How does Overwatch STILL make Money?

“Hold on a second, what?” “I can get tokens just for giving my guesses
on the match? Don’t they try to sell these things?” “Yep. Definitely still selling them.” “Wait; Then how the hell do they still make
money?” That is the question that I sought out to
answer. And no, this is not a random skit I came up
with for the sake of adding backstory to an otherwise one-dimensional video- I genuinely
didn’t know how Overwatch is still making money, prior to researching for today’s
topic. I mean, okay, I think we all know about a
lot of the different things they are trying to sell us, but most of us probably never
sat down to try and quantify any of them.

And that’s what I want to do today. I went out and tried to find every single
revenue stream that can be associated with Overwatch. Everything from ingame purchases to merchandise
and franchising- I think I managed to find most of them. And if I did happen to overlook something,
as always my friends: Feel free to let me know, down in the comment section below. But until then, let’s begin. Before we can find out how much money Overwatch
is generating, we need to find out how much Blizzard has spent making it. While finding definitive figures for most
of the things we’re covering today is rather difficult, estimating the overall development
cost of the game is actually on the easier side of things to do. Even if Activision Blizzard does not publicly
announce the exact sum of money they spent on the creation of Overwatch, we know how
expensive it is to make video games on average anyway. But before Overwatch was even on the table,
we have to talk about “Titan”. Overwatch became what was originally supposed
to be an MMORPG, and internally, they referred to it as “Project Titan”.

“Development costs for Titan may have amounted
to tens of millions, perhaps $50 million or more. This is not an unusual event, however. Blizzard has cancelled several games in various
stage of development in the past.” explained independent analyst Billy Pidgeon. What remained of Project Titan was eventually
turned into Overwatch, and as we all know, it became a smash hit at launch. The article quotes another, even higher estimate,
of 70 to 140 million dollars, which, for the sake of argument in a “worst case scenario”
is the figure that we’re gonna be using for today.

But that only covers the expenses of the 7
year project that is Titan itself. Two years of development followed the cancelation
of the first game, until Overwatch eventually emerged. Which is estimated to have cost another 15
to 25 million dollars. So if we assume that Blizzard has spent up
to 165 million dollars until Overwatch finally released- Did they make that money back? Well, I think it’s no secret to any of us
that they did. In the first year of the game launching, they
have sold over 25 million copies and reportedly made over 1 billion dollars in revenue. Including us buying alt accounts over and
over again, the game has sold over 40 million copies by 2019. If we all paid 40 bucks per copy, that would
make for up to 1.6 billion dollars in revenue off of game sales alone. Which I don’t exactly believe to be accurate
simply because the game went on sale like a hundred times, but then again, it cost 60
bucks on console for a very long time, so..

I do, however, believe that it is reasonable
to assume that most of the sales have taken place before they reduced the price permanently
to 20 bucks on PC. Anyway, 1.6 billion is gonna be our estimate
for now, but take it with a grain of salt. At the end of the day, all of us assume that
the big money is not to be had with game sales, but with microtransactions, right? And a lot of players believe Overwatch to
have popularized the modern day loot box, so they should be swimming in money! Well, funny that you say that..

Because just a couple days prior to me starting
the research for this video, SuperData published a report that attributed 1 billion dollars
in microtransaction revenue to Overwatch. Which, you know, sounds like a lot, but let
me put that into perspective for you. That is not the money they made this year. Or even in the entirety of last year. This is the entire microtransaction revenue
they made, since launch. It took them 3 years to make 1 billion dollars
through ingame purchases when the launch year of Overwatch already boasted 1 billion in
revenue. Meanwhile, FIFA’s Ultimate Team microtransaction
system is making 900 million dollars a year. Just off of ingame purchases, without even
considering game sales. Well, perhaps not for long considering all
the legislations that are currently being discussed. And need I remind you that Blizzard has added
League Tokens to the game? So the 1 billion dollars they made through
ingame purchases isn’t even limited to just loot boxes, it also includes all the League
Skins that have been paid for.

The fact that they have expanded their offering
of ingame transactions itself should show us that Loot Boxes were not making as much
money as they would’ve liked. But now, next to giving out League Tokens
for watching the League itself since launch, but also giving us a chance to earn tokens
by voting on different outcomes of matches- I think it is safe to assume that they’re
not banking on microtransactions to be their big money makers. And this is where diversification comes into
play. Diversifying revenue streams simply means
that you don’t want to rely on one single source of income, in the event that this bridge
collapses. To give you a very real-world example, as
a Content Creator, I primarily make my money via the ad business on YouTube. I make videos, YouTube puts ads on those videos,
and I get a cut of the revenue they made by serving these ads.

Now, if you were to pay for a membership on
my channel, then I would no longer be reliant on ads alone, right? At this point I have diversified my income
away from the ad business. However, that is not quite how that works. And that’s also why League Tokens aren’t
a step of diversification away from Loot Boxes either. Because all of my revenue is still coming
from YouTube. And while I appreciate everyone who has signed
up for a channel membership (and now gets to enjoy early previews and sneak peeks of
upcoming videos on my Discord and in the YouTube Member Exclusive Community tab), a true diversification
that you will often see comes in the form of Patreon. Creating a completely separate stream of income
that would still function, should something go wrong with YouTube. Besides that, you will also see a lot of YouTubers
livestreaming on Twitch and selling merchandise over third party platforms.

In that same vein, Blizzard does not want
to be relying on us buying loot boxes alone. They want us to get attached to the IP. And this is where the really interesting part
of the video begins, because I am quite impressed with the amount of revenue streams they have
created. While merchandise would be an obvious one
to start with, I want to talk about the Overwatch League first because.. Quite frankly, there are some really big numbers
to cover. And if you saw what I saw then you’d already
know why we wanna start with the League. The League itself has a number of sponsors
supporting the show, on top of being broadcast on ESPN and Disney XD.

But of course, the partnerships don’t end
there. Twitch itself has joined forces with Blizzard
to be the exclusive live streaming platform of choice for a number of Blizzard eSports
events. Not only are they running ad breaks on the
platform itself, but they are also selling the exclusive Overwatch League All Access
Pass. And its integration is only possible because
of that partnership. Overwatch League is where we know big stacks
of money are being put on the table. In its first season, acquiring an Overwatch
League Franchise cost the owners 20 million dollars upfront each. is citing 30 to 60 million
dollar bids for becoming an Overwatch League franchise in the second season.

And what do they get for that money? Well, as far as I remember, Blizzard is deeply
involved in creation each and every OWL franchise. That’s why the promotional material across
the board looks very uniform. They were all made in house. Also, remember the League Tokens I talked
about? Back when they were introduced, Blizzard said
that they take 50% of the revenue generated by those sales, and the other 50% is distributed
among the teams.

While I don’t think they ever commented
on the specifics of that deal, a lot of people are suggesting that, no matter which item
you buy, you are ultimately supporting all of the teams equally. So even if, let’s say the LA Gladiators
are selling the most ingame skins, every franchise in the League is still getting the same cut
off of all the sales combined. At least that’s what we’re assuming. Every team itself obviously has the option
to seek out individual sponsors, which you can see presented on their jerseys. And I’d be hard pressed to believe that
they don’t see any of the ad money that the League is generating via ad breaks on
Twitch and integrated ads in the show itself.

Oh, and ticket sales. Of course. We are so used to the sale of digital goods
and ads, that sometimes, we forget that people actually physically go to these events. “I wouldn’t know what that feels like,
I sure as hell never leave my room.” The verdict is estimating up to 800.000 dollars
of revenue for ticket sales this season, including the markup for special events like the playoffs. Doesn’t seem like a lot for a company that
made over 7 billion dollars last year, but hey, it all adds up. And speaking of things that add up: Merchandise. Obviously you can buy Overwatch T-Shirts and
accessories over on their store, but that is kind of a given at this point. Let’s take a look at all the third party
merchandise that you can buy, outside of just the Blizzard Store. You can get Razer peripherals in Overwatch
design. You can get Overwatch Nerf Guns.

You can get Overwatch Lego. And hell, you can even eat Overwatch with
a variety of Kellogg’s products including Poptarts, Pringles, Cheez-Its and of course:
Lucio-oh’s. Now, it isn’t really that easy to get exact
figures or even details on those types of deals, but the most reasonable assumption
I can make is that they have a licensing agreement with a lot of these companies. “In a typical licensing agreement, the licensor
grants the licensee the right to produce and sell goods, apply a brand name or trademark,
or use patented technology owned by the licensor. In exchange, the licensee usually submits
to a series of conditions regarding the use of the licensor’s property and agrees to
make payments known as royalties.”, as explained by The long and short of it is that, companies
like Razer, Lego and Kellogg’s believe that they are going to be able to sell more products,
if they associate them with the Overwatch IP.

Or Activision Blizzard convinced them that
this would be the case. They have to agree to a set of conditions
on how that IP is going to be applied onto their product, and then they have to pay Blizzard
for the rights of using it. Now, all of these things are obviously very
cross-promotional. Every time a new deal like that is coming
to light, Blizzard is advertising it through their own social media channels. It is a win-win kind of situation where a
mainstream product finds its way into the minds of players that would usually not think
twice about it, while getting the image of their IP into the minds of people who may
have never heard of the game. Or, perhaps a brand wants to solidify their
standing in the gaming community itself. While I couldn’t find any reliable information
on the exact value of these deals, I don’t think you need me telling you that brands
like Razer, Lego and Kellogg’s make a lot of money. But I also know that you are here to see some
big numbers.

So for context: According to CNBC, Razer has
made 517.9 million dollars in revenue last year, and the company is valued at 2.2 billion
dollars. Lego reported 5.4 billion dollars in sales
in 2018 and it gets even more ridiculous with Kellogg’s, who reported 13.55 billion dollars
in revenue in the same year. So we’re talking massive, cross-promotional
deals here. Now, truthfully, I don’t believe that these
individual brand deals are more profitable than the League itself.

There is a lot of money flowing through the
ad business itself, and even people who buy the All Access Pass to avoid the ads are going
to be met with ad integrations during the show. And it’s not like the companies paying for
those ad placements aren’t huge either. I mean, Toyota? Coke? I’m sure you heard of those before. So all things told, I think that game sales
and microtransactions are a thing of the past for Overwatch. And most of us can feel it. A lot of players have expressed that they
don’t see a reason to buy Loot Boxes anymore, considering that they only care about a couple
skins per event, and that they have enough ingame currency to get them for free. Players who are big fans of the League and
watch it actively anyway can buy League Skins for free as well, since there is more than
one way of getting tokens now. And with the implementation of a 2-2-2 Role
Queue System and the introduction of separate Skill Ratings per Role, we are no longer going
to have to buy a new account just for the sake of practising new heroes without ruining
our current MMR.

Blizzard has successfully diversified their
revenue and are able to make money thanks to a very strong IP. The reason that all of these different Overwatch
products exist is because there is a demand for them. And they are simply trying to meet it. So let’s quickly summarize all the ways
that Blizzard makes money with Overwatch in rapidfire fashion: Game Purchases. Loot Boxes. League Tokens. Official Overwatch Merchandise. Licensing Agreements. Mutually beneficial partnerships featuring
exclusive digital goods. Ad breaks. Integrated Ads and Sponsorships and of course,
Overwatch League Ticket Sales. An honourable mention goes out to Overwatch
Contenders, though I’m hard pressed to believe that they make a profit on that. Those are a lot of different ways to make
money for sure, but don’t forget that they are also paying for ongoing development of
the game, they are hosting the League themselves and they also have to pay support staff to
be at the ready in case there are any problems with any of the products they offer. And if you want to support the work that I
do here on YouTube, then I highly recommend you subscribe to the channel and hit the notification
bell to not miss out on any of my uploads.

But for now, I want to thank you everybody
so much for watching, don’t forget to drop me a like on your way out if you enjoyed the
video and naturally- Feel free to leave all of your thoughts surrounding the subject in
question, down in the comment section below. I am looking forward to hearing back from
you guys, and I hope to see you all next time..

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