TALL ORDER: The development of a new esports/concert arena and hotel in downtown Toronto, is shown in this rendering. (Courtesy Populous)
Project reflects shift in esports economics
A proposed 7,000-seat esports and concert venue in downtown Toronto has been delayed over the past year, due in part to financing issues, but continues to progress, according to two officials tied to OverActive Media Group, the publicly-held company that’s privately financing the development.
Groundbreaking was supposed to take place in October 2022, as reported by Toronto media outlets.
The esports arena would be connected to a 400-room hotel, said Bob Hunter, the veteran facility manager, who spent three years working on the development as OverActive Media Group’s senior vice president. Hunter left the firm in July and is no longer under contract. He’s now consulting on the Calgary Flames’ arena project and remains an advisor to OAM on the esports venue.
Alyson Walker, OverActive Media Group’s chief commercial officer, said the project is still moving forward and that an update would be announced in the coming weeks.
“This is a major project in a challenging environment and we’re going to take our time to get it right,” Walker said.
The site is next to BMO Field, the city’s Major League Soccer stadium, that’s part of Exhibition Place, an entertainment district. The business plan requires the hotel to be built before the esports arena breaks ground, Hunter said.
“It’s a great concept and a great design,” Hunter said. “Populous is the architect. We were working closely with Live Nation on it being a major concert venue.”
Apart from esports, Walker said there’s a demand for a midsize arena in Toronto with 5,000 to 7,000 seats to book concerts that may not be the right fit for Scotiabank Arena, the city’s 19,800-seat NBA and NHL facility. The initial business plan called for the smaller arena to host 200 events a year.
“It’s a good business prospect and good for a company that has esports teams,” she said. “Make no mistake, it is a performance venue. Esports and events beyond our own teams will be tenants and that’s why we were involved.”
The project was announced in February 2021, three years after OverActive Media Group was formed. OAM’s investors include Bell Canada, a major shareholder in Maple Leaf Sports and Entertainment, owner of Scotiabank Arena and the Maple Leafs and Raptors. On its own, MLSE is not an investor in the esports company, Hunter said.
OverActive Media Group’s purchase of the Toronto Defiant, an expansion team in the Overwatch League, started the company, which later bought the Toronto Ultra, which competes in the Call of Duty League.
Both teams would play in the new esports arena, OAM officials said when the project was announced. The company also owns the MAD Lions, a Spanish esports organization with multiple teams.
Over the past few weeks, the Defiant exited Overwatch, which will soon cease to exist under its current format, Walker said. There are plans for Activision Blizzard, which owns Overwatch, to start a new league in the future with a different business model and OAM remains interested being part of the new ecosystem, she said.
Call of Duty, a 20-year-old property whose league consists of a dozen teams, remains one of the strongest brands in esports, Walker said.
From a venue development perspective, Hunter says the esports phenomenon has slowed down significantly. The dissolution of the Overwatch League is one sign of the shakeout tied to the esports boom.
“No one is making any money,” he said. “The franchise values went crazy for a while and everyone was excited. It was like owning an NFL team. Then it died off, because nobody has turned a profit. It’s impossible. Sponsorship is almost your only form of revenue and live events, although getting popular if it’s a regional final, are not doing well.”
Walker joined OverActive Media Group in August 2019 after spending five years with Maple Leaf Sports and Entertainment, owner of Scotiabank Arena and its two tenants, the Maples Leafs and Raptors.
The fundamentals of esports haven’t changed in terms of scale and scarcity, Walker said. People all over the world are still playing video games and the activity itself is not going away, including “human behavior that is the need to be competitive, the desire to be the very best in the world.”
The scarcity aspect is tied to the franchise model in Call of Duty, which has hundreds of millions playing its games, watching the competitors and buying merchandise during events, creating an opportunity for OAM to connect with younger consumers making up the fan base, which is what brands want in terms of sponsoring that content, Walker said.
“Consumer behavior has changed, we all know that,” she said. “Young people don’t watch a whole Raptors game, but they’re still engaged with the NBA. The same goes for esports. They may not sit and watch a whole match, but they are engaged across every platform.”
Media rights in esports is also in flux, she said. What’s evolving in that space is a different environment with many social media influencers co-streaming esports competitions, essentially serving as broadcasters of those events.
“Initially, there was lots of money and it was coming in fast,” Walker said. “Now, the business model is shifting and reconciling some of that. It’s certainly not going away. The strongest organizations will be left standing and leading in that way. It will be successful, just in a different way than in 2018, when we started.”
Editor’s Note: This story has been revised.