The Esports Winter is a colloquial term used to describe an industry-wide market correction in esports which has resulted in layoffs, downsizing and beloved companies shutting down. The phenomenon was first reported by the LA Times in December 2022. Due to the lack of earning potential in esports, many companies in the industry had difficulty raising funds.
The article mentioned terminations within prominent esports organizations such as TeamSoloMid (TSM) and 100thieves. It also touches on organizations that have dropped premier titles, such as Evil Geniuses pulling out of Defense of the Ancients 2 (DOTA 2) and Misfits Gaming Group who sold their League of Legends European Championship slot in July.
The LA Times also highlighted FaZe Clan’s fatal decision to go public as a Special Purpose Acquisition Company (SPAC) which led to an 80% stock drop and the multiple woes Activision Blizzard faced in Call of Duty (CDL) and Overwatch League (OWL).
Since the article was published, Esports Winter has trudged along without any sign of slowing down, claiming new casualties and putting some previously mentioned organizations in even more precarious positions.
TSM and Astralis Sell League of Legends Slots
TeamSoloMid (TSM), once heralded as the most valuable esports organization according to Forbes, sold their League of Legends Championship Series (LCS) slot for approximately $10 million to Shopify Rebellion.
The announcement was followed by yet another round of TSM layoffs.
Before TSM sold, Riot Games made significant changes to the LCS broadcast format in December 2022. Riot announced the changes under the guise of combating broadcast overlap between titles. The changes put LCS games on Thursday and Friday at 12:00 PM PT, a time where target audiences were either working or at school. The nonoptimal broadcast time resulted in record low viewing numbers for the LCS Spring and Summer.
The LCS Spring had the lowest recorded viewership numbers seen thus far, with 14.8M hours watched and 109K average viewers, and the LCS Summer split amassed even lower numbers with 11.9M total hours watched, with an average of just under 77,000 viewers. In comparison, LCS Summer 2022 amassed about 19M hours watched with a rough average of 116K viewers.
Astralis followed in TSM’s footsteps, and sold a majority stake in their League of Legend European Championship (LEC) slot to Karmine Corp for 129 million DKK (18.3M USD) on Oct. 18. Although Astralis doesn’t bear the same clout as TSM, the exit of multiple teams from League of Legends is jarring for an esports that was once deemed such a hot commodity.
Activision Blizzard Shut Down OWL
After a tumultuous 2022 sparked by sexual harassment allegations that saw almost every sponsor renounce affiliation with Activision Blizzard, the once-storied video-game publisher has had to shutdown its flagship league.
The Overwatch League (OWL) has been in operation since 2018 and garnered the investment of multiple endemic esports companies such as Misfits, Cloud9, Immortals, NRG and Gen.G. All of the original 12 Esport organizations that participated were asked to pay approximately $30 to 60 million to join the league, but despite all the financial backing, the OWL has failed to turn a profit.
Shortly before Activision Blizzard revealed their second quarterly report for 2023, OWL teams saw the initial buy-in fee rescinded and eventually offered a severance. On July 19, 2023, Activision Blizzard announced that it would offer a $6 million severance to Overwatch team-owners in an attempt to shut down operations for the OWL.
In Activision Blizzard’s second quarterly report for 2023, Call of Duty and OWL account for less than 1% of Activision Blizzard’s revenue.
In the midst of the OWL meltdown and the exodus of sponsors, Activision Blizzard’s stock dropped 40% and was scooped out of the depths of purgatory by mammoth multinational enterprise Microsoft.
As Microsoft’s acquisition of Activision Blizzard is finalized, it’s difficult to see how a profitless endeavor like the OWL will survive.
Another Round of Layoffs and Shutdowns
Here’s a list of layoffs and shutdowns that have occurred throughout the esports space in 2023:
– By The Summit (BTS), a production studio and tournament organizer has announced that it will layoff all staff and shut down.
– The Guard, a North American organization co-owned by Stan Kroenke, has closed down despite qualifying for Valorant Champions Tour.
– In February 2023, FaZe Clan had a wave of staff layoffs.
– In October 2023, TSM experienced layoffs.
– In January 2023, 100thieves faced a wave of layoffs.
– In July 2023, Esports Engine, an esports production company, reportedly experienced layoffs after being acquired by ESL FACEIT Group.
– In June 2023, Misfits rebranded away from esports.
What’s Next, Impending Doom?
Although it’s easy to witness the ongoing market correction and plainly declare that Esports will die or idyllically hope that Esports will eventually prosper, the conjecture misses the point entirely.
If the Esports Winter has shown organizations and game publishers anything, it’s that there might be no going back to how things were.
The VC companies and major league sports owners who saw no return on investment (ROI) from OWL will not be coming back to Esports. Activision Blizzard will not recover from the failure of the OWL; they are getting bought out by Microsoft. All the people being laid off due to unsustainable business models from organizations would do well not to come back to Esports.
The Esports industry will have to limp to the next source of steady funding. One controversial prospect is Saudi-owned company, Savvy Gaming Group, who ran their second annual multi-game esports festival in Riyadh earlier this year. Many esports organizations look to embrace a faustian-pact with the Saudi-owned company in order to stay afloat.
Jason Garcia Escobar is a Sports Staff Writer. He can be reached at jasonag3@uci.edu.