CDL Media Rights = $24M Per Season

Call of Duty League

‍We published a piece this week that projects the media rights value for the upcoming Call of Duty League (CDL) at $24M/season. The CDL is currently selling franchise spots to various investment groups for $25M each. Just as we saw with the $90M Twitch deal for the Overwatch League ($45M/season), there will certainly be another media rights deal for the CDL. Using the OWL deal as a benchmark, we back into a price for the CDL. We also did the same process for League of Legends (LCS) and found that it should be priced at $160M per season.

Press: 2 news articles came out in response to our projections for the CDL:

• Dexerto: How much are CDL broadcast rights worth compared to OWL & LCS?
• Esports Talk: Nadeshot was right, CDL spots aren’t worth it

Traditional Sports vs Overwatch League: if you look at the average # of viewers for the latest championship for each sport, and then include Overwatch League (OWL), you get a value per viewer. While this is not entirely reflective of the underlying value in each league, this is one way to compare “apples to apples” across various competitive leagues. Interestingly, the value for Overwatch and MLB is identical at $52/viewer:

Comparing Each League: as our research shows, you can use the price per channel, hours watched, and average viewer to back into a price for the media rights of the CDL and LCS. Depending on which metric you look at, the pricing for the LCS and CDL is varied. I believe that the hours watched and average viewer metrics are the most pertinent for a media rights deal. The below is a summary comparing the OWL, LCS, and CDL:

Conclusion: $24M/season ($48M for a 2 year deal)

We believe that the upcoming contract for the media rights of the CDL should be priced at $24M per season. In theory, media rights revenue is split up evenly with all the franchise teams. With 9 franchises announced for the CDL, we expect them to announce at least 3 more, taking the total to at least 12 spots. Our estimates would indicate that each team would receive a max of $2M a season ($24M/12 teams). This assumes that Activision Blizzard takes $0 from media rights, which is unlikely to be the revenue split between them and the franchise owners. In reality, the franchise teams will likely receive quite a bit less.

There are definitely other costs and revenues associated with being part of this league, yet if we were to assume all teams are breaking even on the CDL before they receive 100% of media rights revenue ($2M/season, also unlikely), it would take 12.5 seasons to make back their franchise fee of $25M. That said, most investors don’t buy franchise teams for the cash flow but for the appreciation of the asset over time. However, unlike traditional sports that last for 100+ years, video games come and go and we firmly believe an investment strategy should reflect this different reality in video gaming.