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Overwatch League will disappoint investors, stock market analyst downgrades Activision

The Overwatch League is an incredibly ambitious initiative that Blizzard is enforcing to raise the standards of the esports industry. Everything carries risk but the extremely high buy-in cost placed by the company has only ended up dividing the community.

Since its announcement last year, there are those who believe that the business model will yield fruits and those who have doubts about sustainability. In short, Blizzard is asking esports organizations to invest as much as $20 million into the Overwatch League for returns that may or may not happen in the long term.

While addressing investors on Monday (via CNBC), the financial Cowen Group reduced its rating for Activision Blizzard by pointing out that the Overwatch League carries immense risk and may perform worse than expected.

“As this is the first time a publisher has ever attempted to launch a major esport from scratch, we expect OWL 1.0 to be a learning experience, and thus believe that the probability of reality failing to meet investor expectations is relatively high,” the firm’s analyst Doug Creutz stated.

It is important to note that the same financial group has been giving Activision Blizzard an outperform rating for the last nine years. The shares have risen more than 600 percent since 2008. The report further indicates that the value from other games, such as Call of Duty: Black Ops 4 from Treyarch, is likely to help offset the potentially high losses incurred by the Overwatch League.

In March, leading global financial firm Morgan Stanley estimated the Overwatch League to generate an annual revenue of as much as $100 million. However, this is based on the assumption that an average viewership of at least 72,000 is achieved for the regular season and 7.7 million for the playoffs. The current audience is nowhere near the minimum marker.