In May, Activision Blizzard warned that the Overwatch League was not in a good place. The city-based esports league is facing what the publisher calls "headwinds" that are hurting both its current operations and its long-term future. Sean Miller, head of the Overwatch League, also acknowledged that the company remains "committed to Overwatch esports" and that the league "is not going away anytime soon," but also acknowledged that efforts to address these challenges "may fail."

The future of the Overwatch League became even more uncertain with the release of Activision's most recent quarterly results, which indicate that the league may be forced to make significant structural changes at the end of this season and may even be shut down entirely.

"During the second quarter, the Company amended its arrangements for working with the team entities participating in the Overwatch League. According to the amended terms, after the current Overwatch League season concludes, teams will vote on a renewed operating agreement." If teams do not vote to continue under the renewed operating agreement, a termination fee of $6 million will be paid to each participating team entity (totaling approximately $114 million in termination fees)."

Despite the torrent of money pouring in, the Overwatch League never fulfilled its original promise of a city-based esports league. The move to a home-and-away format like professional sports leagues took a hit with the Covid-19 craze, major sponsors lost interest, and there is still no Overwatch publisher in China. Meanwhile, the league is not making money: Activision announced today that the Overwatch League generates less than 1% of the company's total net revenue.

A report from The Verge also points to the growing woes of esports at Activision: the company laid off about 50 employees in its esports division yesterday, a move that one employee described as "Activision Blizzard Esports' described it as a "major downsizing. Another employee said that Activision was planning to shut down some of the tools it uses to run its tournaments, and although alternative tools were being developed, the layoffs included at least some employees who were involved in their development.

The possibility of Overwatch 2 revitalizing the pro scene also now appears hazy. In its earnings report, Activision acknowledged that Overwatch 2 "engagement and player investment" were down quarter-over-quarter, but the August 10 Overwatch 2: Invasion update, which will include PvE story missions, new game modes, new heroes Overwatch 2 will also be available on Steam on August 10, and while that is likely to be much bigger in terms of player numbers, how it will affect interest in the Overwatch League is another question entirely.

Overall, it is fair to say that the future of Overwatch does not look particularly bright right now, which makes one wonder if this post-season vote is really more of a formality than anything else: Activision is really more than a large cash prize for teams, no one particularly committed to Does Activision really think that teams would choose the uncertain future of an unstable league to which no one seems particularly committed over a large prize purse? Or do publishers simply want to pay $114 million to stick a pin in Overwatch esports and move on?

How the teams will vote cannot be predicted without knowing the terms of the updated operating agreement. Even if the city-based structure were eliminated, the Overwatch League could continue to operate in a more conventional esports league format if there is enough interest from existing esports organizations. Given the above, however, one can see why players and fans are not very optimistic about the OWL's continued existence.

I have asked Activision for comments and will update if they reply.