Expanding its media empire, Activision Blizzard Inc. of Santa Monica last week purchased video-game league and online broadcaster Major League Gaming for $46 million.

Activision aims to use the acquisition to bolster its quest to become the ESPN of e-sports. But industry watchers say the video-game publisher’s recent moves suggest the company isn’t content to stop there and that it could harbor bigger goals more in line with ESPN’s parent, Walt Disney Co.

In terms of the most recent acquisition, plans are already in the works for Activision to develop an e-sports cable channel. In addition, upgrades will be made to MLG’s online broadcast platform, which industry insiders said would be needed to handle larger audiences.

While the reported purchase price for the New York firm is small compared with Activision’s $27 billion market capitalization, the move points to grander ambitions.

“Activision seems to want to be bigger than a game company by moving into movies, action figures, e-sports and mobile games,” said Joost van Dreunen, chief executive of SuperData Research, a New York video-game research firm. “They want to cover everything and be larger than life. They want to be a media conglomerate.”

After relying on console and PC game sales for almost all of its 37-year history, the company has transitioned into the digital realm. In the quarter ended Sept. 30, about 73 percent of Activision’s $960 million in revenue was scored from online distribution channels, according to a filing with the Securities and Exchange Commission. Those purchases came in the form of full-game downloads, expansion packs, subscriptions and virtual goods.

Now the company is moving rapidly to diversify its business, as exhibited by its activity over the last four months.

The company launched an e-sports division, Activision Blizzard Media Networks, in October and a movie studio, Activision Blizzard Studios, in November. Activision also agreed to purchase Irish mobile-game maker King Digital Entertainment in November for $5.9 billion; King created the popular Candy Crush game.

“Activision’s strategy fits into games becoming a much more mainstream form of entertainment,” said van Dreunen.

Much like Hollywood, the video-game industry traditionally has been a hit-driven business, with multimillion-dollar investments into game development quickly earned back or lost within weeks after a title hits shelves. Experts said diversification offers Activision new ways to milk value out of its most cherished properties while capitalizing on trends in the industry.

Worldwide leader

When Activision acquired MLG, it quickly made its intentions plain.

“Our acquisition of Major League Gaming’s business furthers our plans to create the ESPN of e-sports,” Activision Chief Executive Robert Kotick said in a statement. “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.”

In fact, the newly launched e-sports division is being led by former ESPN Chief Executive Steve Bornstein. The acquisition of MLG builds on Activision’s purchase of e-sports league IGN Pro League from Hollywood’s J2 Global Inc. for an undisclosed amount in 2013 and the April launch of Heroes of the Dorm, a collegiate e-sports tournament televised on ESPN2.

Mike Sepso, a co-founder of MLG, joined Activision in October as senior vice president of e-sports, though he said no acquisition talks were underway before his move.

“There’s a significant opening in the market for premium content to be distributed,” Sepso said, expanding on Activision’s vision for e-sports. “Expect an ESPN-quality production level with directors, producers, cameras and lights.”

Activision said it expects to command strong advertising rates to go along with those premium production values, though a spokesman for the company said this year’s prices are still being worked out.

In 2014, video advertising rates on MLG broadcasts were about $25 per thousand views, with some championship broadcasts jumping to about $50 per thousand, said former MLG Chief Executive Sundance DiGiovanni, now a vice president with Activision, in a 2014 interview with now-defunct online magazine onGamers. By comparison, YouTube on average sold video advertisements for $7.60 per thousand views in 2013, according to research firm Tubemogul.

When you consider that consumers often buy more video games after watching e-sports contests, the purchase of MLG becomes even more compelling, said Ian Sharpe, chief executive of Azubu, a Sherman Oaks e-sports online broadcaster.

“Clearly the e-sports community is a valuable group of people,” he said. “They are valuable, passionate, committed and engaged. They buy a lot games. They watch a lot of content. They are a revenue stream for a company like Activision.”

New Disney?

In many ways, the hit-driven nature of the video-game industry mirrors the triumphs and failures of Hollywood blockbusters.

“You spend 100 million bucks (on game development) and then you launch it and hope that enough people care to send you their money,” said SuperData’s van Dreunen. “The economics of video games are expensive, very risky, with a very small payoff window.”

With more than 150 million people playing its games worldwide, Activision is looking for new ways to make money from its customer base.

It is perhaps not surprising that the company’s diversification resembles the strategy of Burbank media giant Disney. Disney has diversified its business and reduced its reliance on blockbuster films by using its movie titles as the basis for toys, theme parks and television shows. And its $500 million purchase of Culver City’s Maker Studios in 2014 year showed that it values online content and viewership.

In November, Activision announced the formation of Activision Blizzard Studios. The studio is headed by former Disney executive Nick van Dyk and its first title, “Warcraft,” based on Activision video game “World of Warcraft,” will be released in June. The company also has plans for television and film content based on its “Call of Duty” and “Skylanders” games.

What’s more, the pending $5.9 billion purchase of mobile-game developer King, with its 330 million monthly users, gives Activision an even larger customer base as well as a deeper portfolio of intellectual property that can be monetized across various platforms.

“Video-game companies are essentially just intellectual rights holders,” said Jason Xu, chief executive of Vancouver’s Battlefy, a company whose technology facilitates e-sports tournaments. “There are multiple ways to monetize that IP. Playable games are just one of those ways.”

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