Video game company Activision Blizzard agreed to a settlement with the Justice Department ensuring the company doesn’t suppress the wages of esports players even if it is acquired by Microsoft Corp.
(Bloomberg) — Video game company Activision Blizzard agreed to a settlement with the Justice Department ensuring the company doesn’t suppress the wages of esports players even if it is acquired by Microsoft Corp.
The agreement, which the Justice Department filed in federal court in Washington Monday, comes after a long investigation into Activision Blizzard’s efforts to limit compensation for players on professional esport leagues it owns and operates. The US is asking the court to approve the settlement, which would prevent the company from ever imposing a similar tax on its esports teams.
“Video games and esports are among the most popular and fastest growing forms of entertainment in the world today, and professional esports players — like all workers — deserve the benefits of competition for their services,” said Assistant Attorney General Jonathan Kanter, head of the Justice Department’s antitrust division.
Activision Blizzard in a statement said it believes that the salary agreements, which it suspended under pressure from the Justice Department in 2021, were “lawful” and “did not have an adverse impact on player salaries.”
“We remain committed to a player ecosystem with fair pay and healthcare,” said Activision Blizzard spokesperson Joe Christinat.
The Justice Department is asking the court for a consent decree that ensures Activision Blizzard is not allowed to enforce a “competitive balance tax,” which penalized teams for paying esports players above a certain threshold set by the company. The department opened its probe into esports leagues last year.
Separately, the Federal Trade Commission filed its own lawsuit last year seeking to block Microsoft Corp.’s $69 billion acquisition of Activision Blizzard, arguing that it would harm competition in the growing video game industry.
Activision Blizzard CEO Bobby Kotick launched the Overwatch League in 2018 hoping it would one day become mainstream enough to compete with sports leagues like the National Basketball Association as traditional sports appealed less to younger generations. Teams bought $20 million franchise slots to compete at the gaming giant’s enormously popular shooter game. Those teams intended to showcase their athletic skills in brick-and-mortar stadiums around the world, where fans would purchase concessions and merchandise.
Read more: The Shaky Future of Activision’s Overwatch League
Although it was popular in its first year, the Overwatch League lost steam due to the pandemic and waning interest in the game. Overwatch 2’s launch in 2022 did little to help curry mainstream-level interest in the league.
Activision Blizzard launched a league for its blockbuster first-person shooter Call of Duty in 2020 with a similar model and a larger buy-in fee.
The young players competing in these leagues can train up to 8 hours a day, or 70 hours a week, according to the complaint. Many have had grueling travel schedules involving international flight. Many players have left the Overwatch League citing physical or mental exhaustion.
Player salaries are a controversial topic in the esports industry. The industry had a rough 2022 as teams participating in publishers’ leagues struggle to turn a profit. Critics say that part of the reason is large player salaries, which can top six or seven figures in some instances.
The salary floor for players was $50,000 when the League launched. Activision also levied the “competitive balance tax,” which the complaint alleges “had the purpose and effect of substantially lessening competition for players by suppressing player competition.” Teams that spent over a certain threshold on players’ salaries would suffer a fine.
Although other professional sports leagues have similar caps on salaries, they are members of a union and able to collectively bargain. Because members of Activision Blizzard’s esports league teams are not, the DOJ alleges, these salary restrictions amount to an “unreasonable restraint of trade” and violate the Sherman Act.
(Updates with background from seventh paragraph)
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