Overwatch League commissioner Nate Nanzer: Esports profits are light at the end of the tunnel

Nate Nanzer is the commissioner of the Overwatch League, and he hopes his particular esport will become the mainstream competitive league of choice for a global audience of esports fans.

The Overwatch League kicked off in January with a dozen teams that were organized into franchises from local cities. In the first week, the league generated more than 10 million viewers. By the time the finals came around in July, the league drew a global audience of 861,000 viewers per minute across TV and streaming platforms.

For its second season, the Overwatch League has added a total of eight new teams, and some sources say that the winning team owners in the most recent round bid anywhere from $30 million to $60 million to snag the franchises for their cities. (Nanzer declined to comment on that number).

Esports is expected to generate $1.7 billion in revenues by 2021, and the fan base is expected to grow from 395 million in 2018 to 580 million. And Nanzer’s job is to make sure that the Overwatch League is the top sport in the esports pantheon.

But first, all the esports teams have to start making money. Nanzer spoke at the Esports BAR Miami event, and I interviewed him there. He said that the period of investment is nearing its close, and the time of profitability for teams, particularly as big brands come in, is the “light at the end of the tunnel.”

Here’s an edited transcript of our interview.

Above: Nate Nanzer, commissioner of the Overwatch League.

Image Credit: Dean Takahashi

GamesBeat: Where is esports at now from your perspective? How much progress has been made for esports in general, and where does it still have to go?

Nate Nanzer: Even though esports has 20, 25, maybe even 30 years of grassroots events at this point, it’s really only very recently that there’s started to be this broad professionalization, I guess you could call it, of esports. The shift is to publishers looking at it as a stand-alone commercial opportunity. That’s what’s driving a lot of it. Is there an opportunity to create a professional structure on games that opens up your ability to sell sponsorships and media rights and merchandise and all those things.

That’s obviously very recent. What we’ve done with Overwatch League and what Riot’s done with LCS are the two highest-profile examples. It’s not to say that there wasn’t commercially-focused operations in esports before, but they didn’t own IP. Now you have the IP owners coming in and building the structure.

It’s still very early days. It’s impossible to predict where that goes, but if you think about the evolution of esports, we’re right at this interesting point now. You go to conferences like this and you meet a lot of people from traditional sports and traditional media. You realize there are things built up around traditional sport that have been built up over the course of 50, 60, 100 years. We’re still in very early days here in esports.

GamesBeat: It’s interesting to look at from the outside, looking at the Overwatch League and its foundation, and comparing it to other strategies side by side, like Riot’s league. They’re less local and you guys are more local. That can change things.

They just announced Mastercard as a global sponsor. It’s a sign of some of the things you talked about, how the sponsors are leveling up and the reach of esports is attracting the attention of non-endemic brands. It looks like there’s an opportunity to run with sponsors in different directions. They can go for something that makes a lot of sense globally, but you can tap into local opportunities that might not be within their reach.

Nanzer: The local thing, we think, is an important piece that’s been missing in esports, and it can help the entire industry grow and move forward. It came from looking at–when we were first designing the Overwatch League, looking at traditional sports, we were not just trying to understand how leagues make money, but also trying to understand how teams make money. Teams in traditional sports make money with revenue-sharing from the league, but most of their economics are driven by the fact that they have a stadium, an arena, where they’re selling tickets and VIP packages and concessions and parking and merchandise.

Above: The California Cup will make the Overwatch League’s off-season events into a regional competition.

Image Credit: LA Valiant/Immortals

The commercial side is one piece of it, but what that also does is it creates this anchor for all the fandom around the team. If you think about how international sports has become–I guarantee you, if you go to Old Trafford and watch Manchester United, you’ll see people from all over the world who’ve come to that event, because that’s the ultimate destination for their fandom, to go experience a game live. Why they want to do that is because–what’s more awesome than going and having a shared experience with 50,000 people that have the same passion you do?

Esports fans want that too. Some people think esports should go a different path. It’s digital. It’s online. That’s true, but every esports event I go to in person, like the grand finals at the Barclay’s Center–I was in Paris this past weekend at the Overwatch World Cup event. Those fans want to go to live events. They want to go meet other people who have the same passion they do. There’s something special about that.

The local thing, yes, is going to be good for teams in that it opens up additional sponsorship opportunities and revenue opportunities, but it’s really good for fans. Right now, if you don’t live in Los Angeles, Seoul, or Shanghai, what events can you go to on any regular basis? It’s important to give fans that touch point around the world.

Above: Nate Nanzer speaks with Saira Mueller of Dot Esports at Esports BAR Miami.

Image Credit: Dean Takahashi

GamesBeat: Peter Warman had an interesting line, with the hardcore games on the right and the accessible games on the left. NBA2K was to the left, League of Legends was to the right, and you guys were in the middle. Do you see that as an important position to hold?

Nanzer: Accessibility is super important. We’ve been spending a lot of time thinking about we can make the broadcast more accessible. At the grand finals, we had these map explainer videos we played before each map. It broke down exactly what you’re about to see. That type of content is going to be important for esports to break out, from an audience perspective, from just people who already play the game.

I don’t think esports gets a lot of the benefit of the doubt on this. People say, “Oh, esports is hard to watch.” Well, if I take you to your first hockey game, I’m gonna have to explain the rules to you. I have to explain what icing is and line changes and all that stuff. You’ll get it, and over the course of a game you’ll start to understand. But you won’t understand strategy and tactics and nuance until you get really deep into it.

Esports is the same way. I can explain the rules of StarCraft or Hearthstone or Overwatch, but it will take time for you to understand the nuances. With the content we create and the way we produce the broadcasts, we can do that in a way where it can be more accessible. That doesn’t mean making a product that’s not good for core fans. We think we can do both.

GamesBeat: We talk about how new all of this is. There are a lot of interesting questions about what the rules might be. I saw recently that Blizzard made a ruling on third-party services that could be used during tournaments by esports players, things that would show you your stats in real time and tell you to do something that could help your game result. “Use this power now.” That could be perceived as an unfair advantage.

Nanzer: Our policy is that we don’t allow any third-party software to be running alongside the game in a match. That’s why we took that action. The point you raise is the right one, though. This is all new. People are going to go out and create products and we’ll have to have discussions around what’s acceptable from a competitive integrity perspective.

Above: Overwatch League skins.

Image Credit: Twitch

GamesBeat: I was thinking about parallels. Maybe it’s like a football player with AR glasses that show him where the first down marker is.

Nanzer: [Laughs] Yeah, I’m guessing the NFL would not be okay with that.

GamesBeat: You have to know these things are coming. Technology is always advancing. People can figure out different ways to get an advantage beyond pure skill.

Nanzer: To me one of the reasons it’s so exciting to be in the industry now is how rapidly it’s changing. It’s amazing just to see the last three years I’ve been focused on esports. It’s completely different now. It’s exciting to work in industries that are evolving and changing that fast. There isn’t a playbook for this. We can learn things from traditional sports, but it’s not a one-to-one copy-paste scenario. It’s an exciting time.

GamesBeat: I was doing a call with Brendan Donohue at 2K. He talked about how their No. 1 priority right now is marketing to women players, to try to get them into NBA2K esports. We all know Riot’s had some problems on the culture front recently. Where do you think there are some opportunities around get a wider audience to be interested in esports?

Nanzer: It’s something we think about a lot. When we do events in Asia — we just did a World Cup event in Inchon, Korea — the team told me more than 70 percent of the tickets were purchased by women. We obviously have a big female fanbase. Overwatch is a game that overindexes on women players compared to some other games in the genre. But it’s still much smaller as a percentage.

We’ve been thinking a lot about things we can do at Blizzard to make sure the online environments our players play in are safe and welcoming and inclusive for everybody. We’ve instituted an endorsement system in Overwatch. We have an LFG feature now. That’s targeted to make sure people are having positive experiences in the game. I don’t think anyone’s ever going to eradicate toxicity from the internet 100 percent, but it’s something we’re focused on.

At the Overwatch League level we want to make sure everything we do is also creating a safe, welcoming, inclusive environment. We obviously had one woman player in the league last year. We just announced the first woman head coach in the league. We’re starting to see more and more women step into those roles. We’re in the middle of a transition period now. If we have this conversation in three to five years, I think it will be very common to see women playing in the top-tier leagues across all of esports, and in top-tier positions, whether it’s GM, coach, and so on.

One of the great things about esports is we don’t need create different competitions for men and women because of physical differences. We can have a mixed competition. I think that sends an awesome message.

Above: The LA Valiant and the San Francisco Shock face off in the Overwatch League.

Image Credit: Lionsgate

GamesBeat: Related to the Olympics, I know they brought up violence as one of their concerns about video games. Somebody pointed out that they have actual boxing going on.

Nanzer: We were talking about that earlier! They have sports in the Olympics that cause chronic traumatic encephalopathy. That seems pretty violent to me. But that’s been an ongoing debate for probably 30 years now.

GamesBeat: It makes sense to have some of these conversations, though. That’s where you could eventually go, or the stage you’re getting ready for.

Nanzer: Sure. Especially when you think about the brands that are now involved in esports, partners of ours. It’s important to have a point of view and perspective on these more complex community and social issues.

GamesBeat: Getting back to things that are relevant today, the notion that teams that should be making money, that everybody should be making money throughout the whole ecosystem here–do you feel like we’re getting to that point? Are we still in an investment period?

Nanzer: The answer to that question varies by the ecosystem you’re talking about. I can only speak for ours. Our goal was always to have a very narrow investment period and work to get teams to profitability as quickly as possible. We’re making great progress on that front. In our ecosystem, and I suspect in some of the other top-tier ones, we’re at the tail end of that investment period. We’re starting to see the light at the end of the tunnel. Teams have a pretty clear path to profitability in the franchise leagues where there are contracts and revenue sharing and those sorts of things. I can’t speak for the non-publisher-led, more open ecosystems, but in the closed ones I think there’s a pretty clear path there. We’re very close.

GamesBeat: I don’t know if you look at Warman’s stuff on Newzoo very much, but they had some interesting charts. How much money comes into the ecosystem in the traditional sports side of things from different streams, compared to esports. Where do you think we are as far as growing those? What do you think is different for esports compared to traditional sports?

Nanzer: Sponsorship is growing a lot. There’s a lot of sponsorship dollars that were going into traditional sports and are now starting to get allocated against esports. Media rights, there are a lot of questions even about the sports media rights landscape going forward, as OTT becomes a bigger thing. We’re happy working with Twitch.

A lot of big non-endemic brands–there’s always hesitation around being first at something. But now they’ve seen a lot of other brands do it and have positive experiences. It’s one thing that’s incumbent on the esports industry. Make sure that, when big non-endemic brands come in, they have a great experience.

One area where esports has lagged behind in a major way, but I think will be an increasingly big part of the pie–I know for us, and I hope others get their act together on this, it’s merchandise. It’s amazing to me how hard it’s been to buy a jersey of an esports team. Our program this year, I think it was a good start. It could be a lot better. We have plans to make it a lot better. But at least you had–all of our teams, you could very easily go buy their jersey.

One of the things that’s exciting to me about esports, you have an entire generation of kids growing up playing and watching other people play video games. I know that there are a bunch of kids all over the world whose first sports jersey ever in their life was an Overwatch League jersey this year. That’s really cool. It shouldn’t just be that way for Overwatch. All across esports, we have a real opportunity there to give fans a chance to show their fandom outside the game.

Above: Overwatch League’s Seoul Dynasty, the South Korean representative in the new major esports venture

GamesBeat: The ESA has that chart showing the average age of a gamer, around 35 or 40 now. Everyone’s becoming a gamer. It’ll be interesting to see where the age of esports fans ends up.

Nanzer: It’s very young right now. Very broadly, what’s happening is, everyone under the age 50 has had video games in their lives forever. There’s never been a moment where you didn’t have some kind of game in your life. Take that out 20 years. Pretty much everyone on earth who’s alive is going to have had exposure to video games at some point.

When I’m talking to people about investing in esports, the longevity of it, to me it’s not even a question. There’s the train, and you can get on it, because that’s where it’s headed. A 10-year-old right now who plays Fortnite 20 hours a week and then spends 60 hours a week watching Fortnite on YouTube and Twitch, that’s not going to magically change when he turns 35.

I hate doing the “focus group of one” thing, but I look at my son and all his friends. They like sports, I guess? They play a lot more video games, though, and they’re spending a lot more time on YouTube watching people play video games. They have zero interest in watching any content on television that isn’t someone playing a video game.

Disclosure: The organizers of Esports BAR paid my way to Miami. Our coverage remains objective.