Activision Blizzard is set for an unexpected bump in earnings thanks to its recent sale of city-based professional gaming teams, according to Jefferies research.
The entertainment giant sold seven of its 28 city-based Overwatch League teams for a reported $20 million each. That should add $140 million of revenue recognition over the next few years that analysts haven’t factored into their estimates.
Overwatch is an online video game where players select heroes with various abilities to work together in winning matches against others. Membership exceeds 30 million players globally.
It is moving into pro gaming by selling teams. New England Patriots owner Robert Kraft and Sacramento Kings co-owner Andy Miller are just two of many prominent sports figures who have agreed to participate in the new gaming league.
“Assuming Activision sold all 28 teams for $20 million, this implies ATVI would generate $560 million of revenue just from selling teams,” wrote chief equity analyst John Streppa. “None of this was included in our estimates.”
Jefferies raised its 12-month price target on Activision to $68, which is 11.4 percent higher than Wednesday’s close.
But Activision and its team owners are eyeing a much bigger prize.
Given its large and “passionate” fan base, the company wants to build an NFL-style video gaming empire, complete with media broadcasting, advertisement and merchandise.
“Overwatch’s model of bringing new free content through maps and characters has continued to excite and grow the fanbase,” the report continued.
Though the esports league may be many years away from establishing an NFL-like industry, entertainment researcher Newzoo estimates a $1.5 billion market opportunity by 2018.