Hector “H3CZ” Rodriguez (CEO of the eSports organization, Optic Gaming) and Seth “Scump” Abner (second-winningest professional Call of Duty player of all time) have filed a $680 million joint lawsuit against Activision.
The suit alleges that Activision has devised and is operating an unlawful monopoly over the Call of Duty eSports scene. They also allege that Activision coerced the 12 teams within the Call of Duty League (CDL) to pay an entry fee of $27.5 million just to compete.
Initially, Activision attempted this with the introduction of the Overwatch League. According to the lawsuit, the Overwatch League operated as a closed league, meaning that only 12 teams were allowed to participate, selling a spot for $20 million each. Due to Overwatch being a less popular title, it was an easy way for Activision to test its new business model which proved itself to be successful as teams were required to pay the pricey entry fee.
In addition, more allegedly imposed restrictions onto the teams by Activision were revealed. Activision allegedly holds power in who they partner with for sponsorships. As a result, teams are unable to have other streams of revenue outside of the CDL’s most lucrative sponsors.
I haven’t spoken of this publicly really, but I was fined for playing Raid Shadow Legends during a sponsored stream. It was during the off season as well which makes it worse. My channels are MY channels. I should be able to do what I please, but apparently I cant.
— OpTic Scump (@scump) November 15, 2020
In a statement released by Activision, they claimed “Mr. Rodriguez and Mr. Abner demanded that Activision pay them tens of millions of dollars to avoid this meritless litigation, and when their demands were not met, they filed. We will strongly defend against these claims, which have no basis in fact or in law.”
Regardless, Activision allegedly “wielded its power as a virtual nuclear weapon,” according to the lawsuit.
Furthermore, H3CZ and Scump stated that 50 percent of their revenue was taken from all Call of Duty-related opportunities. Teams who did not agree to the terms set by Activision were allegedly forced out of the market and retaliated against with threats to withhold tournament hosting opportunities which would provide much-needed revenue for the stability of eSports organizations like Optic Gaming. Additionally, Activision fired 60 out of the 72 staff in the eSports division leaving just 12 to maintain the entirety of the COD League (a 83 percent workforce reduction); only two days after the first major tournament held in Boston for the 2024 season.
The lawsuit also alleges Activision prohibited teams and players from “participating or supporting any professional Call of Duty leagues or tournaments other than the CDL.” Worst of all – they weren’t allowed to profit from their Call of Duty gameplay outside of the CDL.
“We are disappointed that these members of the esports community would bring this suit which is disruptive to team owners, players, fans, and partners who have invested so much time and energy into the Call of Duty League’s success,” stated Activision.
In 2020, H3CZ re-acquired Optic Gaming after it had been sold for $100 million in 2019. When he tried securing a CDL spot, Activision allegedly denied him.
Allegedly, Activision asked H3CZ to provide proof of $3 million in capital and whether he could attain a $10 million letter of credit. He was also allegedly told by an executive that he wasn’t the “type of owner” Activision wanted in the league.
“Activision’s conduct forced Rodriguez to give to the billionaire investors’ company Envy Gaming, Inc. a 92.5 percent ownership share of OpTic,” the lawsuit alleges.
H3CZ argues that if it were not for the alleged unlawful conduct on behalf of Activision, he would’ve never had to merge with Envy to stay within the lucrative Call of Duty market which cemented the brand identity at its core.
According to the lawsuit, the attempts at monopolization didn’t stop there. Activision acquired the former leader in the eSports industry, Major League Gaming (MLG) for $46 million in 2016 to build the “ESPN of eSports.”
“MLG’s ability to create premium content and its proven broadcast technology platform including its live streaming capabilities strengthens our strategic position in competitive gaming,” said Bobby Kotick, former CEO of Activision Blizzard.
However, following the acquisition of Activision Blizzard by Microsoft for a whopping $69 billion, MLG’s last branch, GameBattles, was shut down.
“Our team learned yesterday that Activision Blizzard has decided to shut down GameBattles, the last remaining branch of MLG, by mid-January. The entire team at GameBattles has been notified that we’re all being let go as part of the closure,” said Chris Evans, Operations Supervisor at GameBattles.
GameBattles Community,
After careful consideration, we have decided to shut down the GameBattles platform and service as of January 15th, 2024.
If you have any questions about your account or the shutdown, please visit our support site: https://t.co/M5YzDe4CWy
— GameBattles (@GameBattles) November 13, 2023
At the time of acquisition, the eSports industry was projected to grow an estimated 43 percent making the value jump to $463 million, according to Newzoos 2016 Global eSports Market Report. In 2024, the eSports industry market is expected to reach $4.3 billion in revenue, according to Statista.
“We are focused on identifying and investing in business opportunities that extend our existing franchises into adjacent entertainment verticals, deepen audience engagement by celebrating our players, deliver high production values to our communities, and provide greater opportunities for player investment. This includes investments in our Media Networks and Studios businesses. Our Media Networks business acquired Major League Gaming Inc. (“MLG”) which provides an immediate expansion of our reach across the rapidly-growing eSports ecosystem by adding proven live streaming capabilities and technologies,” Stated Activision in public filings regarding the 2016 MLG acquisition.
Despite Activision’s initial attempts at continuing the MLG business, H3CZ and Scump believe they planned to control and dominate the eSports landscape from the inside out. Though, as of Feb. 16, H3CZ and Scump have decided to remain quiet about the ongoing lawsuit.
In a recent livestream hosted by Optic Gaming, H3CZ stated “At the moment, Seth and I have nothing to say. As usual and it has been since 2005, we’re going to focus on Call of Duty and eSports and try to continue to grow the space as we have for over a decade.”
H3CZ and Scump on the lawsuit they have filed against Activision and the CDL:
“At the moment, Scump and I have nothing to say.” pic.twitter.com/q6PDWhFvwi
— CharlieIntel (@charlieINTEL) February 16, 2024
