during the league season so the schedule holds. Blizzard also plans to make the game easier to watch, with more camera angles, statistics overlays and the like.

Ordinary Players: How Do You Actually Become a Pro?

Finding new pro players is a problem for every esports title; Korea's StarCraft II scene withered partly for want of fresh blood. For a game as new as Overwatch, how an ordinary player becomes a professional matters even more. Nanzer and his team want to build an Overwatch rookie training camp.

They plan to borrow the NFL's method. Every year the NFL holds the Scouting Combine, a joint testing camp that evaluates prospects before the draft. There, players are measured on basics like height, weight and sprint speed, and teams use the results to pick out the ones they want in advance. Top pros are invited to the Combine to spend time with the prospects.

"Of course we're not going to test your bench press the way the NFL does. We have our own measures: reaction speed, dynamic visual acuity, problem-solving, logical thinking. That includes in-game mechanics too — how accurate your Roadhog hook is, which obviously matters," Nanzer said. "But we'll also look at a player's team skills, communication for instance, because Overwatch is a team game after all." Blizzard has not yet said what the tests will be or how they will work.

Draft candidates will be drawn from players near the top of the Overwatch ladder and from strong showings in third-party tournaments. Blizzard may also hold online rookie qualifiers that need no fixed team, to feed the camp. To give solo players a fair chance, at the same ladder rank it will favor those who queue alone over those who play with a set group of friends.

Korea's KeSPA (the Korea e-Sports Association) brought this kind of draft to StarCraft back in 2005, and it produced pros of legendary rank: Bisu, JieDong, Flash. The draft ran until 2013, when too few players entered and it stopped.

Now that esports is borrowing from traditional sports, NFL- and NBA-style drafts are coming back. Early this year, China's League of Legends scene announced a 2016 trainee draft for professional clubs and picked 18 rookies in May. In November, the North American LCS ran a week-long rookie scouting event, inviting the top 20 players on the North American ladder to train and scrimmage in person with top European and American teams; 18 of them were eventually taken on as LCS substitutes.

The trouble is that finding rookies is one thing and using them is another. For one, a player may break his contract at any time: streaming gives pros a way to earn money other than competing, so slacking in practice, walking out on a team, even retiring to stream for a living are all live possibilities. For another, because teams live on prize money, most dare not field rookies, preferring to pay big for experienced veterans with results behind them — poaching them in breach of contract if need be — and sometimes putting blind faith in imported foreign talent.

The "old guard" in Dota 2 and the Korean imports in League of Legends are perennial flashpoints on gaming forums, but clearly more people want to see homegrown rookies win. When Wings, a Chinese team of newcomers, took TI6, the top world championship in Dota 2 this year (their form has slipped since), it thrilled plenty of people inside and outside gaming. This was a team that barred its players from streaming and kept to a fixed practice schedule, physical training included. More disciplined rookie teams like that would plainly be good for esports.

But fundamentally, teams need support beyond prize money before they can give a rookie a chance on the battlefield, which brings us back to the earlier question of how teams make money. In an industry as young as esports, the problems are links in one chain; you cannot cure them one symptom at a time.

Through the whole interview, the line Nanzer used most was "we don't have a specific plan yet," or "we can't share the details of our plan yet."

All Blizzard is sure of right now is its direction — what it wants to do. The Overwatch League's approach is not necessarily the right answer to any of these questions, but it does tell everyone what questions have to be asked to build this industry.

And whoever hands in the best answers will be the biggest winner when esports comes into its own.

Cover image: Overwatch League